Interview with A. James Reichley and Ann Hengstenberg of "Fortune Magazine"

Q. Governor, what would you do to deal with inflation in the economy?

Governor Carter. I would proceed aggressively, with the first emphasis on jobs. My economic advisers and I agree that until you get the unemployment rate down below 5 percent, there's no real danger of escalating inflationary pressures. I would also favor additional money supply, carefully controlled, but I think a little more than we've had in the past 2 years.

Q. You think the money supply should now be increasing more rapidly?

Governor Carter. I do. I think there was an overreaction in 1973 and 1974 to the rate of inflation, which was caused primarily, I think, by transient and external circumstances—competitive' bidding for scarce commodities, increases in the price of oil, and so forth.

Another thing that I think should be done to control inflation is a tight, businesslike management of the government mechanism itself—a complete reorganization of the structure of government, the institution of zero-based budgeting which would screen out old and obsolescent programs, and a heavy emphasis toward a balancing of the budget.

Q. Would you resort to wage and price controls under any circumstances?

Governor Carter. I would like to have standby wage and price control authority that could be used for a limited period of time, but I doubt that I would ever use it I know that Arthur Bums has advocated that this authority be permitted for a period of 45 days. This would permit the President, or his surrogates, to try to reach an accommodation with management and labor to hold down preemptory increases in wages or prices. But I would not favor mandatory or permanent wage and price controls. My philosophic commitment is to a freer economy.

Q. How far do you think you can get inflation down?

Governor Carter. I don't see any reason why the permanent level of inflation can't be as low as 2 or 3 percent. If we get down below 4 percent unemployment, you would have very high inflationary pressures as you tried to reach lower and lower levels of unemployment. I think that most analyses have shown that if you reached a level of, say, 3 percent unemployment through government or private sector efforts, the inflation rate would probably rise above 10 percent.

Q. Do you mean in the short run or do you think that’s a permanent characteristic of our economy now?

Governor Carter. Well, I was talking over the next 4 or 5 year period.

Q. You think you can reach 4 percent without inflationary pressures?

Governor Carter. I think you can go below 5 percent without inflationary pressures.

Q. Somewhere between 5 and 4 percent you might run into some problems?

Governor Carter. When you get down around 4 percent, perhaps you might. But you're talking about 3 or 4 years in the future.

Q. You say you feel the supply of money should be increasing more rapidly. Do you think we should continue to have an independent Federal Reserve?

Governor Carter. I do. I think that the present system has enough flexibility in it. I would not want to remove the independence of the Federal Reserve Board. The Congress can modify the income tax laws to give temporary stimulus to the economy through investment tax credits, tax rebates, and so forth. And the President, through his appointments to the Federal Reserve Board, his selection of the chairman every four years, his public statements and private consultations, has an adequate degree of ability to modify policies up and down in an effective way.

Q. How would you go about the creation of more jobs?

Governor Carter. In the first place, contrasted with some of my opponents, I would consider the private sector the primary supplier of jobs. I hope that everything the government does will be oriented to magnify the influence of taxpayers' money by providing more jobs in the private sector. For instance, we should allocate research and development funds to the industries that are inevitably going to arise in the future. One example would be solar energy, where a small investment in research and development money can result in a very rapid increase in numbers of jobs—literally tens of thousands of jobs.

Another thing that I would do would be to have a complete reorganization of the structure of the federal government, to make it, for a change, economical, efficient, purposeful in management. The bureaucracy is now an obstacle to any sort of economic progress. I think it would help a great deal to have a mechanism by which we can clearly define goals and purposes. The predictability of government policies and goals is very important to industry in such areas as automobile manufacturing or housing.

I would also promote the aggressive sale of American products overseas. We don't do this nearly so much as other countries do. I spent a lot of my time as governor traveling around in foreign countries trying to sell Georgia products. When I've been on these trade trips, I've seen small countries, like Bulgaria, or large countries, like France or Germany or Russia, with delegations comprised of government, industry, labor, and agriculture, saying, this is what we have to offer you, what can we do to make you our customer. Right on the spot, they can trade with those potential buyers for delivery schedules, the quality of merchandise, the price, interest rates, and repayment terms. As governor, I was never able to get any sort of answer from Washington on those same questions. It really incapacitates our ability to sell American products overseas.

Also, I would remove some of the tax incentives and other incentives that have encouraged American corporations to manufacture products in foreign countries, when their own employees in this country are out of work. Other nations don't do this, but we do.

Q. Would you remove such incentives if that made it impossible for American companies to compete abroad—even if they wouldn't manufacture more of those products in this country anyhow?

Governor Carter. I wouldn't want to paint my picture in black-and-white terms— to say I would go all-out to remove all incentives. The thing that concerns me is that if a company makes a million dollars in Germany, if they reinvest that million dollars in a new shoe manufacturing plant in Italy, they don't have to pay taxes on it in this country. I think that's an unwarranted discouragement of that company to bring its capital profits back to this nation and to invest in a new shoe factory in New Hampshire, where you have a very high unemployment rate within that same company's employees. I have not analyzed the consequences of my beliefs adequately, in economic terms—I will before the general election—but that's the kind of thing that does concern me.

Also, there are some options in the identification of a country within which a profit is made that I think are unwarranted—so that if a company actually makes a profit in one country overseas, they can claim to have made it in a different country and reduce their taxes paid in this nation. That I think is not called for. I would be cautious about that change, but I think we ought to recognize that American corporations have a responsibility for employment in this nation, and that the sole motivation for their moving to other countries ought not to be to avoid pollution-control restraints, or to seek cheap labor.

Q. Would you have the government intervene directly to create jobs?

Governor Carter. I would provide direct federal job opportunities in some categories of the unemployed—for instance, chronic welfare recipients who have no defect to keep them from working. I would get them off the permanent welfare roles and into productive work. I would train them, give them literacy instruction, the services of private and public job placement agencies— match them with a job and offer it to them. If they didn't accept it, I would not pay them any more welfare benefits.

I would also like to try some things of an innovative nature that are working in other countries. One example would be if you had an area of high unemployment, a geographical area, and a company that had 1,000 employees, and they had to lay off 100 employees temporarily, I would like to see the government and that industry, on a competitive bid basis perhaps, for a short period of time, like 6 months, employ all the people there for a shorter work week, and let the government and the industry share the extra cost.

Q. Would you provide public jobs for people, other than those chronically unemployed, who weren't able to find jobs in the private sector?

Governor Carter. I don't believe we can afford that, on a permanent basis. This would create in our nation an inclination to circumvent the private sector, to depend on the federal government as a first supplier of jobs, and it would be extremely expensive. It costs about $12,500 to supply a job for a person in the public sector. But there are many other things that could be helpful. For instance, a federal-city guarantee of bond repayments for public works construction is the kind of thing that could stimulate the construction industry. A guarantee by the federal government of home mortgage repayments would help a great deal. The construction of low-cost rental homes would help a lot. The guarantee or payment of interest subsidies above a certain level for home mortgages would have a direct impact on the housing industry. But I would not want to use massive public jobs programs except in an extreme case, and I believe that as President I could avoid that circumstance.

Q. Do you think public jobs have a tendency to freeze up the job market, in that the person who takes a public job does not look for a job in industry?

Governor Carter. Yes; I do. It creates an atmosphere or an attitude of permanent commitment and a dependence on the government for jobs, and I just don't think that's a good thing for us to do, unless we get into an extreme and apparently permanent circumstance with high unemployment. I think we can reach a level of unemployment in the neighborhood of, say, 4 percent, with a well-managed government, and with good cooperation from the private sector.

Q. Do you favor the federalization of welfare?

Governor Carter. I don't think we can do that. But I do think the federal government and the state governments ought to take over the full responsibility of welfare. I don't think the local governments ought to have that responsibility on them. And as increased costs of welfare come in the future, I think the federal government ought to take an increasing responsibility for those financial costs. But it would be too much of a burden to put on the federal government now to take over all the states' portion. It would just mean that the state governments could reduce taxes and you'd have an enormous increase in federal expenditures but no increase in the services to our people.

Q. Do you think we need more planning in the overall economy?

Governor Carter. I don't like the prospect of government planning that would be binding on private industry, but my own experience in government is that planning ought to initiate at the executive level, with the President and his office, or with the governor of a state. Second, the goals and policies established ought to be publicly divulged. And they ought to be constantly amended as goals are reached or priorities are changed so that the private sector—business, industry, agriculture, and so forth—can cooperate with the government in the evolution of their own long-range plans. I don't favor government domination of private industry with government plans.

Q. What should be the approximate balance between government and private shares of the GNP?

Governor Carter. Well, the government share has been steadily growing. My inclination would be to attenuate the growth, at least. My hope would be that we could hold down or reduce the government proportion of the GNP compared to what it would have been if I wasn't in the White House. I can't promise you that I'll stop it or reverse it, but I'll do what I can to hold it down.

Q. What would you do about tax reform?

Governor Carter. I think the nation is ready for comprehensive, total tax reform. This has been advocated by people from a wide spectrum of basic political philosophies—all the way from the Brookings Institution to William Simon. There are four basic principles that I've adopted. First, to treat all income the same. Second, to tax income only once. Third, a progressive tax rate. And fourth, to greatly simplify the whole system.

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

Governor Carter. Well, we presently tax corporate income when it's earned and we also tax the dividends paid to stockholders.

Q. You would favor not taxing dividends?

Governor Carter. I would favor taxing income only once. Whether I tax it at the corporate income point or dividends—I would like to keep that option open. I don't favor taxing the same income twice.

Q. Do you favor taxing capital gains the same as other income?

Governor Carter. Yes; I would tax all income the same.

Q. Would you tax accrued capital gains on inheritances?

Governor Carter. That is a question I would rather not go into until I have examined it more closely.

Q. You have indicated you would eliminate many of the current deductions on the income tax. Can you say which ones you would eliminate?

Governor Carter. No; that is something I want to avoid. I'm perfectly willing to accept the criticism about not being specific, but I don't know how to be specific yet I would rather wait until I spend a considerable amount of time with a large number of advisers analyzing the entire tax structure, and then I want to propose it as one tax reform measure. I would like not to get pinned down on a particular promise, or commitment, until I can look at the entire concept in a generic sense, in a comprehensive sense.

Q. What about the deduction for interest on mortgages that favors homeowners?

Governor Carter. I haven't ever said I would keep it as an income tax deduction. I've said I would keep the same amount of incentive for homeownership, or more. I think the $10 billion figure to encourage private homeownership is a very good thing—whether it would be done through the income tax structure or another mechanism, I don't know yet. If I make any change in it, it would be to increase the figure, or if I make any change in who gets the benefits, it would be to give low and middle-income families more benefits than they get now.

Q. Have you given any thought to how you would shift the benefits to those families?

Governor Carter. Yes; I've given it some thought. But there again I don't want to get myself into a position of discussing one little tiny part of an overall tax reform package. I'm just not qualified yet. I would want to do it at one time, so that the people could see a balance of where they might have to pay more in one area and get benefits in a different area. That would be OK. But if they only hear about the part that they'll pay more and don't hear about the compensating element of reduction in tax rates, that just creates consternation and concern, and it's a bad political thing to do. I'm not qualified yet to say what specific aspect of a tax reform package I will maintain maybe 2 years in the future after I've had a chance to go into the concept.

Q. Do you think we should have more emphasis on antitrust?

Governor Carter. Absolutely.

Q. How would you go about applying that emphasis?

Governor Carter. Well, one way would be through enthusiastic enforcement of the present antitrust laws. I would like to get the Attorney General out of politics, and not have any constraint on the Attorney General about which antitrust laws are enforced. I would also like to abbreviate the procedures through which the antitrust laws are administered. It takes too long now for the courts to reach a final determination. There are some areas of antitrust laws that I think are inadequate—both in the procedural approach and also in the exact measurements of a lack of competition. The food processing industry is one that concerns me very much.

Q. What about the oil industry? Would you be in favor of breaking up so-called vertical integration in the oil industry?

Governor Carter. The problem of the oil industry that concerns me is at the wholesale and retail end. I don't think I would favor divestiture of the exploration, extraction, refining, maybe even the pipeline distribution areas. But at the wholesale and retail end, I would probably favor divestiture requirements to insure adequate competition, which I don't think exists now.

Q. How about horizontal integration? Would you be in favor of getting the big oil companies out of the ownership of other energy resources?

Governor Carter. There again, my belief is that the present movement of oil companies into, say, ownership of coal mines is not good for the country. I would favor divestiture to the extent that I felt it was needed to provide for a continuing and very enthusiastic competition, and also to the extent that I thought it would encourage increased coal production. I think in some instances coal production has been constrained deliberately by the oil companies, to hold up the price of oil and to hold up the price of coal. We've not had any increase in coal production in the last 4 or 5 years, and I think that's part of the problems, although it's not all of it

Q. Several months ago you told us that breaking up General Motors would not be one of your goals. Does that still represent your thinking?

Governor Carter. Yes; it does. There are a lot of other things that I would devote my time to doing rather than trying to break up a company just because it's large. I might discover as a candidate, or as President, that General Motors was constraining trade or was monopolistic in its attitude, in which case I would publicly demand that antitrust be enforced in that particular area. Or if I thought that antitrust laws were inadequate, I would do all I could to get new laws passed.

Q. Do you feel that there's too much federal government regulation in the economy at the present time? In the transportation industry, for instance?

Governor Carter. I certainly do. I think that in the transportation industry some of the rulings of the regulatory agencies are counterproductive to what's best for the consumers. And my primary interest, almost exclusive interest, would be what's best for the consumers of this country. I think competition among the carriers is not adequate. Also in my appointments to regulatory boards, I would lean quite heavily toward appointments that would favor the consumers. And I would try to minimize, to whatever extent possible, the sweetheart arrangements that exist between regulatory agencies and the industries being regulated. I think there's kind of a revolving door concept where people move freely back and forth between the regulatory agencies and the industries being regulated.

Q. Would you try to move back toward the market in the transportation industry where it's feasible?

Governor Carter. Yes; that would be a general trend of mine. If I thought that this gives unwarranted advantage to some of the more powerful carriers, which might ultimately result in a lack of competition, then, of course, that's where I would draw the line. That would be a matter of individual judgment on cases to the extent that I would have influence.

Q. Some people think that the newer kinds of regulations protecting the environment and health have cost the economy too much for the benefits that they provide. Do you think that there is a problem there?

Governor Carter. No; I don't. I was asked at the National Press Club the day I announced for President, "If there was a conflict that you couldn't resolve between economic development and environmental quality, what would you do?" And I said that I would go with environmental quality. Because it's an irreversible process. I've had experience as a businessman, as an environmentalist, as a governor for 4 years, eagerly recruiting new industry and trying to retain jobs for Georgia people, with some conflict extant between economic infusions into Georgia and environmental quality. I've always gone with environmental quality. I don't think it's hurt our state at all. And I think there's a growing awareness among our people that if there's an unequivocal commitment to environmental quality, obviously using common sense, that in the long run both industry, employees, the communities, and our nation are better off.

Q. Let me ask you two questions on labor policy. Do you favor repeal of the prohibition of common situs picketing?

Governor Carter. I don't know enough about it to answer the question about what I would do in the future. At the time the common situs picketing bill was on the President's desk, I was asked this question. And knowing that Truman, Kennedy, Eisenhower, Nixon, Johnson, and Ford—at that time— all promised to sign it, I said that if I was President, I would probably sign it. And I probably will. But I would like to be involved in the process of passing a future common situs bill. There are some things about it that concern me. One is the exclusion of an adequate opportunity for work for smaller businesses that might be deliberately frozen out of a job because of the common situs concept. And I also don't want to create additional disharmony in the construction industry. Now, I believe that I would sign the common situs bill, but I would like to make sure that the common situs bill that is passed and brought to my desk would be one that would assuage my concerns.

Q. And you have said that you would sign the repeal of 14-B [the Taft-Hartley Act section that permits states to prohibit the union shop], but you would not promote the repeal?

Governor Carter. That's right. And that's the same position I took as Governor. Of course, on a state level, you don't call it 14-B, it's the right to work. But, yes, that's the position I'd take.