Remarks Upon Signing Bill To Permit Increases in Interest Rates on Insured Home Loans

Secretary Weaver, Members of Congress, Mr. Clarke, Mr. Rogg, my friends the Home Builders:

I have not been too closely in touch with homebuilding recently, but I can tell you about a nice house where there is going to be a vacancy in January.

It is a good location. You have a 4-year lease, with an option to renew at the pleasure of the landlord.

It is very close to where you work. We have a playroom for dogs, children, and grandchildren--and, Helen, for godmothers. Open occupancy, too. I am particularly glad that you homebuilders timed your meeting to come to Washington at this period. As you know, I am getting ready to move from my present residence, and I thought that some of you might want to give me some tips on how to remodel a home on the range for one of the unemployed, or maybe how to purchase a home on the Avenue for Presidents at Palm Springs.

I have come here to sign a measure that I think is of vital importance to all the people who want to build or who want to buy homes.

It empowers our distinguished Secretary, Mr. Weaver, and the Administrator of Veterans Affairs to adjust interest rates on FHA and GI home loans to changing market conditions for the next 17 months. Those market conditions are changing and they are going to change more if we don't get a tax bill soon.

Thanks to this particular act, the veteran who has come home from Vietnam, the young wage earner who is on the way up in life, or the family that is seeking escape from the ghetto will find it easier to buy a home.

I think you homebuilders should know that I am very proud of America's home loan programs. They have helped to fulfill the dream of home ownership for 16 million American families, but unrealistic and arbitrary interest ceilings can cripple these programs.

The bill we will sign today which Congressman Dorn and Senator Randolph, and others, have helped to pass and brought here, will prevent that.

This bill, important as it is, though, cannot guarantee the prosperity of the homebuilding industry because homebuilding, like every other industry, flourishes best in a well-balanced and an expanding economy.

The past 7 years of unprecedented prosperity have shown what a free economy can do. We have created 10 million new jobs. We have added nearly $250 billion to our real output per year.

This increase alone is more than the United States was able to produce in any year up to 1939.

Now, that is very significant, and I hope all of us understand it. We are not saying you never had it so good. We are just saying that the increase in your gross national product has been more than the entire gross national product was in the year 1939.

So that is one of the things that your industry has contributed toward and the economics of this country have contributed toward. It is something we really don't want to lose.

We had a situation like that in 1929, and we did lose it very shortly. We can lose it here if we are not careful.

The real income of the average American has risen 31 percent. That is a bigger gain than in the previous. 19 years combined.

For the past 5 years of our period of prosperity, homebuilding was one of the leaders in the advance. It contributed to our prosperity and it also benefited from our prosperity. We were building at least a million and a half homes a year, and we showed that the housing industry need not suffer the sharp ups and downs.

But in 1966 the performance took a sharp turn for the worse. Homebuilding sagged to the lowest level in 20 years.

Thousands of builders were deprived of their livelihood and their profits were wiped out. Hundreds of thousands of Americans lost their opportunity to buy or to build better homes.

The need for homes has always been there and the income was there. But the mortgage credit, which is the lifeblood of homebuilding, was nowhere to be found. We just couldn't get credit to build the homes that we needed and that we had the income to pay for.

We could have avoided this if we could have passed a tax increase. I knew it and the homebuilders knew it.

I called together the leadership of the Congress and they told me we couldn't get four votes in the entire committee of 25 for the tax bill.

I called together the business group of this country, some 300 businessmen. There wasn't a one of them who would raise his hand for a tax increase.

I called together the labor people and they did not favor a tax increase.

In 1967, though, we went ahead and urged the Congress publicly to pass it.

In August 1967 we repeated the recommendation.

In January 1968 and again in March of 1968 we have done the same thing.

The sad lesson of history is that it has this meaning: It is time to show that America has learned its lesson.

While we have let this tax bill languish, we have seen mortgage interest rates go from 5 1/2 percent to 7 percent and even 8 percent. Three years ago, no one would have believed that an 8 percent mortgage rate was possible in the United States. But today interest rates are nearing the highest point in 50 years and I think this is something that should disturb every American. If we do not act now, an even worse shock is in store for you. I want to warn you about it.

If we do not act, 10 percent mortgage rates are not outside the realm of possibility, according to the best economists who can see into the future. Tight money is the price that we pay for excess deficits and our refusal to act on a tax bill in wartime. We have never had a war during which we wouldn't pass a tax bill. But now, for 3 years, we have said first, we didn't need it; second, that we couldn't afford it; third, it would hurt the economy; and fourth, we ought to take care of spending first. One excuse after the other.

Only responsible fiscal policy can check inflation and prevent another disastrous credit crunch. Yesterday's long-awaited action by the House Ways and Means Committee gives us some hope that we can soon have a realistic tax bill.

I congratulate the Congress and the committee on that action. I asked the leadership this morning to please ask each conferee to stand up and do what is best for his country.

If we must cut $4 billion in expenditures to get $10 billion in taxes, we will do it. But if you cut more than $4 billion, you involve great dangers. If the Congress will go along and take the action on the 10-8-4 formula, if some individual can find another $2 billion that he can cut, he can always offer that in an amendment the rest of the year and let the Congress vote on it.

I think that we just must act now to chart a course of fiscal prudence. We are willing to accept the 10-8-4 formula that the Appropriations Committee of the House voted and that the Ways and Means Committee voted yesterday.

We think we must do that if America is to fulfill her promise to her people, and most of all, her responsibility to the world.

Today our economic future is being decided up here on Capitol Hill. We have come to a crossroads. One road leads to stable economic expansion.

We have had 87 months of the greatest prosperity any nation has ever known, and the only time in all of our history we have gone this long. Why must we just sit idly by and reverse that and go back downward? The other road leads to a feverish boom. One road leads to stable prices; the other road leads to a step-up in inflation.

One road leads to easier credit; the other leads to soaring interest rates.

We have already paid more in extra interest rates and extra costs and extra high prices than we would get out of the whole tax bill.

With these choices before us, I believe this Nation will travel the road of reason, the road of restraint, the road of prudence, and the road of responsible fiscal policy.

I hope America will travel the right road, because America must. I am doing everything I know how to give the Congress and the country the kind of leadership they need in this trying hour.

I have never thought that tax bills were popular. I have never relied on polls for them. You can ask anybody, "Do you favor a tax increase?" and the answer will be "No."

But if you ask them, "Do you favor a tax increase, or do you favor increased inflation, increased prices, and increased fiscal ruin?" that is a different matter.

I think the average person in this country is a prudent person and a fair person. We cannot fight a war in our cities, we cannot fight a war on poverty, we cannot fight a war on ignorance and illiteracy and disease, we cannot fight aggressors in Vietnam and reduce taxes at the same time.

Yet I want to show you what we have done. [From this point on, the President referred to a series of charts to illustrate his points.]

These are the individual income tax rates. Now, when I became President, the person who made $1,000 a year was paying a 20 percent rate. We reduced that to 14. The person who earned from $2,000 to $4,000 was paying a 20 percent rate. We reduced that to 17. The person who made $8,000 to $12,000 was paying 26 percent. We reduced that to 22 percent.

The person who earned $44,000 to $52,000 was paying 59 percent. We reduced that to 50 percent. The person who was earning over $400,000 was paying 91 percent. We reduced that to 70 percent

If we had the same tax rates that we had when I became President, before we got into the difficulties that we have, the extra expenditures, we would take in $24 billion more this year.

Now, I am not asking you to go back to the rates that we had here under the Kennedy administration and the Eisenhower administration. I am asking you to just go back enough to get not $24 billion, but $10 billion of the $24 billion. That is all.

Here is the corporate tax rate. This is your corporate tax rate. I reviewed these this morning with the leadership.

The corporation that had earnings of $25,000, we charged them 30 percent. We reduced that when we came in to 22 percent. A corporation here was paying 52 percent. We reduced that to 48 percent. Now we are just asking for a part of it.

Here is your personal income. Let me show you what we were doing.

Here is where we were when we came in. That is the income in America. I hope every one of you will see that. When you really "poor mouth" and you feel sorry for yourself, think about your mother and your father and what they did in 29 to '31.

Here is what you have done. You have gone from $466 right here to over $700. That is during these 4 years. You have almost doubled your personal income. Congressmen have not doubled theirs, but the country as a whole has doubled it. Maybe the reporters have not doubled it. But the facts are here: from $466 to a little over $700. That is personal income.¹

Here is your corporate profits. Let's see about your income to your corporations. They were a little under $60 billion; here they are over $90 billion. Up 33 percent in 3 1/2 to 4 years.

Here is your personal income and your tax receipts. Here it was $466. Then it moves up to $498. Then $538, $584, $626, and that is '67; '68, you remember, goes up to $700.

Here are the tax receipts. All the time the income was going up, even though we reduced taxes, tax receipts went up.

This is the last one, the corporate profits before taxes and income tax receipts. Here is the corporate profit. This is what they made after taxes. You see, when we came in here in '63 how much they had to make? They made $60 billion and we took only $20 billion. Here they got $66 billion and we took $24 billion. Here they got $76 billion and we took $26 billion. Here they made $83 billion and we took $31 billion. Here they made $80 billion and we took $33 billion. Look at this line here, the blue line.

So those are not going down. Now, if you want to keep them going up, every businessman I know, every labor man I know, every economist I know who is a student of this situation, they tell us that if you have a gross national product running over $800 billion, with the expenditures that we have to make in the cities, in Vietnam, and our poverty program, if you would avoid inflation, if you would avoid runaway prices, if you would avoid high interest rates, if you would avoid a slump in the homebuilding industry, then you must have a moderate tax bill.

We have had it in every war we have been in. We must have it now.

I don't know what is going to happen, but I am going to do my best. I hope that all of you will do yours.