The President's News Conference

STATEMENT ON THE MESSAGE ON FISCAL

POLICY

THE PRESIDENT. I have conferred with the leadership during the last few days, and as recently as the hour. I am sending to the Congress this afternoon a message on fiscal policy. That message is or will be available to you.¹

¹See Item 444.

I will be glad to summarize briefly the recommendations we are making there and take any questions on that or on any other subject that may interest you.

ACTIONS TO BE TAKEN BY THE ADMINISTRATION

[1.] First, we state to the Congress that the administration is doing three things:

Review of Appropriation Bills and Spending

First, we are reviewing very carefully at the present time the appropriation bills that have reached us. There are some three or four of them that are being examined. There are some eight appropriation bills that have not yet cleared through the Congress. We do not know what they will contain.

We are asking the executive branch to carefully review their appropriations that have been received and make recommendations as to the low priority items that can be eliminated. We have given them target goals, as you will observe in the message.

When and as we receive the other eight appropriation bills, we will go through the same procedure.

We are hoping that in light of this message, and the prudent attention and consideration that the Congress will be giving the remaining eight bills, that they will be somewhere in reasonable proximity to the budget and the request that I made earlier, namely, a budget of $112 billion 800 million.

But until they reach me, I have no way of knowing how much the cost of government is likely to be next year. When they do reach me, we will review them and see how much we can eliminate and see where that leaves us.

Then we will ask General Westmoreland, the Joint Chiefs of Staff, and Mr. McNamara to carefully review the situation at that time and to make any recommendations they may feel are required along the line of a supplemental. I am informed that they will try to make some estimates when we call upon them after we get the remaining appropriation bills.

Now, in the meantime, we are going to reduce all we can as the appropriation bills get to us by impounding, by postponing, by stretching out, by every legitimate means available to us, the low priority items.

Sale of Government Securities

[2.] Second, we are asking the Secretary of the Treasury to ask each agency with which the Government is affiliated to present to him, and the Secretary will present to me, any securities that they anticipate selling between now and the first of the year.

That will be Import-Export, Federal Land Bank, Federal Home Loan Bank participations, and other items of that nature, so that we can coordinate those sales and attempt to eliminate from the market as much of the Federal demand as possible.

The Secretary will give you the details of that in the next day or two.

Interest Rates

[3.] Third, we are asking the Federal Reserve and the large commercial banks, in the light of the action we are taking, to slow down the Federal Government's demand and prune our appropriations and adopt sound fiscal policy, to see if they can't use their good offices to help us lower interest rates, and to handle the credit situation that confronts them.

So there will be three things: the Federal Reserve, the sale of Government securities, and the withholding of appropriations which the administration has undertaken.

SUSPENSION OF INVESTMENT CREDIT AND

ACCELERATED DEPRECIATION PROVISIONS

[4.] There will be two things we ask of the Congress: first, to make inoperative the investment credit provision of the law that pays 7 percent on purchases of equipment and investments.

Second, to suspend and make inoperative for a period of 16 months the accelerated depreciation provided by law.

We do not anticipate that either of these measures will bring great revenue to the Treasury. But we do have an accelerated boom that we think could be held back and cooled off if we said to the people now purchasing equipment and getting a bonus to do it, when we would prefer they not add to the increase in the backlog of orders (some machine tools have a backlog of as much as 15 months, the average is 10 months): "We won't give you a bonus to do what we don't want you to do. But if you will withhold your orders and can withhold them until January 1968, then the investment credit will be operative again and you can get it."

SOME EXAMPLES OF CURRENT ECONOMIC

PRESSURES

[5.] Just to give you background before your questions, some of the illustrations of what happens here are: Our plant and equipment investments are up 17 percent this year over last year. We have a survey this week from Commerce and the SEC showing that there is no weakening in the investment boom despite the tight money and despite the discouraging stock market.

It was anticipated that if money became tight and they raised the rate, people would be reluctant to borrow it. But it not only hasn't cooled off, it is up about $100 million.

Last week's NICB survey showed capital appropriations still rising, with the second quarter up 10 percent over the first.

The order backlog for machinery is up 29 percent in the last 12 months. The backlog of machine tool orders is now 10 months.

The unemployment rate in machinery industry is an amazingly low 1.9 percent.

The average workweek in machinery is 44 hours--the longest of any manufacturing industry.

The Bureau of Labor Statistics reports persistent and intensifying labor shortages in the machinery industry.

Press reports on bonuses given to workers who recruit new machinists; guarantees of 8 overtime hours a week; women recruited for traditionally male jobs.

And the prices of metalworking machinery are rising at a 7 percent annual rate in 1966.

The pressure on the credit market, the net external funds raised by the corporate sector, is up 26 percent in the first half of 1966 versus 1965.

The net corporate bond issues are up 82 percent in the same period. The bank loans to business are up 22 percent in the first 7 months. These funds are diverted from mortgage and homebuilding and are going into bank loans.

The effects of the suspension will be mostly to reduce order backlogs and price pressures, rather than real growth capacity. There are plenty of incentives to continue desirable investments. Reduction in pressures on existing capacity will far outweigh any slowing of capacity.

THE INVESTMENT TAX CREDIT AND THE BALANCE OF PAYMENTS

[6.] The effect on the balance of payments from '62 through '64 of the investment tax credit obviously helped the balance of payments, but it is now hurting.

In the first half of 1966 the imports of capital equipment were up 44 percent, with imports of metalworking machinery up 89 percent. Because of the great backlog here, we are importing them and they are taking our dollars there.

Imports of textile machinery are up 71 percent. The excess demand for machinery is also affecting exports. So far this year the foreign orders for U.S. machine tools are up 39 percent. Although foreign orders are up 39 percent, foreign shipments are down 17 percent because the export orders went to the bottom of the pile because of the great domestic demand for them.

So it is our view and our hope that this will cool that situation and be helpful.

SUSPENSION OF ACCELERATED DEPRECIATION

PROVISION

[7.] As to the accelerated depreciation on structures, the same general reasons apply to it as apply to the investment credit. The additional special reasons include release of funds and resources for housing. If funds are not going into big buildings, if insurance companies do not lend for these big buildings, they can lend for more needed housing.

The price of nonresidential construction rose 3 7/10 percent in 1965. It is now at an annual rate of 4.7. This is putting great pressure on material prices, the current rises in cement and copper and other things. It also adds pressure on construction wages.

We will ask the Congress--and I am informed that they will give the matter prompt consideration--to give us legislation in two fields: to suspend the investment credit and the accelerated depreciation. We will take the other three steps ourselves.

QUESTIONS

INSTALLMENT PURCHASES; CONSUMER CREDIT

[8.] Q. Mr. President, we have just had an opportunity to skim through your message. I wonder, sir, if you have anything in here, or do you have any thoughts, on what to do about installment credit, consumer credit.

THE PRESIDENT. We have no recommendations in it. And we have nothing in the message which pertains to it.

POSSIBILITY OF TAX INCREASE

[9.] Q. Mr. President, in your message to Congress you mentioned that further long-range actions may be necessary. Could that include raising corporation and personal income taxes?

THE PRESIDENT. We have no idea how much it will take to operate the Government next year. We are taking in more money this year, at the present rate, than we are spending.

What happens from here on out will depend on two things primarily: one, the remaining eight appropriation bills; two, the Defense supplemental bill. We do not guess or speculate on that because if we went up to ask for any additional tax measure of any kind, the first thing the chairman tells me he will ask me is, "How much do you want? What do you want it for?" He said, "How can you tell that until you get your appropriation bills telling you how much it will be?"

TIMING OF CONGRESSIONAL ACTION ON MESSAGE

[10.] Q. Mr. President, do you expect Chairman Mills² to react sympathetically to this particular group of proposals?

THE PRESIDENT. I would suggest that you talk to Chairman Mills about his reaction. We have made our recommendations.

²Representative Wilbur D. Mills of Arkansas, Chairman of the House Ways and Means Committee.

Q. Sir, have you any assurances or understandings about the early holding of hearings by the Ways and Means Committee on this proposal?

THE PRESIDENT. I believe that they will get to it as soon as possible. I would think at an early date. But I would prefer those announcements to come from the Hill, for obvious reasons.

HOUSE SUBCOMMITTEE ACTION ON FOREIGN AID

APPROPRIATIONS

[11.] Q. Mr. President, yesterday, the House Appropriations Subcommittee cut rather substantially the foreign aid appropriations. Would this be one of the appropriations that you prefer not to be cut?

THE PRESIDENT. I have not seen the action on foreign aid. And we do not refer to it specifically in this message.

I would have to study it. I think it would be premature to conclude what will be in that appropriation bill until it finishes in the Senate and in conference.

I frequently read where I am rebuffed on one vote, and they give me more than I asked for on the next one. So let us try to wait until that time.

LOW PRIORITY SPENDING

[12.] Q. Mr. President, can you give us any idea of some of these low priority projects that you will consider cutting?

THE PRESIDENT. . No. We are having the appropriation bills examined now. As soon as we reach a decision they will be announced.

ANTICIPATED RESULTS OF THE PROPOSALS IN

THE MESSAGE

[13.] Q. Mr. President, is there any way that you can give us an idea of the specifics of what this action will take out of the economy in the way of dollars or percentages of increase?

THE PRESIDENT. That would depend entirely on the individual. Some fellows that are building a big plant will go on building it anyway. Others will say, "Well, if I can postpone it a year I can get 7 percent, and I will wait."

We know only this: that we will not be providing a bonus to someone to build something we don't want built.

Q. Mr. President, have you evaluated the possible political consequences of this action?

THE PRESIDENT. No. I have been busy enough trying to get the recommendations up there. I would think that anything that is good for the country is good politically. And I believe this to be in the best interests of the country.

EXTENT OF TREASURY AUTHORITY WITHOUT

CONGRESSIONAL ACTION

[14.] Q. Mr. President, does the Treasury have authority now to cut the depreciation allowances on its own motion without action by Congress?

THE PRESIDENT. They can make adjustments in accelerated depreciation. But the experts felt that to suspend it as we are doing we should have the authority of the Congress.

Q. Will the Treasury wait until Congress acts?

THE PRESIDENT. Yes.

THE STOCK MARKET

[15.] Q. Mr. President, could you give us your observations on what you think is specifically troubling the stock market?

THE PRESIDENT. No.

THE NEED FOR FURTHER ACTION

[16.] Q. Mr. President, do you know when in calendar terms you will be able to tell whether further action is necessary?

THE PRESIDENT. I don't know that any further action will be necessary.

Q. When will you be able to decide?

THE PRESIDENT. If you tell me when the appropriation bills will come, it will be shortly thereafter. I don't think that the Members know themselves when they will get the appropriation bills.

A good many of the authorizations haven't passed yet. There are eight or nine of them that have yet to be acted on. Some measures like Defense have passed both Houses. But Senator Russell has one viewpoint on the National Guard and the Reserves and the House has another viewpoint.

When they resolve that difference, I guess your experience around town is probably as good as mine on when they will agree to that.

LOW PRIORITY SPENDING

[17.] Q. Mr. President, I believe you used the word "impound" a while ago. Could you tell me what specific bill you might have had in mind?

THE PRESIDENT. No--all of them, all of them, we want to withhold, or impound, or stretch out, or reserve. It doesn't necessarily mean we would let the whole appropriation lapse. We might not proceed to use the money when it became available until we could see further ahead. We want to relieve the pressure on the economy to every extent we can.

THE MEANING OF "WHATEVER IS NECESSARY"

[18.] Q. Mr. President, you have used the phrase which has been repeated over and over again in regard to Vietnam, which has become a measure of your determination in the Vietnam war. You have used it in this message by saying: "This administration is prepared to recommend whatever action is necessary to maintain stable growth," et cetera.

Does this represent a similar degree of determination on the domestic stability issue?

THE PRESIDENT. Ask your question again. I know what I said but I am not clear what you said. What question are you asking? [Laughter]

Q. You have used that phrase "whatever is necessary" to carry on the war in Vietnam over and over again. It has become a measure of your determination to see the Vietnam war through to the necessary conclusion.

Now you have used that same phrase "whatever is necessary" to keep domestic stability in this message with respect to keeping the domestic economy stable.

My question was simply: Does this represent a similar degree of determination on the whole economy?

THE PRESIDENT. When I say "whatever is necessary," I mean whatever is necessary. I mean it whether it is applied to Vietnam or to the domestic situation or to answering your question. [Laughter]

SPECIAL SESSION OF CONGRESS?

[19.] Q. Mr. President, have you discussed with the congressional leadership the prospect of a special session after the elections?

THE PRESIDENT. No.

TIMING OF A TAX INCREASE

[20.] Q. Mr. President, are you sorry, the way some economists say you should be, that you did not raise taxes last spring?

THE PRESIDENT. I am not aware of any economists who have said that to me.

REACTIONS TO THE PROPOSALS IN THE MESSAGE

[21.] Q. Mr. President, did you touch base with business and get businessmen's opinions before making this recommendation on investment?

THE PRESIDENT. Yes. As I have said, we have talked to the employers and employees, the business community and economists in and out of Government. We meet with them frequently. We talked to Congressmen and Senators, young ones, old ones; and to chairmen of the committees: Appropriations, Ways and Means, Finance; and the leadership.

I went around the table the other night with some 30 of them and asked each one what they found and what they would recommend. I let them play President for a while just like they were working for some newspaper. [Laughter]

Q. Did you get any reluctance from the businessmen in discussing this?

THE PRESIDENT. Well, yes, some of the businessmen opposed this. They want to get the 7 percent now. A good many of them recommended it. A good many of the labor people recommended it.

I think that there is very strong support for both proposals. I think all of them realize we have a big backlog, and that there is no reason to give a bonus to add to that backlog when that backlog is causing your problem.

We are short of labor, we are short of material, and we are short of the end product. We are importing and sending out our dollars to get that. We are paying our people 7 percent to send our dollars abroad.

We think that as to the things which could be withheld which were to their interest to withhold, they can get 7 percent on it next January and perhaps that would be an encouragement and incentive to them.

TERMINATION OF SUSPENSION IN JANUARY

1968

[22.] Q. Mr. President, what are the factors that lead your advisers to think it would be all right to put this back on again in January of 1968?

THE PRESIDENT. We will take a look at it then. It is like setting a date for foreign aid to end. Some people think 5 years. Some people think 1 year. We felt the suspension could well be looked at again in January of 1968.

We have no arbitrary position in the matter. If the Congress wanted to extend it a few months, or move it up, it would be all right with us.

We are looking at this fiscal year and the year ahead. We would not fight about it. It was the date that seemed to most people to be a proper date to look at it.

Q. As you propose it, as the administration will propose the legislation, would it provide for the investment credit and the depreciation automatically to go back into effect in January of 1968?

THE PRESIDENT Yes. That is a very important point in connection with it. Some people do not want to repeal it and wouldn't vote to repeal it but they assured me that they felt that it could be made inoperative.

They believe very much in it. They know there are times when this bonus does its job. It did in the years 1964, 1965, and 1966, and it did it too well.

When the accelerator is down you want to get up to the limit of 60. You were going 40, and you got up to 60. It is now 70 and on the way to 80. So we said, "Let's take the foot off the accelerator until it gets back down to 60 and we will look at it there in January of 1968."

STATEMENT ATTRIBUTED TO FOREIGN MINISTER

CHEN YI

[23.] Q. Mr. President, on another matter, do you find any encouragement in the statement attributed to Chen Yi of Communist China, that neither China nor the United States is seeking a military confrontation, and, if there is any follow-up by the administration, can you tell us about it?

THE PRESIDENT. We always are glad when other nations feel that there is no reason for them to engage in a confrontation with us.

Each day we pursue with every means available to us suggestions and ideas and make proposals that are calculated to bring about better understanding and better relations with other nations.

We will continue to do that. We do do that. So the answer to both of your questions is "yes."

First, we are glad to see people feel that there is no reason why they should have a confrontation with us. Second, yes, we do explore every possibility that we are aware of and encourage everything that we think has any potential.

WITHDRAWAL OF TROOPS FROM EUROPE

[24.] Q. Mr. President, what are your feelings about the proposal in the Senate that it be the sense of the Senate that we withdraw some troops from Europe?

THE PRESIDENT. I think my administration's position has been made clear. I stated to Senator Mansfield and I have stated it publicly. My press secretary has, also. We told Senator Mansfield that there are going to be conversations with regard to NATO and its many problems, its strengths and its forces.

We think that the best course for the United States to follow would be for us in collaboration with our allies to first try to realize what strength is necessary, how to equitably apportion it, and to arrive at a joint agreement.

We do not think that this involved problem can be solved by Senate resolution. I already know the sense of the Senate, and certainly the sponsors, and I think of most Senators: that is, that we would like to have every boy home that we can possibly have home--that our security would permit us to have home.

It is not a question of desire. It is a question of necessity. We feel that this will be more wisely handled in the NATO discussions. Every step we take we want to take with the knowledge of our allies, and we would hope with their approval.

TIMETABLES FOR WITHDRAWAL IN VIETNAM

[25.] Q. Mr. President, President de Gaulle seems to feel that if the United States withdraws its forces from Vietnam, peace will come to Southeast Asia.

Could you comment on his remarks?

THE PRESIDENT. We don't have any information to that effect. No one has communicated any evidence to that effect to us.

I have made it clear, I think, time and time again, that we love peace, we want peace, we are willing to do anything we can to achieve peace, but that it is not a one-way street.

We are willing to lay on the table at any moment our schedule for withdrawal from Vietnam, if someone can also lay on the table their schedule of withdrawal--and if we can give the freedom-loving, liberty-loving people of Vietnam any assurance that they will not be murdered, assassinated, or killed either by infiltrators or assassins.

Our Secretary of State will meet any of them whenever they need to--tomorrow, next day, or next week. I will lay our schedule on the table any day that anyone will act upon it. But we cannot say to our men that we will strip you of all of your protection and say to our allies that we will afford you no assistance without some assurance from someone else.

The great problem here is, as Mr. Steinbeck,³ I think very properly, stated it in his communication with his Soviet friend, "We are very anxious to talk about the war and peace, but let's not talk about half the war. Let's talk about all the war. Let's not talk about just what the United States is doing; let's talk about what the aggressor is doing."

³John Steinbeck, American novelist.

We will lay on the table our plans to withdraw if they will lay on the table their plans to cease their aggression.

REPORT ON ATTITUDES ABROAD TO OUR ROLE IN

VIETNAM

[26.] Q. Mr. President, the United States Information Agency, we understand, has prepared for you a rather extended report on attitudes abroad about Vietnam and our role in the Vietnam war. Is it your intention to make this public or make a partial report on it public?

THE PRESIDENT. Newspapermen frequently do this. They have information before the President. I don't have it. I don't know what the report contains. I would think that I would refer you to the United States Information Agency. Whatever they would recommend in the matter, I would be glad to consider.

I am not aware of the report. The man you probably got it from is more on his job for you than the man who is representing me over there, because I haven't seen it.

Merriman Smith, United Press International: Thank you, Mr. President.