Radio Address About the Nation's Economy.
No aspect of our public life has a greater impact upon the way each of us lives than our national economy. Next week, I plan to send a special report to the Congress on the state of our economy. Today, I want to talk with you directly about the economic problems we have been experiencing in recent months and the directions we plan to take in the future-new directions which will strengthen our economy and which will benefit all the American people.
During the past 2 years, the economies of both the United States and the rest of the world have been through severe storms. There has been a sharp drop in world food production. There has been a boycott on oil shipments to the United States and other countries by major exporting nations. And there has been a steep rise in world prices, fueled in part by the oil boycott and in part by the economic boom in the industrial areas of the world.
As a result of these developments, the United States and the world are experiencing the highest rate of inflation in 20 years. We have seen a slowdown in production and employment. We have had the most radical change in international economic relations in peacetime that anyone can remember.
For some people, these changes have meant a severe strain on the family budget, shorter working hours, and even the loss of a job. But the majority of Americans have come through this period well. Look at some of these facts:
Despite a dip in the first 3 months of this year, resulting primarily from the energy crisis, personal incomes today--after inflation and after taxes--are still 14 percent higher than they were 5 years ago.
The number of Americans working today is at a record level, while the rate of those unemployed has risen only slightly. And the quality of life in America--the ability to feed, clothe, and house our people-has continued at a level which exceeds that of any nation in the world today--for that matter, of any nation in world history.
In view of the international stresses on our economy and the gloomy predictions that were widespread at the beginning of the year, this has been a good performance. More importantly, there are also encouraging signs today that the worst is behind us. The storms are abating. As the effects of the recent oil shortage have passed, the production level of automobiles has begun to rise again, and industrial production overall is showing an increase for the first time in almost half a year.
Our efforts to dampen inflation are also beginning to pay off. The chief causes of inflation last year and in the first few months of this year were the increases in food and energy prices. As the shortages of food have eased in the past several months, the wholesale costs of basic food items have declined sharply. Prices of wheat, corn, soybeans, beef, hogs, and chickens are all down.
There have been similar improvements in the energy picture. As the oil shortages have eased, the prices of gasoline and other oil products rose much less in April than in earlier months, and we anticipate a leveling off of these prices in the next few months. As a result of these changes in both food and energy prices, overall consumer prices in April rose only half as much as the rate of the previous 3 months. This is a hopeful indication that our efforts to curb inflation are having a positive effect.
Two weeks ago, I initiated new programs which would put up to an additional $10 billion into the financing of housing. If we are going to check inflation, we cannot quickly escape the disciplines of tight money and high interest rates. As we check the inflation, and lenders and borrowers come to expect less inflation, these interest rates will come down. But in the meantime, we must be sure that the burden of high interest rates is not concentrated too heavily on housing, because this hurts both the homebuilders and it hurts the home buyers.
I am confident that we will experience further improvements in the economy during the remainder of this year. We expect our output to rise and to rise at a more rapid rate. We expect the inflation rate to be significantly lower than the rate we have experienced in the past 18 months. And while there may still be some increases in unemployment before the rate begins to recede, we expect a further expansion of jobs for American workers.
All of these forecasts are soundly based, and they are encouraging, but it is not enough to rely upon forecasts alone. We must continue to do everything we can to assure that this economic progress comes about. To assist me in coordinating all economic policy and programs, I am announcing today the appointment of Mr. Kenneth Rush to be my Counsellor for Economic Policy. I have known Mr. Rush for almost 40 years; he is a man with a distinguished career in business, in the law, in diplomacy, and in the arts of government.
As my Counsellor here in the White House, he will hold Cabinet rank, and I will look to him to coordinate for me U.S. economic policy in both the domestic and international areas.
I am requesting again that the Congress provide permanent authority for a small, flexible organization within the Executive Office--a Cost of Living Task Force--to monitor wages, prices, industry bottlenecks, supply shortages, and other factors that bear on inflation.
The White House has already joined with Congressional leaders on a bipartisanship basis to study potential economic shortages of material other than oil and the steps necessary to deal with these problems. I hope that the results of that study will be available in about 6 months and that action can be taken to deal with that problem at that time.
As serious as the threat of material shortages to economic growth is the shortage of capital for investment. I have directed the Chairman of the Council of Economic Advisers to establish a high-level group which will be responsible for evaluating this situation and devising measures to deal with it.
In coming weeks, I will be meeting with major representatives of labor and business to discuss how we can work together to advance our efforts to reduce inflation.
That must be our first objective in keeping the economy moving ahead. We have to get the rate of inflation down, and we have to keep it down. Our policy of encouraging maximum food production will contribute to this goal. Last year, the Congress enacted the agricultural act which this Administration proposed to restructure the outmoded relationship between the Federal Government and America's farmers. We have substantially expanded the land in use by our farmers, and we have every reason to expect excellent crops this year. All this will help to hold down food prices.
Our policy of developing domestic sources of energy will serve as a deterrent to further price increases by oil exporting countries and will serve as a hedge against any further oil boycott. It should also permit the Federal Government to withdraw from the business of allocating petroleum products. And I have directed the Administrator of the Federal Energy Administration to provide me with a plan to do just that.
As you know, we have proposed Project Independence--a $10 billion program-for achieving energy self-sufficiency in America by 1980. In addition, there are 16 important energy proposals before the Congress, including a windfall profits tax on excess oil company profits. I urge the Congress to act on these proposals and to act quickly.
The combination of rising food prices and rising oil prices accounted for some 60 percent of the price increases of 1973 and early 1974. Our action in these areas alone should have a significant effect on the rate of inflation.
While we must avoid pumping up the economy into a new inflationary boom, we must also be concerned with those who are unemployed during this period of economic slowdown. In April 1973, over a year ago, I proposed a job security assistance act to raise levels of compensation for Unemployment and to extend compensation to farmworkers except on the smallest farms. This year, because of the rise in unemployment connected with the energy crisis, I proposed two additional improvements in the system. One would have given a 13-week extension of benefits, federally financed, in labor market areas of high unemployment. The second would have allocated Federal funds for benefits to the unemployed living in those areas who were not a part of the unemployment insurance system. Congress has not yet acted on either my 1973 or my 1974 proposals for job assistance. I urge the Congress to act on these measures which are so important to those who may be unemployed.
An additional consideration in controlling inflation--in fact, the key to controlling inflation--is the way we manage the Federal budget. Nothing is so certain to cause inflation as runaway fiscal policy. That is why I have placed so much emphasis on holding down Government spending. It may, to some, seem cruel or indifferent to object to enlarged spending programs, for the President to veto bills which would have the effect of massively increasing Federal spending, because almost all of these programs appear to have very desirable purposes.
But the fact is that higher spending by the Government, however desirable the immediate goal may seem to be, has a most undesirable impact in the form of higher prices. Such spending on the part of the Government may help some of the people, but in the end, it will hurt all of the people by raising prices for the family budget. It is therefore not an act of generosity on the part of the Government to increase spending. We now have a budget of $305 billion for the fiscal year that will begin on July 1. I believe this is a prudent budget, sufficient to cover the most important functions of Government. We must hold the line at this level of spending and even reduce it if we can.
The Congress and the Administration must act to insure that we do not initiate new and costly spending programs that commit us to rapidly rising expenditures in the future. One of the ongoing economic problems that we face today is the fact that past spending commitments continually frustrate efforts to manage the budget in a stabilizing way.
Possibly the gravest danger to the economy today is the threat of a general tax reduction. However popular that may be, nothing could be more irresponsible than to cut taxes in the present inflationary situation. The notion that a large tax cut can be given to the vast majority of the American people and that the money made up by taxes on a few people who are rich, or corporations, is one which holds great appeal---especially in a political year. But the tax which is transferred to industry simply comes back to the taxpayer in some hidden form, such as higher prices or lower pay.
Another temptation we must avoid is the call for cheap money by means of monetary expansion. All this will do will speed up the rate of inflation, and it will increase the cost of borrowing money. The requirements for full economic recovery may sound like harsh medicine--budgetary restraint, no tax cut, tight money-but there is no alternative if we want to keep down the cost of living--I wish I could tell you there is a way out of the present inflation without such measures, but there is not. We cannot spend our way to prosperity. Neither can we achieve prosperity of price stability by putting America back into a straitjacket of controls.
The American economy, like the American Government itself, is an instrument for achieving the purposes of the American people. We want to make that economic instrument as powerful and flexible as we can so that all of you, the American people, can achieve your goals, whether those be new automobiles, better medical care, or cleaner air. At the same time, a more productive economy is vital to our role of political, military, and humanitarian leadership in the world, leadership which is absolutely indispensable if we are to build a structure of peace, not only for America but for the whole world.
To make the American economy stronger and more productive will require more saving, more investment, more research and development, more advancement of the skills of the people, and a more effective economic organization. Many initiatives of this Administration are directed to these purposes. I would mention specifically our suggestions for reform of financial institutions, for improved manpower training programs, for reform of educational finances, for expanded research and development, especially in the field of energy. I also want to emphasize the importance of Congressional enactment of the trade reform bill which I have proposed.
This is vital not only to strengthening the American economy in the long run, but it will also provide the United States Government the means to play its proper role in the development of the world economy. We are beginning to emerge from a very difficult period in the history of our economy. We are not completely through this difficulty, but all the economic indicators prove that we are making encouraging progress.
The weeks ahead will still require restraint and sacrifice, but the ultimate goal of prosperity in peacetime, prosperity without war, is one which is worthy of sacrifice. It is attainable. It will require the fullest cooperation between the Administration and the Congress, and I can pledge to you the complete cooperation of the Administration with the Congress in achieving this goal.
It will also require the fullest cooperation of labor, of business, commerce, and industry, and of you, the American people. I am asking today for your cooperation. I am confident that we can, together, achieve our great goal of prosperity in peacetime.
Thank you and good afternoon.
Note: The President spoke at 12:07 p.m. from Key Biscayne, Fla. The address was broadcast live on nationwide radio.
On the same day, the White House released at Key Biscayne, Fla., an advance text of the address and an announcement containing additional biographical data on Mr. Rush. The announcement is printed in the Weekly Compilation of Presidential Documents (vol. 10, p. 551).
Richard Nixon, Radio Address About the Nation's Economy. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/255640