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Press Briefing with Senator Mondale in Plains, Georgia

July 28, 1976

Governor Carter. This morning, Senator Mondale and I are going to divide up the responsibility on the briefing that we had yesterday on economics. Later, we're going to have a full session on tax reform.

I thought we would divide it into three parts and then let you ask us questions on those subjects or others.

In the first place, the Nixon-Ford Administrations have been responsible, in my opinion, for a major part of the nation's economic woes. Their standard policy is to depend on a small recession to deal with the problem of inflation. And it has been evident on many occasions that their small recessions degenerate into very large recessions. Their response to this has been, under both Nixon and Ford, to assume that a 7 to 8 percent unemployment rate was normal for our country and they presently have that rate of about 7.5 to 7.6 percent with no prospect before the end of next year, according to their projections, to get it below 7 percent.

In addition, the inflation rate now is the highest it has been since 1952 and, under present conditions, it is still up around 5 percent and as you know, is increasing.

Under the Ford-Nixon Administration we've also had the highest peacetime deficits in the history of this country. And had it not been for the Congress, which Senator Mondale will cover in a few minutes, it would be much worse.

One of the reasons that they have been so unsuccessful is the lack of purpose or the lack of policy or lack of planning or goals for our country to achieve in the field of energy, agriculture, transportation, economics. There is no certain purpose in our nation's growth or tax policies, or any other policies. This has a lot of additional adverse effects. When President Nixon, with a great deal of fanfare, in the fall of 1973, announced "Operation Independence," we were importing about 25 percent of our oil. In March of this year, under Nixon and Ford, we imported over 50 percent of our oil. And so, what they've done is to aggravate potential problems that exist. This has had other very serious, adverse effects in addition to those which fall to every family with inflation and those families that are unemployed because of the problem. The interest rates which are always high in a Republican Administration are now still very high with 9 percent being a good, an optimum interest rate on mortgages. And our balance of trade has now degenerated from a very high surplus to almost a negative figure this year. We do have a slight surplus of goods and services, we have a slight deficit now on goods alone. And of course as I mentioned yesterday, a lot of this surplus is derived from excessive sales of weapons overseas. The last point that I would like to make is this; we have lost confidence in the programs that the administration now has decided to put forward for dealing with unemployment. Including the recent bill that was passed over President Ford's veto, we are spending about $7 billion a year just to provide jobs for people. But in many ways, the Nixon-Ford Administrations have made it obvious that they don't really believe in these programs. They are not pushing them aggressively and of course this results inevitably in the failure of programs that have been financed by Congress, most often over Ford or Nixon's veto. These are some of the problems that have befallen us because of the policies of the present administration.

Senator Mondale will now comment on how the Congress and the President have worked together in the past and how the Congress has helped to overcome some of these problems. Then I'll come back in a minute and outline some of the additional things that we propose to do in the next administration if we are successful this year. Then we'll open the session to questions.

Senator Mondale. Despite the fact that even now, we have the highest inflation in 18 years, the highest unemployment since World War II, except for a few spots in the Eisenhower years, it would have been much worse had not the Congress fought the Nixon-Ford Administration economic policies in the midst of a very, very deep recession. We must recall that it was President Ford's proposal not to decrease taxes on the average American, but in fact to increase them. And we had to resist that policy. Then when we finally persuaded them to reduce that, the proposal was for a very modest tax cut most of which was supposed to go to the very high income Americans—persons with $40,000 or more, and it was to terminate in a single year. We fought that policy and deepened the tax cut, made it progressive, so that the average American got some relief from inflation and was able to buy goods and services that were needed.

In the interest and credit field, the Congress has consistently and strongly pressured the Federal Reserve Board to back off its high interest and tight credit policies, and while they're still much higher and less accommodating than they should be, I think there's probably a more forthcoming Federal Reserve policy, almost as surely would have been the case, had it not been for congressional pressure. In addition to that, the Congress rejected the strong and consistent advice of the Nixon-Ford Administration that there should be deep and profound slashes in the federal budget for human programs and particularly for jobs. And most of the vetoes have been in that area, and we've had a strong struggle to try to keep some of those programs going in order to provide employment, in order to provide some relief for persons of average income. And that is an additional source of strength in the economy today. Finally, the administration, over a year ago, and people sometime forget this, proposed the immediate—immediate, I underscore that—deregulation of oil. So that overnight the price of oil was soared to the Arab price levels on U.S. produced oil. That would have added something like $400 to the cost of living for every family in America. We were able to head that off after a long and bitter fight. So that despite the unimpressive performance of today's economy, in which both unemployment and inflation are excessive, it would have been far worse had it not been for the insistence of the Congress in these crucial areas.

Governor Carter. The last thing I'd like to do is to establish for you the results of our long discussions yesterday, and outline the goals we hope to achieve, with, I think, a very good chance of success, and then list 10 or 12 things—I haven't counted them—that would lead to the achievement of these goals.

Our first goal would be full employment for all those who are able to work in this country. We analyzed in depth how this might be achieved with a minimum adverse impact on inflation, and by targeting the emphasis on job opportunities in certain sectors of the unemployed Americans, we believe and the economists who advised us yesterday believe, that we can reduce unemployment by a full 1 percentage point without having the adverse effect of inflation compared to what would be the case if it was a broad based approach. So unemployment reduction is one goal.

The next one is to achieve an inflation rate of 4 percent or less. This is by the end of the administration.

Third, is to have a balanced budget. I believe that this is an achievable goal and is one that would be a good achievement to be sought. And I would be deeply committed to this under normal, economic circumstances. And we believe that our projections, based on studies of the Wharton School of Business, by the conference board, and others, is that the budget can be balanced and any surplus generated can be spent to carry out the promises of the Democratic Party platform.

Fourth, a steady growth. We project a conceivable growth rate conservatively speaking of 4 to 6 percent per year.

And the last goal, that we would attain is to stabilize a percentage of the gross national product which is absorbed by the public sector through taxes and is spent by the public sector. It has been growing in recent years and is now about 20 to 21 percent and we would hope to level off the percentage of our gross national product that's collected through taxes and spent by the public sector.

Now, how to do these things. One would be to have as a major goal, not just the control of available money supplies, but the stabilization of interest rates. High interest rates are a very serious problem in expansion of industrial capacity, the generation of new job opportunities, particularly important in a field like housing or construction. To have long-range policies on economics, agriculture, energy, transportation and so forth, which we do not have now. Third, is to do everything we can to increase competition within the business sector. By rigid enforcement of the antitrust laws, and by giving as much attention as we can to removing unwarranted regulation to protect industry and emphasizing the advantages to be derived from regulation for the consumer.

To redefine the purpose of our strategic stockpiling. In the past, we have had strategic stockpiles based exclusively on national defense. But we need to maintain adequate stockpiles in some strategic goods, I can name any one of them, that would be conducive to stabilizing prices on products that fluctuate wildly on the international market. Third, strengthen the Council on Wage and Price Stability and to increase our efforts through jawboning, through persuasion, through involvement of labor and industry, and to hold down voluntarily unwarranted pressure on the economy through rapid rises in prices or wages. The first step would be to strengthen the Council of Wage and Price Stability.

This is a very important consideration that we discussed at length yesterday and that this is to increase investment by the business community through equity financing as compared to debt financing. There has been a major shift in the past number of years, particularly under the Ford-Nixon Administration toward a dependence on debt financing.

And the last thing that we discussed was a more accurate and current inventory of jobs that are available to be filled, matched accurately with the output of our vocational and technical schools, other educational institutions, and the job capabilities of those who are chronically unemployed.

One point that I forgot to mention is the increase again in the impetus in our own country on research development. We have now fallen far behind countries like West Germany and Japan on the amount of research and development that goes into increasing productivity for efficient means erf generating goods and services.

Most of our research and development now in this country is going into defense and space. But the orientation of more research and development funds into better productivity would be, we believe, a way to pay rich dividends.

Those are some of the policies of the Ford-Nixon Administration, the goals that we've established, the history of what the Congress has done in the past and their contention over some of these same questions and some of the means that we would use to achieve those goals. And now both Senator Mondale and I will be available to answer questions.

Q. Do you as yet have any specific ideas as to how you would deal with the Federal Reserve Board. Whether you would ask for any statutory changes in the present system?

Governor Carter. I personally favor retaining the independence of the Federal Reserve Board. The only request that I would make for statutory change is to let the chairmanship term be coterminate with the term of the President. I might say that I would strengthen the interrelationship between the Federal Reserve Board, the Council of Economic Advisers, the President, perhaps the leaders in Congress—Ways and Means and Finance—of course the Commerce Department and others involved in the inventory of economic strength in this country and long-range planning. But that's the only change that I would advocate for the Federal Reserve Board itself.

Q. You wouldn't foresee any problem in getting interest rates to the level that you want them with continued independence of the Board?

Governor Carter. No, I think not, because there is an adequate flexibility in the President's budget and the congressional budget when it's finally decided, and also the availability of tax changes that might be derived from the Ways and Means Committee in the House that would help to change interest rates. There are also studies going on with which I am not thoroughly familiar about increasing competition in banking facilities. Giving savings and loan institutions the right to maintain demand deposits and pay interest on them, and also to permit commercial banks as they presently exist to pay interest on demand deposits. But there are other matters that can be pursued to stabilize perhaps the lower interest rate level.

Senator Mondale. In my acceptance speech, I talked about the deadlock of American democracy, this deep gap which existed between the Executive and the Legislative Branch. Perhaps in no other area has it been more expensive and costly to Americans than in the development of economic policy. Today, the monetary policy is basically the province of the Executive Branch—of the Federal Reserve Board. And fiscal policy, taxing and spending, being the province of the Congress. And they have been operating in a disjointed and even hostile and suspicious environment. And that's one of the key reasons that the economy has worked so poorly. Fiscal and monetary policy have to work together. And they have to be coordinated very carefully. There is a role for taxes and tax reform, and there is a role for government spending or government restraint. There is a role for credit, there is a role for money supplies. It has to be tied together in a balanced and steady— and I emphasize the word steady—policy. One of our problems has been this stop and go, up and down, uncertain environment in which business and workers have to operate. They do not know from day to day what our policies are going to be, because frankly we haven't had a government that could govern. And I think one of the most helpful things about the Carter Administration is that we'll have a single, coherent, coordinated economic policy, which we haven't had for years.

Q. Would you then support, as I believe you did last year, correct me if I'm wrong, a bill which would require the Fed to set money supply, M-l and M-2, according to congressional desire.

Senator Mondale. That was an expression of the futility of the situation. It makes a lot more sense to have a single, coordinated economic policy, with the Executive and the Legislative Branch cooperating. We said that at the time. But we couldn't get an answer out of the Federal Reserve Board. We knew that their money supply and credit supplies were bringing the American economy to a halt. It had created a depression in the housing industry, and in desperation, the only thing we could reach for was some kind of legislative resolution which if nothing else would embarrass the Federal Reserve Board toward a more accommodative policy. That is a very tough way to try to bring about a coordinated policy. And it didn't work. I think we embarrassed them some. But it is far more preferable— I mean, we did several things. We passed a resolution that tried to effect guidelines and all of it was designed in our frustration to get the Federal Reserve Board to help us get the economy moving again. And it is far preferable to have a single coordinated national economic policy which we would have under a Carter Administration.

Q. Has the Federal Reserve Board revealed their policies?

Senator Mondale. Yes, they started to reveal their projected money supply target But it would not be necessary if you had a cooperative arrangement.

Governor Carter. I might point out that yesterday Mr. Burns announced he was further tightening the money supply.

Q. Governor Carter, many economists in the present administration think there is an essential tension, if not a contradiction between your goals 1 and 2—full employment and inflation. I was wondering if you have any reservations at all about supporting the Humphrey-Hawkins bill, as obviously the Republicans do have great reservations about it.

Governor Carter. Well, the Humphrey-Hawkins bill, in my mind, is an expression of a commitment to full employment. Full employment as now being defined by the Congress. I haven't kept up with the day-by-day amendments to the Humphrey-Hawkins bill. I think that the latest amendment that has been introduced in the House is that this is 3 percent unemployment among adults, and adults are defined as a 20 year old or older. The thrust of the Humphrey-Hawkins bill is to have a coordinated approach to unemployment. To reduce it so those who are able to work will be able to find a job. Now, it's hard for me to comment on everyday's version of the Humphrey-Hawkins bill. It's a fact that the Humphrey-Hawkins bill has not cleared either the House or the Senate—it hasn't gotten out of committee yet, and I think the chances for it this year are highly doubtful. But the overall purposes of the Humphrey-Hawkins bill, yes, I do support it. I did not support the Humphrey-Hawkins bill when it was originally introduced.

Q. I wanted to ask, is your position essentially as it was in April when you announced that you did support it?

Governor Carter. When I expressed my support for the Humphrey-Hawkins bill, with the unemployment rate at the time as prescribed, and with a minimum of interference of the federal government in the private sector on planning, and with an emphasis on jobs in the private sector, and not in the public sector. I think the amendments, if you want to go into detail, I think the amendments have also been adopted by the House committee that does not require that wages paid to unemployed be equivalent to wages paid to those in the community. I think that was too rigid a requirement I do favor through the payment of the minimum wage, at least, to those who are unemployed.

Q. Governor, do you accept a definite goal—full employment means different things to different people. Do you use the Humphrey-Hawkins bill definition of 3 percent unemployment for people of 20 years or older?

Governor Carter. I think that's a reasonable definition. You have to remember that when you are talking about the unemployment rate now, it's 7 1/2 percent or more. To start arguing about the exact definition of unemployment when it gets down to 3 percent is really an ideal exercise, but I think as a goal, that's a good one.

Q. You also mentioned strengthening the Wage and Price Stability Board as one of your goals. Conceivably, could that strengthening process ever extend to the reinstitution of wage and price controls?

Governor Carter. I would favor, as a last resort, if all the other provisions failed, in sequence, the awarding to the President of wage and price control authority. I don't think that I would ever have to use it. But there are many things that can be done with a President that is trusted by business and labor within the present council, if it's strengthened, it would avoid any necessity for the imposition of wage and price controls. But if I considered it necessary, I would not hesitate to call for them.

Q. Could you amplify a little bit on the strengthening process? What would you like to see done with the Board as far as the Board's power goes?

Governor Carter. Let me just give you a couple of examples. Because I don't want to go into detail, I'm not qualified to do that yet. One would be our promise that wage and price increases be announced ahead of time—either 30 days, or 60 days or 90 days. Which would give the President, business and labor leaders, Members of the Congress, a chance to express their displeasure, their concern about those possible increases. In other words, it would be through consultations with labor, and consultations with business perhaps in the same forum, to get them to establish on an industry-wide basis voluntary goals, say no more than a 6 percent increase, for instance, per year. Another thing that could be done is to continue a policy which I personally favored under President Ford, of limiting wage increases for federal employees to a reasonable figure. I think this sets a good example for the private sector, and it's a very good and persuasive argument among the American people who are the ultimate arbitors in a question of this kind. Besides that, there are a series of things that can be done before you impose wage and price controls.

Q. You said you could reduce unemployment by 1 percent without realizing any adverse effects—is that correct?

Governor Carter. No, the economists yesterday had done a study at my request over a period of some months. Dr. Carolyn Bell was the one who had done this work. Their analysis showed that if you can target special groups of Americans who are unemployed, or perhaps special areas of our country where unemployment is greatest, then you can reduce the unemployment rate 1 percent or more without having inflationary pressures. Compared to the inflationary pressures that would result if all efforts on unemployment were blanket throughout the country. The targeting aspect can alleviate pressures of inflation.

Q. Are you saying that unemployment can be reduced indefinitely in a number of areas without having any inflationary effect?

Governor Carter. Let me just give you an example. If at a time you reach a 5 1/2 percent unemployment rate, which would be 2 percent less than it is now, you would have a certain degree of inflationary pressure at that level if the unemployment reduction effort was done broad base, nationwide, with no targeting. With targeting, and spending the same amount of money from the federal government which is now $7 billion a year, you could reduce the unemployment rate down to 4 1/2 percent and have the same level of inflationary pressure.

Q. May I ask you about the Federal Power Commission's decision yesterday on natural gas, Governor? Whether you agree with it and what you would do with it if you don't?

Governor Carter. I don't really know what they decided.

Q. It allows the deregulation of natural gas prices immediately.

Governor Carter. I don't favor that. The only deregulation that I would favor is to leave existing contracts in effect at the present level of price stability, many which go far beyond the year 2000, and deregulate for a limited period of time.

Q. About your remarks on federal employees. Because Presidents Ford and Nixon consistently did not accept the recommendations of the board, which is set to recommend comparability pay raises for federal employees. Are you saying that you think a federal employee ought not to get an increase to keep him comparable with the civilian employees for the same job?

Governor Carter. What I'm saying is, that as an overall part of the example, if the influence of the President is any good, his policy on federal employees can be a guideline to be used to encourage the private sector to restrain wage and price demands.

Q. You are saying, then, are you not Governor ...

Governor Carter. Let me use my language and you use yours.

Q. I'm not clear on what, at the moment, Senator Mondale can correct me on this, there is a Board which is set, a comparability board, and it comes up with the recommendations. The President then accepts it and sends it to Congress and Congress may try to override the President's request. The last one, where they should have gotten 8.66 percent according to the formula, the President recommends 5 percent, because it was tied in with that congressional business about raising their own salaries. I am trying to find out whether you would accept comparability or whether you would ask federal employees to, in effect, take a cut, an inflationary cut, which you then are saying is an example to private business.

Governor Carter. I would leave that option open to set an example with reduced increases for federal employees if it was part of an overall agreement with labor and industry in the private sector to hold down inflationary pressures.

Q. I don't know if you got into this broad range of subjects, but was there any long-range thinking about equalization of opportunity, what the whole thrust of your economic policy would be, in broad social terms?

Governor Carter. Yes, one of the studies that we'll be continuing is continual analysis of the roughly $180 billion that the government now spends on income transfers. And how this can best be used with the existing amount of money through welfare reforms, the elimination of unnecessary programs and other income transfer to provide more equity and opportunity. I would not hesitate to use some aspect of tax reform as a part of this composite approach to the right of people to have an adequate income. My heavy emphasis would be that those who can work ought to work. But among those who cannot work, then I think we have a long way to go to provide equity. So I would look at the whole proposition of tax credit, and of income transfer, that presently comprises roughly $180 billion as a composite amount to be used in an equitable way for income maintenance.

Jimmy Carter, Press Briefing with Senator Mondale in Plains, Georgia Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/347626

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