Newspaper Page Text
— Griffin Daily News Thursday, July 19,1973
Page 8
Excerpts from Nixon’s Phase IV program
WASHINGTON (UPI) - Ex
cerpts of President Nixon’s
statement Wednesday on the
aims and actions of Phase IV of
his economic stabilization pro
gram:
The American people now
face a profoundly important
decision. We have a freeze on
prices which is holding back a
surge of inflation that would
break out if the controls were
removed. At the same time the
freeze is holding down produc
tion and creating shortages
which threaten to get worse,
and cause still higher prices, as
the freeze and controls con
tinue...
The main elements in the
policy we need are these:
First, the control system
must be tough. It has to hold
back and phase in gradually a
large part of the built-in
pressure for higher prices
which already exists in the
economy.
Second, the system must be
selective. It must permit
relaxation of those restraints
which interfere most with
production, and it must not
waste effort on sectors of the
economy where stability of
prices exists. The control
system should also be designed
to accommodate the special
problems of various sectors of
the economy under the strains
of high use of capacity.
Third, the system must
contain sufficient assurance of
its termination at an appropri
ate time to preserve incentives
for investment and production
and guard against tendencies
for controls to be perpetuated.
Fourth, the control system
must be backed up by firm steps
to balance the budget, so that
excess demand does not
regenerate inflationary pres
sures which make it difficult
either to live with the controls
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The Program
The Cost of Living Counci
will describe the Phase I\
controls program in detail ii
statements and regulations
These will take effect at varioui
times between now ant
September 12. They will include
special regulations dealing ‘witl
the petroleum industry, pub
lished for comment. Here I will
only review the general fea
tures of the program, to
indicate its basic firmness and
the efforts that have been made
to assure that production
continues and shortages are
avoided.
The controls will be man
datory. The success of the
program, however, will depend
upon a high degree of voluntary
compliance. We have had that
in the past. Study of the reports
on business behavior during
Phase II shows that voluntary
compliance was almost univer
sal. Nevertheless, the rules we
are now proposing are stricter,
and it is only fair to those who
will comply voluntarily to
assure that there is compulsion
for the others.
Except for foods, the freeze
on prices will remain in effect
until August 12. However,
modifications of the freeze rules
will be made to relieve its most
serious inequities.
The fundamental pricing rule
of Phase IV is that prices are
permitted to rise as much as
costs rise, in dollars per unit of
output, without any profit
margin on the additional costs.
Cost increases will be counted
from the end of 1972; cost
increases which occurred ear
lier but had not been reflected in
prices may not be passed on. In
addition to the cost rule, there
remains the previous limitation
on profit margins.
Large firms, those with
annual sales in excess of
$100,000,000, will be required to
notify the Cost of Living Council
of intended price increases and
may not put them into effect for
30 days. During that period, the
Council may deny or suspend
the proposed increase.
The wage standards of Phase
II and Phase 111 will remain in
force. Notification of wage
increases will continue to be
required for large employment
units.
Special Case of Food
Nowhere have the dilemmas
of orice control been cleared
than in the case of food. In the
early part of this year, rising
:il food prices were the largest
V part of the inflation problem,
in statistically and psychological
s. ly. If price restraint was needed
is anywhere, it was needed for
id food. But since the ceilings were
le placed on meat prices on March
h 29, and especially since the
> freeze was imposed on June 13,
11 food has given the clearest
i- evidence of the harm that
o controls do to supplies. We have
d seen baby chicks drowned,
e pregnant sows and cows,
n bearing next year’s food,
e slaughtered, and packing plants
closed down. This dilemma is no
coincidence. It is because food
prices were rising most rapidly
e that the freeze held prices most
below their natural level and
therefore had the worst effect
1 on supplies.
s
? We must pick our way
V carefully between a food price
- policy so rigid as to cut
j production sharply and to make
, shortages inevitable within a
) few months and a food price
) policy so loose as to give us an
i unnecessary and intolerable
bulge. On this basis we have
! decided on the following special
t rules for food:
, 1. Effective immediately
s processors and distributors of
food, except beef, may increase
their prices, on a cents-per-unit
i basis, to the extent of the
increase of costs of raw
i agricultural products since the
freeze base period (June 1-8).
2. Beef prices remain under
present ceilings.
3. The foregoing special rules
expire on September 12, after
which time the same rules that
apply to other products will
apply to foods.
4. Raw agricultural products
remain exempt from price
control.
To relieve the extreme high
prices of feeds, which have an
important effect on prices of
meat, poultry, eggs, and dairy
products, we have placed
limitations on the export of
soybeans and related products
until the new crop comes into
the market. These limitations
will remain in effect for that
period. But permanent control
of exports is not the policy of
this government, and we do not
intend at this time to broaden
the controls beyond those now in
force...
Process of Decontrol
There is no need for me to
le reiterate my desire to end
g controls and return to the free
st market. I believe that a large
i, proportion of the American
1- people, when faced with a
d rounded picture of the options,
r share that desire. Our experi
e ence with the freeze has
h dramatized the essential dif
e ficulties of a controlled system
:, —its interference with produc
t tionj' its inequities, its distor
t tions, its evasions, and the
j ' obstacles it places in the way of
, good international relations.
, And yet, I must urge a policy
, of patience. The move to
> freedom now would most likely
i turn into a detour, back into a
I swamp of even more lasting
' controls. lam impressed by the
unanimous recommendation of
I the leaders of labor and
business who constitute the
Ixibor Management Advisory
Committee that the controls
should be terminated by the end
of 1973.1 hope it will be possible
to do so and I will do everything
in my power to achieve that
goal. However, I do not consider
it wise to commit ourselves to a
specific date for ending all
controls at this time.
Balancing the Budget
The key to success of our anti
inflation effort is the budget. If
federal spending soars and the
deficit mounts, the control
system will not be able to resist
the pressure of demand. The
most common cause of the
breakdown of control systems
has been failure to keep fiscal
and monetary policy under re
straint. We must not let that
happen to us.
I am assured that the Federal
Reserve will cooperate in the
anti-inflation effort by slowing
down the expansion of money
and credit. But monetary policy
should not, and cannot, be
expected to exercise the needed
restraint alone. A further
Idea backfires
MOSCOW (UPI) - A state
farm in the Ukraine sought
maximum efficiency by its
harvester drivers by handing
out pay packets in the fields, to
prevent delays in work.
But the newspaper Pravda I
Ukrainia said Tuesday that the I
idea backfired when several
drivers abandoned their harves
ters, hopped onto tractors and 1
drove to the nearest village to
buy vodka.
contribution from the budget is
needed.
I propose that we should now
take a balanced budget as our
goal for the present fiscal
year...
Achieving that goal will be
difficult, more difficult than it
seems at first. My original
expenditure budget for fiscal
1974 was $268.7 billion. Since
that budget was submitted
economic expansion, inflation
and other factors have raised
the estimated revenues to about
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the level of the original
expenditure estimate.
However, while that was
happening the probable
expenditures have also been
rising as a result of higher
interest rates, new legislation
enacted, failure of Congress to
act on some of my
recommendations, and
congressional action already
far advanced but not
completed.
It is clear that several billion
dollars will have to be cut from
the expenditures that are
already probable if we are to
balance the budget. That will be
hard, because my original
budget was tight. However, I
regard it as essential and
pledge myself to work for it.
Despite the difficult condi
tions and choices we now
confront, the American econo
my is strong. Total production
is about 6.5 per cent above a
year ago, employment has risen
by 3 million, real incomes are
higher than ever. There is every
prospect for further increases
of output, employment and
incomes. Even in the field of
inflation our performance is
better than in most of the world.
So we should not despair of our
plight. But we have problems,
and they are serious in part
because we and the rest of the
world expect the highest
performance from the
American economy. We can do
better. And we will, with mutual
understanding and the support
of the American people.