Remarks to Members of the Business Council Meeting in Hot Springs, Virginia.

Mr. Nickerson and members of the Council:

I have come here today for basically two reasons.

First, I want to say to you--and, through you, to all the American business community--"Thank you."

Over the past 4 1/2 years, our Nation has moved as it has seldom moved before.

Here at home, we have sustained and carried forward the longest period in history of uninterrupted expansion of this economy for which you have such a direct responsibility.

In the world, we have sustained the strength of the free world alliances against aggression everywhere. We have stood our watch on the walls of freedom, and we have--like those who preceded us--guarded the flame of man's hopes for peace on this earth.

The two parties met this morning in Paris for more than 2 hours and agreed on procedures for official conversations between the United States and the Democratic Republic of Vietnam. These official conversations will begin at 10:30 a.m., Monday, May 13.

As no other generation before has done-or has been able to do--this generation of Americans has gone out to meet the future. We have not been content that our times should be prosperous while future times would be impoverished by our neglect. In these few years, we have grasped the nettle firmly. We have undertaken to respond to the thorny challenges, the trying challenges, and the toughest challenges our society presents.

Some would call what we have done, "liberal." Others--although perhaps none present here--might call it, "conservative." For myself, I would call this response of the American people over the last 4 years, and this performance of the American system, "responsible."

That is why I came here today, on your invitation and mine, to say again to each of you--and, through you, to the business community that you symbolize--"Thank you from the bottom of my heart."

I am everlastingly grateful to the leadership of American management for the strength and the complete support you have given me--all along the way. The commitment of the energy, the initiative, and the intelligence of the modern business community has been a most decisive factor in the social progress we have begun in this decade. I hope it may always be.

The day is long past in American affairs when any worthy group or any worthwhile interest can be served by setting class against class. I came into politics when that was a favorite pastime. I am glad I am going out when you never hear of it any more. A new day, a new time has come when political leadership must be tested not by its talents for division, but rather by its capacity for responsibility and for unity.

For I say this to you with great earnestness: If America is to keep her commitment abroad or at home, if we are to eliminate the causes of poverty, if we are to open the doors of opportunity and self-respect for all, if we are to have--as we should have--a just society where law and order prevails, if we are to leave our children an environment of decency and a vision of hope, then all sectors of this society must be brought together--closer together-to fulfill together the American promise.

For the leadership and responsibility you have offered during my years as your President, I most sincerely thank you.

On December 4, 1963--when I had been in office just a matter of hours and days--I first spoke to the Business Council as President. I then asked you for your help on the Nation's tax policies. For nearly 1 year, a needed tax reduction had been stalled in the Congress--and Secretary Dillon and Secretary Fowler had worked feverishly and untiringly to move that bill. But with your strong and very able support and help, the tax cut soon became the law of the land.

You know the great good that flowed from that wise move. Our position today has both similarities and contrasts to the situation of 4 1/2 years ago. Once again, I need your help to pass a tax bill which has been in the Congress for more than a year now. Once again, tax action is the most essential and most urgent step to preserve the health of our prosperity.

Unfortunately, this time it is a tax increase that we need rather than a tax cut. Our special defense costs in Southeast Asia have added almost $30 billion to our budget. By the most stringent management, we have been able to hold the needed tax increase down to only $10 billion, a third of the cost of the war and less than half of the tax cuts that we enacted in earlier years.

The principles of good fiscal management are the same in 1968 as they were in 1963. Then the budget was a drag on the economy. Today, the deficit is clearly the most dangerous stimulus in the economy, threatening the stability of the dollar at home and aboard. We can eliminate that key danger just as soon as we can enact a tax surcharge.

To achieve a broad nonpartisan compromise on an adequate fiscal program, I agreed to accept a major cutback of $4 billion in spending for fiscal 1969 and $18 billion in reductions in present legislative authority for Government spending programs. That is, I believe, as far as the Congress is likely to vote and will safely go, and I believe it is much farther than Congress would normally go in the regular appropriation process that they will follow if this measure now is voted down.

Last year they voted about a billion and a half reductions in expenditures. This year the clerks of both committees tell us that of the bills that have passed thus far, the indication is that the reductions will be less than $2 billion.

You know--I think, I know, and I believe all Americans know that we do have urgent needs at home and abroad.

I doubt there is a man in this room who wants to bring to a halt this Government's programs that are essential to the pursuit of justice and harmony in our American cities, as I understand was discussed with you this morning by that very able Mr. Beebe and Mr. Kaiser, who have worked so long and so hard to be helpful.

I am sure there is no thinking American-in any walk of life--who wants to sow more seeds of despair and frustration by eliminating the programs that are so vital to human well-being throughout the land. I am confident there are none among us who want the Nation to turn its back upon the future and fail the commitment we have made to the young Americans who come after us.

We have needed action on taxes now for more than 2 1/2 years. And the record is clear on what that delay has cost us:

--Our rate of price increase has accelerated from less than 2 percent to 4 percent.

--Our international trade position has eroded to the poorest quarterly performance since 1959.

--Our interest rates have jumped 1 1/2, or 2 percentage points to the highest levels in nearly 50 years.

--The millions of Americans who have no defense against inflation are losing through price increases, alone, three or four times what the surcharge would cost them.

--Millions of home buyers, homebuilders, consumers, and small business borrowers have paid five and ten times the cost of the tax surcharge through higher interest rates.

Keeping the Government's fiscal house in order is an absolutely essential first step to meet the problems that endanger our prosperity. I am proud that the business community is generally united behind the tax bill; it recognizes that higher taxes are insurance for the greater goal of sustaining prosperity and fiscal stability. But your voices must be heard throughout the land if we are to help make fiscal responsibility a reality.

A proper fiscal program will give us the opportunity to get back on the road toward price stability, balance-of-payments equilibrium, and healthy credit markets. But even at best, the journey is going to be a difficult one and a long one.

Beyond the first step, that journey is in your hands much more than in mine, or even my successor's. The strength of the dollar at home and abroad will depend on millions of decisions that are made by American labor and American business. These will determine how rapidly our productivity grows, how well our costs are held down, and how forcefully and competitively we can sell our products in world markets.

Let me mention some of the key decisions-just a few--that you will be making in the months ahead.

Those of you in the steel industry will participate in decisions this summer that will determine whether we avoid the dual dangers that face us: on the one hand, a costly strike, and on the other, a severely inflationary wage and price adjustment. The relative stability of steel prices has been one of the key favorable factors in our recent price record and it must be preserved.

Those of you in the automobile industry will determine whether we meet and whether we beat the foreign competition for the small-car market or whether the import share of the American auto market will keep growing.

All of you employers will help determine through your hiring and your training programs how much and how fast we can melt the stubborn hard core of unemployment-that is giving us so much trouble--through private initiative.

All of you who export or who can export will determine whether we undertake the imaginative efforts needed to develop new directions and new markets for our goods. Today, less than one-third of our trade is with the vast regions of Asia, Africa, and Latin America, which make up the less developed world.

Your actions will continue to determine whether we can get balance-of-payments savings that we urgently need from our emergency foreign investment program. With its typical initiative, American business has turned to the capital markets of Europe to raise needed funds. In the first 4 months of 1968, borrowing by American firms in the Eurobond market exceeded $700 million, more than five times the amount borrowed just a year earlier.

I am confident of your intelligent response to these challenges. All of my relations with business and all of my economic policies as President have been based on a very deep faith and belief and a confidence in private enterprise, in free markets, and in profits as a reward for productive contribution.

I maintain that faith and confidence. As your President, I do not advocate any system of mandatory direct controls on wages and prices. For more than 4 years now, in all the Vietnam crisis, we have been able some way, somehow, to successfully avoid taking the steps that we had not been able to avoid in other similar crises. We must not stifle the market system; we must try to perfect it.

Perfection requires a coordinated battle by Government, business, and labor against the virus of inflation. We cannot tolerate the rapid price increases that we are suffering today. But neither can we weaken our economy with heavy unemployment, slack and sluggish growth, in order to defend against inflation.

I proposed an alternative a few months ago: If increases in wage settlements and profit margins in 1968 could be held to the 1967 rate, we could make decisive progress toward our goal, once the tax bill was enacted. But so far, we have failed. The wage settlements have moved the other way. They have moved upwards, towards 6 percent, and profit margins seem to have also widened.

If business and labor do not accept these suggestions or these answers, then I would like to hear your answers--because this is a national problem, not a partisan problem. It is a problem that confronts all Americans. Noninflationary prosperity is not a goal merely for business or for labor, nor for Democrats or Republicans. It is a challenge to the entire Nation. I have asked for the privilege, as I did only a few months ago, of speaking to the AFL--CIO council of labor leaders in exactly the same terms that I speak to you. And I plan to do that next Tuesday afternoon. Indeed, I think this is a challenge to every industrial nation of the world, and it has not been solved, so far as I can see, anywhere. But America is the nation that can solve the problem, and 1968 is the year that we should begin.

When I became your President, I determined then that--after a long and satisfying career of service to the Nation--I had no personal partisan cause to serve.

I have no such cause or interest to serve now.

Back in the days when I was in politics-[laughter]--some used to say that I wasn't much of a politician anyway--and as I look back on it, maybe they were right. Maybe it is bad politics to be for increasing taxes in an election year. But in retrospect, as I reflect, I have won a few elections and I have had great respect for the intelligence of the American people. I think that they are wise enough and they are patriotic enough and they are farsighted enough to know that what is best for their country is best for them--whether they are politicians or just individuals.

I have respect for the ability of the American people to recognize that what is bad for their future and for the prosperity of the people is the very worst kind of politics. And I think that further delay on taking the actions that we must take, including actions on the tax measure, is very clearly bad for the future and the prosperity of all the American people.

So I come here to thank you; to ask for your continued leadership; to say to you that there has never been a time in the history of the business community when more enlightened, unselfish leadership has been given to your country than now, as you must have observed from some of these people who have appeared here with you; and to say to you again, the country needs you and needs you badly now.

It needs your support. It needs your curiosity and your interest in what's happening in this country and the world--whether it is the college campuses here or in Paris, whether it is in the peace talks in Paris or other capitals. It needs your untiring labors to help find for us peace in the world; to help keep America moving forward; above all, to try to bring an end to the bitterness and the hatred and the divisiveness that can and is, in places, occurring in this country.

Therefore, all that you can do to bring about a united, cooperative, and responsible America will pay rich dividends in the future.

Thank you for listening.