Business Council Remarks and a Question-and-Answer Session at a Meeting of the Council.

THE PRESIDENT. It's a pleasure to be with you tonight. I look around the group, and I think in a close vote the administration could just about equal the business leaders of our country. [Laughter] But I would hope that the vote would be unanimous on any controversial issue that affects our country.

I am honored to have this opportunity to come back and talk to you, a group of men and women who helped to shape the economic present and future of our great country. I think I should begin my own remarks as President of our Nation by expressing my deep thanks to you for the help that you've given me and to our Nation's Government since the last time I appeared here. You've given me advice, counsel, sometimes criticism, constructive always, and when I've called on you to help me with matters of great importance, you have never failed to be very forthcoming in your aid to me.

When I faced the difficult political question of the Panama Canal treaties, you responded with superb influence, and I could not have succeeded in having those treaties ratified without the help of those in this room.

You speak with a voice that is carefully monitored and with opinions that are carefully assessed. And I think your own influence at times might be even underestimated by you.

In the civil service reform effort, as you know, the first time in a hundred years, your strong voice as managers, as business leaders, was highly effective in shaping the opinion of the Congress.

Perhaps the most far-reaching and difficult legislation that the Congress has ever considered was the five bills passed to shape the first part of a national energy policy. Again, your advice and counsel was crucial. In fact, in every matter concerning economics you have been in the forefront of my assistance, and I deeply appreciate it. And, of course, in that process you have helped to shape the political posture of our Nation as well.

We have a very good interrelationship between the leaders of the free enterprise system on the one hand, and the leaders of our government on the other. And I think this interrelationship—open, frank, carefully observed, assessed by the public-is proper and advisable and good for our Nation. I've never had any of you or your fellow business leaders approach me on any occasion with a request or a suggestion that I interpreted as President to be selfish or contrary to the best interests of our country. And I thank you for that enlightened attitude as well.

As a matter of fact, on occasion, many of you—John DeButts, Tom Murphy, Irving Shapiro, Ray Jones, and others-have made suggestions to me that in balance might very well have worked counter to the profit margin of their own corporations if they knew that in the process the overall character and strength and well-being of our Nation would be enhanced.

We have made some progress in the last, almost 2 years. The unemployment rate has dropped from 8 percent to about 5.8 percent, and it's leveled off lately. We have been pleased with this. We've added a net of about 7 million new jobs—660,000 new jobs, I believe, in November alone—when predictions were that the jobless rate would go up sharply during the fall. This has resulted in a decrease of about 1,300,000 Americans who were formerly on welfare and are now selfsupporting. The fact is that we still have serious unemployment rates among some groups of our country. But among heads of households now 96.6 percent are employed.

We've had economic growth that's been steady. It's increased by 9 1/2 percent since I've been President. Corporate profits, in which some of you have some slight interest, have gone up 37 percent in 2 years. Farm income, which interests me, net farm income has gone up about 25 percent. Exports, both years, hit an all-time high. We expect to set a new record for our Nation next year. We're constantly probing for new markets for America's goods, and I think that we are about to make more progress even than we've achieved in the past.

In the last 2 years we've also reduced taxes $40 billion, but we still have the specter of inflation hanging over our heads, which could very well wipe out all the gains that I've just described. And my number one domestic priority above everything else is to deal successfully with the inflation threat.

In this respect, your assistance will be much more difficult than it has been in the past because of the diversity of action that must be taken and the wide number of people who will be directly involved in an anti-inflation fight. And I think here the business community's influence can help to counterbalance the mandatory sacrifice, that must be well balanced, on many interest groups that have direct and great influence in Washington and in the State and local levels of government. This will not be an easy or quick task even if we succeed beyond our present expectations. It's going to be a. long and tenacious effort required, and I need you to join in with me as full partners on a permanent basis. We've seen prices double in the past 11 years. And although we've experienced inflation at a steady rate, 6 1/2 to 7 percent for those ! 1 years, for a while there were special factors on which we could blame the high inflation rates—oil price increases, a shortage of consumer goods or raw materials. That has changed, and there's a more broad-ranging reason now for inflation with which we have to deal directly. There are no special factors that we can blame for our problems.

We've also reduced the Federal deficit in the short time that I've been in the White House by about $28 billion. In 1976, the Federal deficit amounted to more than 4 percent of our gross national product. When I complete work on the 1980 fiscal year budget, that Federal deficit will be down about I percent of our gross national product.

I think this is a very vivid and clear demonstration of the leadership that the Federal Government must take in setting an example for others to control inflation. And in the process, we have tried to carry out a campaign commitment that I made to reduce the percentage of our gross national product which is collected and spent by the Federal Government. In the past, it was about 23 percent; we're trying to get it down and will succeed, I believe, to about a 21-percent level.

There are some commitments that I have also made to the American public that I intend to honor. One is to maintain a strong defense. We have obligations to our own people for their security, the number one responsibility on the shoulders of any President. We must convince our allies that we stand staunchly with them with a common approach to any outside threat to the Western democratic world.

I think it's accurate to say that when I became President, because of historical events years past, there was a shaky NATO Alliance. Many of our partners there were not convinced of the resolve of America, and we had to commit ourselves to them, not only to set an example but to join with them in a recommitment to vitalize the NATO Alliance. That commitment will be carried out.

We've tried to get Government intrusion into the business community reduced. Many regulations have been eliminated completely. I think the Occupational Safety and Health Administration is much more cognizant of and much more sensitive to the recommendations and criticisms of the business community without reducing its effectiveness in protecting the health and safety of American workers.

We have tried to combine, in many ways, agencies of the Government. Our reorganization efforts so far have been very well received by the Congress. We have had the amazing success in deregulating for the first time in many decades one of America's great industries, that is, airline deregulation. We have more airline passengers now. They pay lower fares. And I think in almost every instance, the profit margins of the airline companies have gone up. I'm very proud that the ICC Chairman, Dan O'Neal, has been staunch in moving to deregulate the trucking industry. I back him in this. I realize the independence of the regulatory agencies, but with my own voice, my own influence, my future appointments to the ICC, my intention is to continue this trend.

We have many challenges ahead of us. Our country still does not have a commitment to exports of our produced goods that prevails the consciousness of the business leaders in other nations like Japan and Germany. And government can help to some degree. But this is primarily a responsibility that falls on your shoulders. And I think if there was a more intense team commitment, it would be to the advantage of our own Nation and our balance of trade. I think it would be to the advantage of your own corporations and businesses, professional alliances in carrying out the purposes for which they were founded.

Productivity is not rising nearly so rapidly as we would like. We are lagging behind other nations in this respect. We are now assessing the varied and very complicated factors that go into the lowered rate of increase of productivity. We hope to make some progress in the future.

I have some engineering and scientific background, and I have been very deeply committed, even in the tightest of budgets, to increase the influence of the Federal Government in enhancing our research and development programs in all the agencies of the Government itself. When Cabinet officers or the heads of agencies were not enthusiastic about this program, I've inspired them to be more committed to it, because I believe that in the long run, a viable research and development commitment by the Federal Government can pay rich dividends in years ahead.

The implementation of authorization we have on energy programs is still to be demonstrated, but we will take full advantage of the authority, new authority that the Congress has now given me, Dr. Schlesinger, and others.

We have recently moved on November 1, under the leadership of Mike Blumenthal, to strengthen the American dollar, its exchange values in international monetary markets. This has been a program that has been successful to date and, I think, has reestablished the confidence in our own Nation's economic commitments, which were shaky at best just a few months before that.

We've got a good team now evolved in giving me economic advice and working closely with me. Bill Miller gives us sound advice, honoring the independence of the Federal Reserve. Mike Blumenthal is the Chairman of the Economic Policy Group. We have obviously a fine Secretary of Commerce, Juanita Kreps. Alfred Kahn is giving me advice on our anti-inflation effort. And I think we've got a team spirit now, working with Charlie Schultze and others, that can assure that we have a well-balanced and a closely coordinated effort.

You are at liberty to interrelate with this group individually or collectively, and I would certainly appreciate your continuing to do so.

In closing, let me say this: I need your increased help and cooperation. We do not anticipate a recession next year. We don't see any basic imbalances that in the past have preceded a recessionary period. Inventories are in good shape. Recent statistics on housing construction still maintain a very high level in that region of our economy. We have, I think, very good and stable results in retail sales. We've got another $20 billion in tax cuts coming in about 3 weeks, which should revitalize some commitments to the future. But there are predictions of recessions from varied sources which I think can become a self-fulfilling prophecy unless the facts are described accurately to the American people, unless we show the innate confidence that I feel exists in your minds as well as it does in my own.

Our Nation is strong. We had a Cabinet meeting Monday morning, and there was a general consensus there that if we have made one consistent error in economic predictions, it was to underestimate the economic strength and the growth potential of our country.

I might say that just the last few hours, we have promulgated the final regulations on our voluntary wage and price standards. You'll have a chance to assess those thoroughly. I'm not familiar with the details. The general principles are those that I have approved. And I hope that now that that has been done, that every one of you, without exception, and all those that listen to your voice and whom you can influence, will give me your pledge of compliance with the voluntary wage and price standards.

A number of you have already done so, even though you had not seen the final, conclusive interpretation of the guidelines. But there's no excuse now for you to delay, and it would add a great deal to me and to my influence in controlling inflation if you would do so. If there are some details or portions of the regulations which you find not completely in accordance with your desires, I hope that you will overlook that or accept it in our commitment to improve the stability of our own economy.

I need your help in continuing to design modifications to the anti-inflation program as we go along. With experience I'm sure there will be these kinds of changes to be made, and I need your continued counsel and your beneficial influence.

Very briefly, this describes some of the points that I wanted to make to you. We've made some progress. We've got a long way to go. Our top priority is anti-inflation. You have helped in many ways. Now is the time for you to help much more specifically. And I know the hundreds, the tens of thousands of letters that are being sent out by you personally and by business organizations to which you belong will have a great impact. But your own personal influence and a flat statement that your company will comply with the wage and price guideline standards will be the greatest and best thing you can do.

John DeButts has asked me to yield the floor to him at this point, and I'll be glad to answer just a couple of questions, relying on my advisers to help me with answers. John.

MR. DEBUTTS. Ladies and gentlemen, I asked the President if I could take a moment to say something to you. I cannot say it to you as the chairman of the Business Council, because, by tradition, we in the Business Council do not take positions on anything. However, I would like to say just a word to you, not as the chairman of the council, but as the chairman of AT&T and a. businessman and, I hope, a peer of yours.

We all realize that inflation is the biggest problem we have in this country. We all recognize that the solution to inflation is going to require exerted effort on the part of government to reduce their own expenditures, as well as the regulations that impose expenditures on us, labor, and also business. There are some questions about the possible success of the President's program, the wage guideline, voluntary program. I happen to think that the alternatives to the success of that program are far worse—possible mandatory controls. I happen to believe that that program will work, but it only will work if all three of those groups are willing to cooperate and support it.

I happen to believe that the President is sincere and will succeed in his efforts, insofar as government expenditures and reduction of regulatory pressures on us are concerned. I don't know about labor, although one labor leader has spoken out in favor of it. But I believe that it's incumbent upon us in the business community, and I urge each and every one of you to look at this thing as carefully as you can and find a way to comply with the standards established by our President. I think that's the greatest contribution that we can make to solve the problem, and I hope you'll do it.

And now the President has graciously offered to answer questions from the floor for a few moments. So, it's your program. THE PRESIDENT. Let me say that I believe that labor will cooperate. That's my conviction and also my determination. But it's incumbent on me, first of all, to prove that, as President, I will do what I said I was going to do, and you can depend on that. I'm going to adhere to my published goals on controlling the deficit, on having a tight, tough, competent budget. I'm going to maintain the military strength of our Nation, and I'm going to meet the social needs of our country as well. I think the Congress will cooperate.

And the second thing that labor will be watching very closely is if the business community comes forward with an enthusiastic endorsement proven through action that you are part of the team. Many labor leaders have already come forward to ask how they can help, and we've got some that are doubting. But there's no doubt in my mind that if business and government show that we mean to carry out the anti-inflation program, this will be the greatest incentive possible to bringing labor on board, and my prediction is that they will come on board.

QUESTIONS

DEPARTMENT OF COMMERCE

Q. Mr. President, the press has reported that the administration is giving consideration to eliminating the Department of Commerce. This, of course, is disturbing to many in the business community. And I wonder if you'd care to comment on this, sir.

THE PRESIDENT. Well, I don't have any plans to eliminate the Department of Commerce. We will be exploring every opportunity to consolidate programs to make them more efficient and perhaps to shift major programs from one department to another. There's a limit on what I can do as President under the reorganization authority, and I hate to foreclose any possibility for the future. But there are no plans to eliminate the Department of Commerce.

You're not the first one to bring this to my attention. Juanita Kreps has also inquired about whether or not that was my plan— [laughter] —and I am sure she'll feel better about that. But that's one major task that I have no intention to assume for 1979.

There may be some changes made in the Government that Juanita or Mike or Pat Harris, the others won't like, to shift major programs. I'll try to make the Government more effective. But to eliminate that Department is not in my plans.

MINIMUM WAGE LAW

Q. Mr. President, in terms of what an objective is that we both share, that is, control of inflation, I'd like to ask you about the minimum wage law. Since 1956, the minimum wage has gone up 27 percent per year. And in terms of the 1977 amendment to the Fair Labor Standards Act, it's scheduled to go up another 13 percent a year between now and January 1, 1981. What plans, if any, do you have in terms of the administration position to suggest that we rescind those future increases in the minimum wage law?

THE PRESIDENT. We don't have any plans now to do that. Ever since, I guess, the last 30 years, minimum wages have averaged roughly 53 percent of average manufacturing wages. And there has been a trend for the minimum wage to lag behind year by year by year, and then all of a sudden Congress would act and catch up to restore that rough percentage. There may be some considerations going on now in the economic planning group about slight modifications to the basic minimum wage law, but to change it substantially is not in my present plans.

There was quite a debate in the Congress, as you know, about whether to include young people in the minimum wage. I have heard the EPG is considering the advisability of making a change there. It has not got to my desk. So, as far as I'm personally concerned now, I have no plans to do that. I believe the minimum wage ought to be kept at roughly that percentage of the average manufacturing wages, in fairness to the low-paid employees.

Stu, did I get the figure right? Is that roughly correct? Thanks.

Does anyone else have a question?

EGYPTIAN-ISRAELI PEACE NEGOTIATIONS

Q. Sir, are you at liberty to share with us the latest developments in the Middle East, which Secretary Vance is negotiating?

THE PRESIDENT. I can share them with you up until noon today, but I don't know if I can tell you what happened—well, that was 7 or 8 o'clock in Israel. I'll try to be cautious, not to say an inappropriate thing.

Earlier in the fall, we evolved a text for the treaty itself, which, while Prime Minister Begin was over here on a visit, was basically adopted by the Israeli negotiating team. That particular text was not adopted by the Egyptian negotiating team, because they were not present at the time and had no opportunity to do so. There was a mandatory additional agreement, not part of the treaty text, which came under the general aegis of the so-called linkage, that is, whether or not in carrying out the peace treaty concerning the Sinai itself, there would be an equal commitment to carry out the other terms of the Camp David accords in holding elections and establishing a self-govern' ment with full autonomy, to use Mr. Begin's words, for the people who live in the West Bank, Gaza Strip. This is something on which the Egyptians had insisted.

The Israeli Cabinet subsequently met and adopted the text of the treaty itself. They did not take any action, therefore rejecting the accompanying document which was an integral part of the mandatory agreement.

President Sadat then objected strongly to certain provisions of the treaty text itself and made public statements that he could not accept them. I sent Secretary Vance over to try to resolve this apparent impasse.

He had very good success in negotiating with President Sadat. With some possible change with which I am not familiar, President Sadat has accepted the text of the treaty. I don't believe there are any exceptions. And he has adopted a time schedule that was originally proposed by Foreign Minister Dayan himself, that a goal would be agreed of holding elections and establishing a self-government in the West Bank, Gaza by the end of 1979. Earlier, they had talked about a much earlier date or even no date. But Sadat was very generous, in my opinion, in adopting basically an original Israeli position.

There is another point that has been at issue and that is the so-called Article VI of the treaty, which we called the priority of obligations. Egypt has longstanding treaty obligations and other agreements with other Arab nations. Israel had insisted upon language in the treaty which clarified the point that the present treaty would be honored and that these other agreements did not interfere in effect with the application or integrity of the treaty now being negotiated.

They had also asked for additional language which, to the Egyptians, meant that all previous treaties would be abrogated and that this treaty would be paramount over any other treaty, which is contrary to what any other nation has ever been asked to do.

That treaty text has remained and has now been accepted by President Sadat, I understand. And there will be an exchange of letters between us and Sadat, based on the opinion of international lawyers and the lawyers at the State Department, about what this particular section means. Israel would not be required to endorse that language.

My understanding from Secretary Vance is that now the Israelis are reluctant to accept the goal, even, for 1979. And Secretary Vance will be meeting with them, since lunch today, after supper their time—I have not had a report from him-and will be meeting with the Israelis tomorrow morning, and then will go to see President Sadat to give him a report on the Israeli position, and will then return back to our country.

So, the essence of it is that at noon, the Egyptians had adopted the treaty text completely and had adopted our proposal on the ancillary documents. And my understanding is that the Israelis have some problem in accepting those ancillary documents, including the interpretation of what Article VI means about the priority of obligations.

I may have told you more than you want to know— [laughter] —but that's basically it. We pray that both nations will ultimately accept the same documents.

But it is extremely difficult, one of the most frustrating experiences I have ever had in my life, to try to negotiate at long distance through negotiators here who have limited, sometimes no authority, with the appeal going to the Prime Minister and then to the Cabinet, or going to the Cabinet and then to the President, and with both sides excessively using the public news media to express their positions. Because once they say that this is the Israeli or Egyptian position, it's almost a matter of losing national face for them to modify their positions. Whereas when we were enclosed at Camp David, you didn't have the public esteem involved every time a negotiating point was yielded.

It's just like a business and labor contract dispute being conducted at long distance through the public news media. And this is what we've had to deal with.

But there's a limited amount of time that Secretary Vance can spend on the Mideast peace treaty, as important as it is. We are now facing final negotiations on SALT. We've got the Nicaraguan problems, Nigerian problems. We are trying to work on trade matters. I'm going to have a meeting in Guadaloupe with the leaders of France and Germany and Great Britain. We have numerous other things, as you can well imagine, to do. And Secretary Vance and I have spent hundreds and hundreds of hours trying to bring these two nations together on differences that now are almost completely insignificant, compared to what they've already resolved.

Both nations deserve a lot of credit. I'm not criticizing them, because I know the sensitivity of them. But I'm very frustrated at this point, and I hope that Secretary Vance has better news from Israel for me than I acquired from him at noon.

Maybe one more question, and then I'll leave you to your work.

ECONOMIC ADVISERS

Q. Mr. President, this is really a two part question. In the case of economic matters, have you or do you intend to appoint a single spokesman to speak for the administration? And in the area of my own particular interest, in commending you for your posture on deregulation, do you also intend to appoint a single spokesman to talk with the business community about deregulation?

THE PRESIDENT. That is a hard question to answer. Mike Blumenthal has always been my financial spokesman, and I think if you had to pick out one person, he would be the spokesman on economic matters. But at this point, Alfred Kahn has a very important and direct relationship with me on everything that concerns anti-inflation. And, of course, in business matters, trade and so forth, it's Juanita Kreps.

There's no incompatibility among these groups. And I think we have, and you've observed, I'm sure, in the last few months, a much more consistent administration policy being promulgated to the public through the press. But I really have a preference in my own method of administration of dealing with several people. I don't like to have just one person who comes to me and reports a consensus from a group. I prefer to have advice from different sources inside and outside the government.

As far as my personal economic advice is concerned, Charlie Schultze is the one I meet with frequently and regularly. He's a part of my staff itself. And I would say that he and Alfred Kahn are in that category. You're sitting next to the man who generally gives me the documents and gives me his final assessment, and that's Stu Eizenstat.

I'm not trying to confuse the issue, but I would say as far as a public statement on financial matters and economic matters, if I had to choose one person, it would be Mike Blumenthal. But Alfred Kahn is now the foremost spokesman on anti-inflation matters itself.

On deregulation, it varies so much, because from one agency to another, most of the regulatory agencies themselves are independent bodies and report legally more to the Congress than they do to me. I can help to shape their basic policy by appointments to those boards—as is the case with Federal judges and so forth—but that's a long-range process—and, through my own public statements, can certainly help modify general attitudes on deregulation.

In the unique case of the airlines, I had a major input because of foreign policy considerations, and we rapidly deregulated the airline industry in international flights. And ! think that to the degree that that proved to be successful for the airlines themselves, for passenger loads and so forth it made it easier for us to pass legislation deregulating the domestic airline industry.

I think on deregulation, I would have to characterize myself as the one who has the broadest perspective and who makes the ultimate judgments, which may disappoint you, but I hope it doesn't. [Laughter]

Let me say in closing that I'd like to stay with you. I know you have other business to carry out. But I'm very deeply grateful to you, and I hope that my performance is meeting with your approval. I have many groups and many distinguished Americans who give me aid and assistance, advice and counsel, criticism, and you are in the forefront of those people. I trust your judgment. I will have to make the ultimate decisions that affect our country.

Sometimes a particular request or suggestion of yours runs counter to other interests that I have to accommodate, but in general, I think that we have grown to understand and respect one another in the last 2 years. And I hope that you will feel that through your organizational leaders or directly to me or through my Cabinet officers or agency heads or advisers, that you have a constant access and easy access to the decisionmaking portion of the Federal Government.

I'm indebted to you. I look forward to working with you closely in the future, and I hope that you will not take lightly my direct, personal request that you not only adopt but encourage others to adopt the voluntary guidelines on wages and prices that I have put forward. That is the best thing that you can do for me at this point. And if you fail me in that, then I would be not quite so grateful in the future as I am now. [Laughter]

Thank you.