Letter to Business and Labor Leaders on the Rising Cost of Living.
IN VIEW of the growing concern about the` rising cost of living, I would like to share with you at some length my thoughts about what is being done and what we must do to curb inflation.
The danger of inflation is real; the cure requires some unpleasant medicine, patience on the part of all and self-discipline by the government, business and labor.
This Administration is determined to control inflation without imposing controls upon the economy.
Four great forces make up the free market: government, business, labor and the consumer. A government that tolerated huge budget deficits could not fairly heap the blame for the ravages of inflation onto any of the other market forces. It was past government policy that caused our present inflation.
That is why I have refused to look for a scapegoat amid the genuine national concern about the rising cost of living.
That is why I have insisted government put its own economic house in order before enlisting other forces in the fight against inflation.
Hard decisions had to be made to extend the surtax; to slash Federal spending by more than seven billion dollars a year; to drastically curtail construction commitments by the Federal government; to place a strong budget surplus in tandem with a restrictive monetary policy. Economic policy needed backbone rather than jawbone, and backbone is exactly what our record shows.
We have taken the unpopular road to earn back government's credibility in fiscal affairs, and by our actions we have shown that we mean what we say about cooling inflation.
Because of this record, everyone should realize that government will continue to do whatever is necessary in the future to curb the rising cost of living.
Because government's house is now in order, we can turn to business and labor to remind them that inflation is everybody's problem and fighting inflation is everybody's business.
It is in the interest of private business to consider pricing policies in the light of government's determination to check inflation. The business that commits errors in pricing on the up side, expecting to be bailed out by inflation, is going to find itself in a poor competitive position. Betting on ever-higher prices is a sure way of losing.
It is in the interest of every union leader and workingman to avoid wage demands that will reduce the purchasing power of his dollar and reduce the number of job opportunities.
Government has set the example of restraint, and will continue to set that example. When we combine labor restraint and business restraint, we can build a foundation for an on-going prosperity.
In curbing inflation, we must continue to move deliberately, with a careful eye on the unemployment picture. The percentage of our work force unemployed is more than a statistic, it is a human condition that deserves the close attention of every American.
New laws and new restrictions are not required, if we treat with respect the law of supply and demand. Government's recent action in the construction industry, to increase the supply of skilled labor and materials so as to curb the excessive expansion of demand, is a case in point.
Because we add no artificial controls does not mean that there are no controls in operation. The free market has its own controls on those who flout responsibility: loss of profits to the businessman, loss of jobs to the workingman. These are losses that responsible action can avert.
A sense of responsibility must be part of every prudent judgment concerning prices and wages, now that government has repudiated the previous inflationary policies. Price and wage decisions that anticipate inflation's continuing at or near present levels would be shortsighted, imprudent, and unprofitable.
For your own planning, the policy of this Administration in the fight against inflation will be:
First, to continue stern restraints on Federal spending.
Second, to insist on a tax system that has the capacity to generate enough revenues to cover spending outlays. I shall not tolerate, for example, a tax bill that would result in an irresponsible budget.
Third, to rely strongly on the forces of reason and moderation within the private economy, so that governmental intervention will rarely be necessary.
The ultimate consequences of runaway inflation--the bust that follows, with the suffering that accompanies huge unemployment--must never again be inflicted upon the American people. Instead, we will take every measure necessary to build a sound prosperity, temporarily unpopular as some restraints may be.
I would be interested in your own views as to how the private sector and government can work together in holding down the cost of living. In this cause---hard to explain, hard to achieve, but fundamental to the economy of our nation and the progress of our people--I trust that I can count on your support.
Note: This is the text of identical letters addressed to approximately 2,200 business and labor leaders throughout the Nation.
Richard Nixon, Letter to Business and Labor Leaders on the Rising Cost of Living. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/239825