Question-and-Answer Session on Economic and Fiscal Matters in "Business Week"

Q. Republicans in Kansas City [at GOP National Convention] charged that five programs that you've talked about would cost more than $100 billion and would cause personal taxes to rise by 50 percent. How do you respond to the charge that you're a big spender

Governor Carter. Well, I've never been a big spender. I've always been careful with my own money and careful with whatever taxpayers' money I had under my charge. They are trying to cover up their mistakes. I intend as President to achieve a balanced budget by 1980. With a modest growth in gross national product to about 4 percent to 6 percent a year, and an unemployment rate of 4 percent to 4}/2 percent at the end of that time, with careful planning and meticulous detail work, and phasing in the programs that we've evolved, we would have a balanced budget by 1980.

As to welfare reform cost, I think our total net cost would be much less than the roughly $17 billion that we're spending this year on welfare payments and unemployment compensation. Health programs? I don't think the net cost to our country would be any substantial greater figure.

I would be very careful in phasing in programs in accordance with available income. I think eliminating gross waste in government, duplicative programs, excessive numbers of agencies, would save a great deal. So there would be no disturbance to our national economy, no need for an increase in taxes to carry out the promises that I've made.

Q. We've heard that you are considering holding government spending to around 21 percent of GNP, near the current level. How would you impose this restriction and still fund the programs you've talked about?

Governor Carter. Well, that's a goal for me, and I'm not sure about the 21% figure. The existing percentage of federal government spending compared to GNP has been fairly stable over the last couple of decades, and that would be a goal that I would set for myself. There will be very careful pacing of initiation of new programs as old ones are phased out.

Q. This talk of savings reminds us of the Vietnam "peace dividend" is there a chance that these savings will also disappear?

Governor Carter. The savings are there to be realized. I don't say that we're going to cut that much out of total spending and give it back to the taxpayers, but to help programs be more efficient. I think we have now some 300 programs in health, administered by about 76 agencies. There's no way now to decide in Washington who's responsible for errors, who is in charge of the management of government. A clear delineation of authority, a reduction in the number of agencies responsible for the same function, combined with a reassessment of priorities on an annual basis under zero-based budgeting would result in substantial savings. We figure that over a four year period we'll have at least an increased income for the federal government—not in savings, but in dividends—of about $60 billion cumulatively.

You know, I'm a businessman ... and I'm very conscious always of costs, projections, balanced budgets, and that will be part of my consciousness as President.

Q. Recently, we've detected from some of your staff that they are equating the fight against unemployment with the fight against inflation. How do you think that you can carry out these two apparently contradictory efforts?

Governor Carter. I don't believe that they are contradictory as far as inherent characteristics are concerned. When President Truman went out of office, after enormous drains on our economy, with the Marshall Plan, with the Korean War, aid to Turkey and Greece, and so forth, we had an inflation rate of less than 1 percent. We had an unemployment rate less than 3 percent. Interest on a home loan was 4 percent. The budget, over his six or seven years in office, was balanced. There was an average surplus of about $2.4 billion. Now we have had an average inflation rate of almost 7 percent under Nixon and Ford and the highest unemployment rate we've ever had since the Great Depression. This shows that they're not necessarily countervailing forces. When inflation goes up, under Nixon and Ford, unemployment has gone up along with it, and there's such an enormous drain on our economy just to finance the cost of people not being at work. Presidents Nixon and Ford have tried to fight the evils of inflation with the evils of unemployment. This has brought the highest combination of inflation and unemployment in this century. So I don't think there's an inherent economic law that says when inflation goes up, employment goes down, or vice versa.

Q. To fight inflation, you said that you would like to attack the supply side. How do you get the private sector to go along and get involved in the supply side, to prevent capacity bottlenecks?

Governor Carter. It's hard for me to answer that question. There are supplies of different types. One would be automobiles. Another would be food, another would be recreation, and so on. Some of those are determined directly by the government at all levels; others are almost exclusively the prerogative of business. I don't see how the federal government could tell the business sector to produce more autos or more motor scooters, or more bikes, but I think at the same time a more predictable government policy on taxation, transportation, regulatory agencies, energy, exports, imports would have a greatly beneficial effect on the confidence of the business community as it made plans for the future ... As a matter of general philosophy, my own belief is that the best way to control inflation is not to make money scarce, not to try to drive interest rates up, and not to try and keep people out of work and depend on welfare and unemployment compensation benefits to meet those hardships, but rather to put our people back to work, to hold interest rates down, and keep our economy growing, at a reasonably high rate.

Q. You have said that you thought that wage and price increases should be announced 30 or 60 or 90 days in advance and that labor and management should set voluntary price goals. What kind of mechanism do you have in mind to make this work?

Governor Carter. I would like to keep the present Council on Wage and Price Stability intact. I would like to meet with business and labor leaders and ask them to exercise voluntary restraint. If they could communicate with each other on a regular basis, maybe through me, and just lay down some general voluntary guidelines that they would pursue, let the council be informed 30 day or 45 days ahead of time for projected, substantive price or wage demands, and let the pressure of public opinion be focused to see whether or not the need is justified—that in itself would have a greatly beneficial effect.

Q. Do you foresee then, in addition to this prenotification procedure, voluntary price or wage guide posts?

Governor Carter. Yes, what I would like to do, and what we are doing now in an embryonic way, is to talk to business and labor leaders to find out what sort of guidelines they would self-impose. I think the President can induce business and labor leaders to say publicly, "We'll try to hold down our price increases, our wage increases, to this level."

Now, I can't tell you what the figure would be. I want them to be involved in the initial decision about what their voluntary restraints might be.

Q. In a recent speech you promised to maintain farmers9 income while insuring stable prices for consumers. How do you do this and how much would it cost?

Governor Carter. It wouldn't cost any more than it costs now. All of the target prices, all of the loan prices that prevail now in the agricultural industry are substantially less than prevailing prices for farm products. The thing that we have suffered under with Agriculture Secretary [Earl L.] Butz and lack of leadership in the White House is unpredictability—the farmers don't have any idea what we're going to do next.

We oversold wheat in '73 because Butz didn't know how much the Russians were buying, and he didn't realize that our own reserves were so low. This was a major inflationary factor. But the farmers want to produce, they want to sell. The average American thinks that if we sell a bushel of wheat to Russia, you're taking bread out of their kids' mouths. But we are now exporting 60 percent of our total wheat production. We export 50 percent of all our soybeans, 50 percent of all our rice, 25 percent of all our com. And if this were predictable, if the markets were assured, if our customers knew they could buy good quality grains from us, it would help a great deal.

The other point I make is this. We've had disgraceful performance in grain quality inspection because Secretary Butz and President Ford have blocked the professionalized inspection service. They still permit private inspectors, representing companies whose directors serve on the boards of the grain exporters, to be responsible for the quality of wheat that we ship overseas. Butz and Ford are blocking the shift away from private grain inspection for export. This is the kind of thing that really disturbs the farm community.

Q. In your acceptance speech, you said, "It's time for a nationwide, comprehensive health program for all our people" What kind of program do you have in mind, and how much will that cost?

Governor Carter. As I said earlier, the net cost probably won't be substantially greater. My own inclination is to have a package of basic health care that's available to all Americans. Whether it's financed by large groups in a major corporation like Kaiser or U.S. Steel or through private insurers, or through general revenues, that's not very important to me. Coverage to indigents would be funished by the government. But there would be an emphasis on preventive health care, which we don't have now. There would be a tight control over any sort of charges for hospital care or doctor's care under reasonable levels of cost. But to participate in the program, doctors would have to adhere to peer review, doctors checking on doctors' prices.

Another thing that we need to do is to use more medical personnel in addition to medical doctors, and have a broader distribution of medical care for people that don't get it now. Along with the initiation over a period of time, three or four years of the kind of health programs that I've described to you, with the private sector doing as much as possible, I think that we could have no substantial increase in overall health care cost. There might be some additional cost to the federal government, maybe $10 billion.

Q. In the few countries that have comprehensive health insurance, the usage of the health services has gone up. Have you thought about what that would do to costs?

Governor Carter. I have, a great deal. There have been studies made by the Rand Corporation, the Brookings Institution, by governmental agencies, that show that this is not necessarily the case. We now have tremendous pressure on the part of doctors, hospitals, insurance companies, to put people in long-term care. I read some statistics the other day that show that a person who goes to the hospital in Brooklyn, the average stay is 13 days. The person who goes to a hospital in San Diego with the same medical problems has an average length of stay of four days. You have twice as much chance of being operated on if you go into the hospital in Brooklyn as you do if you go into the hospital, say, in Michigan. Many insurance policies won't pay off if you get outpatient care. You've got to be an inpatient, with tremendous additional cost, before you can get coverage.

Q. Many of the suggestions you have made concerning U.S. relations with the Third World have been tried by the Ford Administration. Do you believe that commodity price deals can be negotiated with the less developed countries?

Governor Carter. Yes. I can't guarantee that I've got the answer to every question. But I do think that the best approach is to have a better bilateral relationship toward developing nations, and not treat them as a homogeneous group, which they aren't. Let them know that we understand their problems and send top diplomatic officials to represent us in their nations. Treat them with respect, jointly search the trade items that might be exchanged more readily. Lower the barriers to their finished goods, keeping in mind all the time that we have to keep our people employed, and have long-range trade agreements with them, arranged through the private sector.

I strongly believe that the best approach to the developing countries is in increased trade, building up their own economies, long-range mutual agreements, and some increase in our stockpiles of basic commodities, which will tend to level out the wild fluctuations in price.

Q. One of the first problems you may face if you9re elected is a 15 percent hike in oil prices by the OPEC countries. How would you handle that?

Governor Carter. Well, we can't go to war over it. The one thing that we can do is to reduce our consumption of oil. Hopefully, by next year we'll have the oil pipeline from Alaska in operation, which will help. [So will a] shift toward coal and a shift of ... our oil purchases as much as possible to more stable suppliers.

Q. You have spoken of the need to stabilize or reduce the present worldwide consumption of oil. How can this be done without interfering with economic growth?

Governor Carter. Lots of ways. We now use about 70 or 71 quads of energy [1 quad = 1 quadrillion Btu] in this country. It's estimated by several independent groups that the total consumption will be in the neighborhood of 100 quads by the end of this century. So the growth is going to be fairly modest compared with what we've experienced in the past.

We can [also] shift toward coal. At the present rate of consumption, we've got about 300 years of coal in this country alone. [But] we don't have any strict conservation measures yet. Conservation has got to be implemented regardless of what else we do about energy.

So to summarize, I think we need to shift from oil to coal, have strict conservation measures, have an additional emphasis on solar power. The Oak Ridge people, who primarily are into atomic power, say anywhere from 2 to 8 quads can come from solar power by the end of this century. The Federal Energy Administration says as much as 20 quads—I think that's probably too optimistic. And then whatever energy needs we can't make up with those methods, we'll have to make it up with atomic power.

Q. You appear to oppose the deregulation of natural gas prices immediately. How would you stimulate the exploration? for natural gas in the United States?

Governor Carter. I have advocated the deregulation of new natural gas for a limited period of time—four to five years—and [said that] at the end of that time we should reassess to see if the deregulation should be extended. This would involve continuing the present contract prices and commitments for the delivery of natural gas and the renewal of those contracts as they expired at the existing price. This deregulation of newly discovered natural gas would be an incentive to explore. We are wasting too much natural gas because of the extremely high intrastate prices and the very low interstate prices. I favor the increased price of natural gas in the interstate market.

One other adverse factor is the unwarranted shift of industry that uses natural gas as a heat source or as a basic raw material toward those few states that produce natural gas. This robs New England; it robs all the other states of a fair competitive chance to get those kinds of industries.

Q. You told the AFL-CIO that housing is in a slump, and you talked at great length about the high cost of construction. How would your program of guaranteeing mortgages and subsidizing a portion of mortgage interest rates cope with the problems of high housing costs?

Governor Carter. One of the reasons that houses cost so much is that there are so few of them being built. In multi-family home units in July alone, there was a 30 percent decrease in housing starts. Overall, there was a 9 percent decrease in that month alone. Ordinarily, we've been producing about 2 million houses per year. Last year we only produced about 1 million new home units. We've got about an 18 percent unemployment rate in construction. We don't have any government programs that are predictable except the Section 208 program, which subsidizes rent. Inevitably, we're going to have to shift toward more condominium dwellings, multi-family dwellings, a tighter concentration of home locations, closer correlation between job location and where people live to minimize use of transportation. I would also concentrate on reducing interest rates. I think there needs to be a better long-range commitment to housing programs, with some last resort government payment of interest rates if they exceed a certain level.

But the main thing about the housing industry is predictability—similar to farming. You have to know three years, four years, five years ahead of time what the government is going to be doing, and the hit or miss approach to better housing construction is one of the things that exacerbates inflation.

Q. Have you done any refining on the specific programs that you proposed earlier to solve the structural unemployment problem among young people, women, and minorities?

Governor Carter. In general, when unemployment goes up in this country, the people most severely affected are minors, minority groups, women. I believe the present unemployment rate among young black Americans is about 40 percent. The first step would be to have a general emphasis on employment through business incentives and [incentives] for better housing construction, [with] public service jobs as a last resourt. I would favor a CCC-type of program, similar to what we had during the depression years, for young people, and I think it should be oriented toward urban areas, instead of rural, as much as possible.

Q. Will organized labor go along with this?

Governor Carter. Yes, but it would have to be designed as much as possible to be noncompetitive with regular jobs. I'm talking now about additional employment, and as you know we now have a substantial amount of federal budget revenues going for this purpose. The federal share of the narrowly defined welfare budget is about $5 billion, and I think the total amount of money now spent in GET A [Comprehensive Employment & Training Act] programs, job training, is around $14 billion.

Q. Some of the businessmen who had lunch with you at the '21' in New York the week after the Democratic Convention believed that what you told them about business' role in the economy is not compatible with the tone of the speech you made before the Ralph Nader meeting in Washington shortly thereafter. How do you reconcile this difference?

Governor Carter. The audiences were different, but I don't think what I said was different. I responded in both instances to questions, and when the businessmen asked me a question about international trade, [I said I'm] for international trade. When the consumers ask what I think about a certain emphasis on appointing members to regulatory agencies that would be oriented toward consumers, I said that's what I favor. And in both instances my statements were accurate and reflect my long standing positions. It would be suicidal for me, politically speaking, to make a different kind of answer to the same question. But the tone might very well be shaped by the origin of the audience or the type of questions I get.