Interview in "Business Week"

Q. What is your priority for the United States in economics?

Governor Carter. I think the major priority of the next administration has got to be employment. My own belief is that we can get the adult unemployment rate down to 3 percent, or the overall rate down to 4.5 percent, without any adverse effect on inflation.

Q. How would you attack unemployment?

Governor Carter. My thrust would be in the private sector. Wherever there is a choice between channeling jobs in the private sector or the public, I would favor the private. Quite often, you can get a great magnification of benefits from public money by spending it in the private sector. You don't get much magnification in jobs provided within the federal government.

Q. How would you use the private sector for job creation?

Governor Carter. In a community that had a high unemployment rate, for example, I would explore the possibility of sharing with industry the employment of perhaps all of their employees for a shorter work week. The government and industry would then share the extra costs involved.

Q. You recently endorsed the Humphrey-Hawkins full employment bill. Why did you wait so long?

Governor Carter. I didn't approve of it the way it was originally written. With a mandatory total unemployment goal of 3 percent, taking in all age groups, most of my economic advisers thought that would mean double-digit inflation. And although in its original form the bill professed to make the government the employer of last resort, in effect it placed the government almost as an employer of first resort.

Q. What do you mean by employer of last resort?

Governor Carter. In areas of very high unemployment I wouldn't wait until we tried everything else and found that it failed before I would provide jobs for young people. For example, I would favor not only the summer job program but also in the urban areas a reinstitution of an effort similar to what we did with the Civilian Conservation Corps and the WPA.

Q. Would you lower the minimum wage for teenagers?

Governor Carter. No; quite often they are not part of a family structure. There is no unemployment compensation for them; there is no welfare program when they reach the age of 18. They're forced out in the world [with] the same economic needs as a 45 year old.

Q. Humphrey-Hawkins would also put the government into long-range planning. What's your view of economic planning?

Governor Carter. I believe in long-range planning so that government, business, labor, and other entities in our society can work together if they agree with the goals established. But at least it would be predictable. I don't favor the federal government making plans for the private sector mandatory.

Q. Is a special agency needed for this type of planning?

Governor Carter. No; I would use the Office of Management and Budget.

Q. Your ideas for reducing unemployment would seem to feed the inflationary bias in the United States. How would you control inflation?

Governor Carter. I don't agree with your premise. A lot of the inflationary pressure in the past few years has been transient. The quadrupling of oil prices in 1 year, the heavy demand for scarce commodities, the unwarranted sale of excessive amounts of grain to the Soviet Union. Most of my advisers believe that you could reach a low unemployment level with a stable inflation rate of, say, 3 percent or less.

Q. Would you use wage and price controls?

Governor Carter. I would like standby wage-price controls. My guess is that I would never use them. But I would like them as a lever. I wouldn't hesitate to use them if I had to.

Q. Many people think the major cause of inflation is big federal deficits. How do you stand on the budget?

Governor Carter. We can have a balanced budget by 1980 if I'm President. There is no way now to estimate benefits to be derived from top competent management of the government.

Q. Could you cut spending sufficiently to balance the budget just by improving the operation of current government agencies?

Governor Carter. That's obviously part of it. Also by harnessing the tremendous economic resources of our country to stimulate government income. We're operating now at maybe 70 percent or less of capacity in our plants, and we have 8 million to 10 million people out of work.

Q. Every President since Eisenhower has complained about the government bureaucracy. Do you have anything in mind that would enable you to handle this problem better?

Governor Carter. Total, commitment to that goal. My word of honor is at stake. The country is ready for it, and I know how to do it. I intend to go to the convention strong enough to shape the platform of the party, and better management in government will be one of the major issues I'm going to insist on.

Q. In Georgia you cut agencies from 300 down to 22, and now on the federal side you want to cut from I £00 agencies down to 200. Yet after you got through in Georgia, why did you end up with 30 percent more employees and a 50 percent bigger budget?

Governor Carter. The last year I was in office total employees increased only 2.4 percent. We were able to cut administration costs and shift people to more productive jobs. I promised state employees that no one would be discharged as a result of my reorganization. But I did reserve the right not to fill vacancies as they occurred. And I would do the same thing as President.

Q. You're talking about more efficient government, not necessarily smaller government?

Governor Carter. That's right.

Q. What changes would you propose in tax policy?

Governor Carter. I believe the next President ought to assume the responsibility for complete tax reform. One provision would be to tax income basically the same—tax capital income and earned income in the same way. I'd also seek a drastic simplification of the tax system by removing many of the incentives that have been added over the past 70 years to cover transient circumstances. I would go to direct grants that could be reconsidered annually rather than building them into the permanent tax structure. I also favor taxing income only once, and would want to reinstitute a progressive tax rate so that the higher the income a person or corporation earned, the higher the rate of taxation.

Q. What do you mean when you say you believe in taxing income only once?

Governor Carter. I don't think it's right to tax corporate income and then also tax dividend income.

Q. If you change the taxation rate on capital gains, what do you think this would do to the flow of investment?

Governor Carter. I don't want to be evasive, but I can't answer that question. But before the tax reform package would be completed—it probably would take at least a year of analysis—I would be fully aware of the need for investment capital. That's about as far as I can go now.

Q. What do you think of the proposal of Walter Wriston [chairman of Citicorp] that we throw out the tax code and start from scratch?

Governor Carter. I read his proposal and several others like it, but I don't think this approach would provide adequate equity. Some people have very low incomes and need to be protected.

Q. Are you against the homeowners9 mortgage interest deduction?

Governor Carter. No. I have said that this is one of the tax incentives I would consider changing. But I believe we do need some incentives for private homeownership. If I made any changes, I would maintain stimulation for housing but shift the tax credits more toward lower and middle-income families.

Q. What would you do for housing?

Governor Carter. I would utilize mortgage guarantees, and I favor interest subsidies—if you give me the flexibility to say what interest level should be subsidized. This program would let the government assist the homeowner when mortgage interest rates get above a certain level, paying the difference between the free market level and some fixed lower level.

Q. Do you think the Federal Reserve Board has been too restrictive on money supply and that this has kept housing sluggish?

Governor Carter. I think the Fed was too restrictive in 1973 and 1974, though now it's probably not. But I don't favor destroying the autonomy of the Fed. I think there is enough flexibility built into it.

Q. You said in your Chicago foreign policy speech that you favor joining certain international commodity agreements. Why?

Governor Carter. What I meant was that I favor long-term agreements with other nations, particularly those in the developing world, to stabilize their markets and the amounts they ship. I don't favor indexing, and ( would be much more leery of multinational commodities agreements.

Q. But agreements in which you set shipments and prices are cartels and tend to add to the inflationary bias in world trade.

Governor Carter. If you establish price supports for domestic crops equivalent to production costs, I don't consider that inflationary. The inflationary aspect comes in when you have wild fluctuations in price. Whether you could call price supports equivalent to production costs a domestic cartel, I don't know. I'm not talking about international price supports. I'm talking about a multi-year trade agreement that would involve a relatively fixed price, with some flexibility, and a guaranteed purchase of a certain quantity of the commodity, again subject to fluctuations. If demand were greater than the amount for which we had contracted, then the price for the increased commodity might be higher or lower.

Q. There seems to be an ideological difference between the United States and other industrialized countries and the Third World. What LDCs really want is a redistribution of income.

Governor Carter. The crucial word there is indexing. I would not favor tying prices paid for bauxite, coffee, sugar, or metals to an inflation rate to provide a guaranteed income for the developing nations. I think you ought to be able to negotiate prices, and the free market ought to control prices.

Q. Who would do this, the government?

Governor Carter. I don't see any reason for the U.S. Government to do it. Private companies could negotiate.

Q. If you endorse the current U.S. farm system, why do you want to fire Agriculture Secretary Earl Butz?

Governor Carter. Butz is a completely unpredictable person. He has not been honoring the commitments that were made. For instance, I would rather have done without the soybeans myself in 1973 than go back on a contract with Japan. And I would never use food as a weapon or withhold sales of food to a foreign country, if we had adequate supplies on hand, merely for domestic political purposes.

Q. Doesn't that give away a terrific international negotiating chip?

Governor Carter. I would not single out food as the single commodity to be used as a bargaining lever or weapon. If I wanted to negotiate with Russia on commodities they wanted, it would also include electronics, Pepsi-Cola, heavy machinery, and other materials.

Q. Do you favor extending the most-favored-nation principle to the Soviet Union?

Governor Carter. That's a question I can't answer. I would like to see every pressure maintained on Russia to liberalize its emigration policies toward Jews. I think that can best be accomplished through private negotiations.

Q. What changes would you like to see in energy policy?

Governor Carter. I would continue to import oil at least at the present level. I would let the Arab countries know that if they declare another embargo on oil shipments to us, we would consider this an economic declaration of war and would respond quickly with a boycott against them.

Next, I would shift toward coal as quickly as I could, using government inducements if necessary. I would increase dramatically the amount of research and development funds that go into solar energy. I would favor strong conservation measures, including mandatory efficiency of autos, better insulation of homes, changes in the rate structure of electric power companies. I would continue to use atomic power as a last priority, and with strict conservation and safety protections required. I favor the deregulation of natural gas for a limited period of time, leaving existing contracts at the lowest price levels intact.

Q. How would you reconcile the differences between the environmentalists and the coal companies?

Governor Carter. I favored the strict stripmining bill that was vetoed by President Ford, with a couple of exceptions.

Q. What about air standards that would permit you to burn coal?

Governor Carter. I would not favor the lowering of air pollution standards.

Q. But isn't that a contradiction? How will you get more coal use with existing technology?

Governor Carter. I don't agree. I think we are now burning clean coal, and there's a lot more where that came from.

Q. Do you favor breaking up the integrated oil companies?

Governor Carter. Breaking up the oil companies as a major goal would be counterproductive. At the wholesale and retail level, I think divestiture ought to be considered, unless I was assured as President that there was an adequate amount of competition at those levels. In the exploration, extraction, transport, refining, and distribution of oil, I think divestiture would be counterproductive.

On horizontal divestiture, there again I would seriously consider it, unless I were convinced that there was adequate competition in the production of coal and uranium.

Q. How would you help New York City out of its financial bind?

Governor Carter. If I am elected President in November, I would immediately start to work with the Governor, the mayor, and our advisers to formulate a contract to be signed by me to resolve New York City's financial difficulties.

I don't believe we could do it in less than 6 years. But it would require several basic elements. One is to guarantee to my satisfaction that accurate projections were being made on an annual basis for both income and expenditures. Second, after a period of time, the budget would be balanced. Third, bonds already sold and those to be sold would be sound. Fourth, the state and local governments would jointly assume responsibility for those factors.

I would use the federal government to guarantee the integrity of New York State's bonds, not New York City's, under which circumstances the bonds would not be tax-free. I don't think that revenue-sharing should go to states. I think it ought to go to local governments. And I don't think that, in the long run, local governments should pay any portion of welfare costs.

Q. Would you change the welfare system?

Governor Carter. Yes; I would. I would not completely federalize welfare. To do so, it's estimated it would cost about $20 billion, which would add to the federal budget without improving the quality of the system at all.

We now have about 12 million welfare recipients who are permanently drawing payments; we've got about 2 million welfare workers—a worker for every six recipients. Of the 12 million, about 1.3 million are fully able to work.

They're not afflicted in any way and don't have dependent children. I'd take that 1.3 million out of the welfare system entirely and place them under the responsibility of the Labor Department and HEW, give them job training, literacy instruction if they can't read and write, the services of private and public job placement agencies, and match them with jobs. If they're offered a job and don't take it, I would not pay them any more benefits.

The others can't work full-time. They ought to be treated with decency and respect, for a change. They ought to be given a fairly uniform nationwide payment, one payment to meet the basic necessities of life. There ought to be a work incentive aspect built in, so that a mother with two little kids and the father dead can get a part-time job, and she ought to be encouraged to do so and not lose her welfare. We ought to remove elements of the welfare system that force a father to leave the home. I think everything the government does ought to be designed to bind the family together, not separate it.

Q. How do you categorize your brand of economics? Are you a Keynesian, monetarist, or what?

Governor Carter. How would you describe me? I don't know.