Statement on the Control of Inflation.

THIS ADMINISTRATION is committed to a policy that comes to grips with the problem of inflation. That policy is based firmly on three propositions.

First, this long-sustained erosion in the purchasing power of the dollar has been causing serious economic and social damage, and it must be curbed. The rise in the price level last year approximated 5 percent--a pace that would double the general price level in 15 years. This inflation has been harder on the average man than on the sophisticated investor. It has produced the highest interest rates of a century, posing difficult problems for home buyers. And it has had an adverse effect on our balance of payments and the strength of the dollar internationally.

Second, we can cool inflation only if we deal with fundamentals. Statements that set guidelines and generate headlines have not worked. The inflation that erupted after 1965 was caused by excessively expansive economic policies--such as the $25 billion deficit in fiscal year 1968-that kept our economy in a chronically overheated condition. Our first actions, therefore, had to be getting these fiscal and monetary policies back on course. Accordingly we have reviewed every program in the budget, cutting $4 billion out of projected expenditures for the 1970 fiscal year. I have also proposed a program of tax measures that will give us revenues needed to cover these outlays. This includes extension of the full surcharge through December, and at half the present rate to the end of the next fiscal year. These tax recommendations are crucial to an orderly economy at home, and to a strong dollar in the world economy. It is essential that there be early and favorable action in the Congress on the tax measures we need for a sound budget.

Third, to cool inflation, we must curb "inflation psychology." When people understand what is behind the sharply rising cost of living, they see that tax measures essential for a strong budget are better than the cruel tax of inflation. When the public fully believes the Government is determined to slow inflation, there will be less tendency to automatically include the assumption of continuing inflation in decisions about prices, investments, and wages. Preachments about restraint are not credible unless basic economic policies of Government create economic conditions that make this restraint in the prudent self-interest of the consumer, the union, or the business.

In view of all this, I indeed welcome the program of public education being sponsored by the Advertising Council, the Joint Council on Economic Education, and the Chamber of Commerce of the United States. Only with a better informed public can we build a sound basis for prosperity in the months and years ahead.

Private enterprise, far more than Government spending, is the impetus behind sound economic growth. The voluntary effort of the men and women of private enterprise is needed now, as never before, to enlist the support of the American people in the fight against inflation.