The President's News Conference at the LBJ Ranch

[With Joseph C. Swidler, Jr., Chairman, Federal Power Commission; Henry H. Fowler, Secretary of the Treasury; William McChesney Martin, Jr., Chairman, Board of Governors of the Federal Reserve System; and Gardner Ackley, Chairman, Council of Economic Advisers]

OPENING STATEMENT THE PRESIDENT. [I.] I have been meeting with members of the Quadriad. I met with them last on October 6 and, as Joe Laitin¹ told you some time last week, they were going to meet with me in the next few days, and we arranged it this Monday.

¹ Joseph Laitin, an assistant press secretary.

I asked Mr. Swidler, instead of going into Austin to take his plane back, to await your coming to the ranch where you could have a chance to hear from him on his report ² and ask him any questions you might desire, and also to hear from the Secretary of the Treasury, the Chairman of the Council of Economic Advisers, Mr. Martin of the Federal Reserve Board, and any of the other members, about the subjects of our discussions this morning, and the views we have concerning the state of the Nation and the economy in the days ahead.

² See Item 640.

I am going to ask Mr. Swidler first to talk to you. He has just completed a study--at least some inquiries into the most recent blackout over in East Texas, the most recent power failure, and I will ask him to take any questions about his report, make any statements he may care to, and then the other members of the party will be available to you. Mr. Swidler?

RECENT POWER FAILURES MR. SWIDLER. Thank you, Mr. President. I had the opportunity this morning to present the Federal Power Commission report to the President, to discuss it with him, and to answer the President's questions.

As I think you know, on the evening of November 9³ the President asked the Commission to make this investigation and we have been at it ever since. We were interested not only in what triggered this massive blackout, the largest that this country has ever had, but also in the sequence of events: to look at the question of whether the cascading of the failure was preventable and also to look at the question of whether the restoration of service was in a sequence that perhaps could have been improved.

³ See Item 608.

The report, of which you all have copies, goes into each of these questions, and, on the basis of the study that we made, we have made a number of recommendations which I hope that the power industry and the equipment industries will look into.

We are continuing our studies and investigations. This is not a matter of a day. It is a matter of making this electric power system in this country, which is already probably the best in the world, even better, so that the risks of outages can be minimized to the absolute minimum that is made possible by the use of the best American technology.

QUESTIONS Q. IS there any discussion in the final chapter on possible Federal legislation?

MR. SWIDLER. I told the President that we would expect to make some recommendations along that line at a later date. We have not made any specific recommendation as yet.

Q. Could you tell us what sort of things you are considering?

MR. SWIDLER. No, I am afraid I can't at this date.

Q. Mr. Swidler, you did mention specifically the question of Federal jurisdiction over service reliability. Is this right?

MR. SWIDLER. Yes, sir.

Q. Is that pretty firm in your mind as a recommendation?

MR. SWIDLER. I don't think I want to anticipate the results of the Commission's discussions of this matter. This is very high on our list of priorities and I am hoping that we can make a recommendation to the President very soon.

Q. Do you have any report yet on the East Texas blackout ?

MR. SWIDLER. The East Texas or West Texas?

Q. West Texas--El Paso and Mexico.

MR. SWIDLER. El Paso. We have a report from our staff, and Mr. Brown⁴ and I-Mr. Brown is our Chief Engineer and is with me here today--have explained this situation to the President, and we also have had a preliminary report on the East Texas blackout which occurred this morning.⁵

⁴ F. Stewart Brown, Chief Engineer and Chief of the Bureau of Power, Federal Power Commission.

⁵ The reports by the Federal Power Commission to the Senate Committee on Commerce are entitled "El Paso Power Failure, December 2, 1965," dated April 11, 1966 (31 pp., processed), and "Gulf States Utilities Company Power Failure, December 6, 1965," dated April 28, 1966 (23 pp., processed).

Q. Do you think that if all of the recommendations were carried out and all the legislation enacted, that you could say there would never be another blackout on the scale we had in the last one?

MR. SWIDLER. Well, "never" is an awfully strong word. I think I can say that I don't know any reason why there should be one. It seems to me that if all these recommendations are carried out, and if the companies build the additional interconnections and strengthen their internal systems in the way that we recommend, that this should preclude the risk of widespread blackouts.

Q. Would you expect to have any legislative recommendations ready for the next session of Congress ?

MR. SWIDLER. I just don't want to anticipate our discussions on legislation. I might say, of course, that in one way or another we will make them as early as we can, and the President has instructed us to make our recommendations to him as soon as we possibly can.

Q. Can you tell us how severe the East Texas blackout was ?

MR. SWIDLER. The East Texas blackout was not severe. The outage lasted 25 or 30 minutes, and all of the lines are now back in service. The generating plant that was out briefly is now back in service. This was not an outage of the same proportions.

Q. What cities?

MR. SWIDLER. Beaumont, Sabine

MR. BROWN. The Navasota section, north of Dayton, was out for awhile.

MR. SWIDLER. The Navasota section, north of Dayton, Mr. Brown tells me.

Q. Do you see anything strange with these blackouts--they've never occurred in our history apparently on a national scale-all occurring within a month as they did?

MR. SWIDLER. Well, these two more recent blackouts are not unprecedented by any means. Blackouts of short duration have occurred. And, of course, to the extent that power failures are due to calamities--to tornadoes or floods--that kind you can always expect. But what we ought to be able to prevent is the cascading of failures into areas that are not directly affected by equipment loss. ⁶

⁶On December 8, 1965, the White House made public a report to the President from Mr. Swidler on the power failure which affected communication equipment at Port Hardy, Vancouver Island, B.C. (1 Weekly Comp. Pros. Docs., p. 568).

Q. Mr. Swidler, I have heard it said by some of the private power people that if the country had established the grid system nationwide it would have been a major catastrophe. Is that true? Could this have happened if we had the grid system nationwide; and what would have been the result?

MR. SWIDLER. I am not sure what a grid system nationwide is. This is nothing that we have ever recommended, and that is just too vague a term for me to be able to answer. I think that stronger interconnections would certainly have helped, assuming that before the interconnections between regions were made that the regional systems were themselves strengthened. This is a matter not only of building from one part of the country to the other. It is a matter of strengthening each company and each regional pool along the way.

Q. Mr. Swidler, each one of these recommendations seems to call on the private companies to make changes in their own systems. I'm wondering what happens if they don't. Who is responsible here for ensuring that the right changes are made?

MR. SWIDLER. There is no authority now to ensure that these recommendations will be followed. We expect a very high degree of cooperation.

MR. MOYERS. The Chief Engineer who is here is Mr. F. Stewart Brown of the Federal Power Commission.

THE PRESIDENT. I commended Mr. Swidler and Mr. Brown for the dispatch and the comprehensiveness of their report, and I want to thank them again for their prompt action this morning in connection with the Beaumont-Navasota matter.

DISCUSSION WITH MEMBERS OF THE QUADRIAD [2.] THE PRESIDENT. We spent an hour or more before lunch exchanging viewpoints with the members of the Quadriad. It ranged all the way from the action taken last Friday by the Federal Reserve ⁷ to the anticipated investment figures for the next few months, and the revenue figures for the year ahead, the budget figures.

⁷ See Item 639.

We will meet tomorrow--a preliminary meeting that will lead to our first budget discussion--and that meeting tomorrow will be with Secretary Rusk and Mr. McNamara, and Mr. Bundy and Mr. Komer,⁸ and others from the national defense area, in connection with the national defense needs for the next year.

⁸Dean Rusk, Secretary of State, Robert S. McNamara, Secretary of Defense, McGeorge Bundy, Special Assistant to the President, and Robert Komer, Special Assistant to the President for Peaceful Reconstruction in Viet-Nam.

We discussed the housing situation, the machine tool situation, the price situation, and aluminum and copper stockpiles. We reviewed all the economic factors that are important in our economy. We had a free flow of information and a rather thorough exchange, and we will continue with those discussions after we have completed with Mr. Swidler and with you this afternoon.

I want to ask Secretary Fowler to make a brief statement to you covering any high points that he may care to observe, and I will also ask any of the other members who are present to state their views and they will be glad to have you ask any questions you choose to ask.

SECRETARY FOWLER SECRETARY FOWLER. Ladies and gentlemen. There is very little to add to what the President said about our meeting this morning.

For your background information, we have these meetings about once a month to give the President a coordinated and updated look at the economic outlook for the period ahead, and of course our focus varies on the outlook for the calendar year 1966.

I undertook to review with the President the results of some conferences that Treasury has had with various outside informed persons.

We had a full day's meeting with a group of very outstanding academic economists back on November the 23d. We had a meeting last week for a full day with about 12 or 14 of the leading business executives-Treasury Department Business Council consultants.⁹

⁹ see Item 632.

The Chairman of the Board of Economic Advisers, Mr. Ackley, updated the last reports we had given the President on the outlook in October, and a staff report we had made in November.

Chairman Martin gave an account and a detailed explanation of the reasons for the Board action--Federal Reserve Board action-last Friday.

There was a general exchange of views on the meaning and significance of some of the new economic indicators. Particular attention was given in our exchange to an assessment of some forthcoming figures on plant and equipment expenditure forecasts for 1966 that I think will be released in the next day or two by the Department of Commerce and the SEC.

We reviewed some of the fiscal alternatives or options that are related to the budgetary decisions the President will have to make in the next few weeks.

In general, I think you can just sum it up by saying we tried to give the President the background information that he might find useful in making up his 1967 budget, and the related legislative program, particularly as it involves fiscal questions.

THE PRESIDENT. There will be some half dozen departments and agencies here at the ranch in the next few days. We will meet with them either Friday or Saturday, here or in Washington. I think it will be here. Bill will keep you informed as they are scheduled. Any questions ? Secretary Fowler will be glad to take them.

QUESTIONS Q. Mr. Secretary, what is your prediction of the economic outlook ?

SECRETARY FOWLER. The economy is burgeoning. The growth--and economic growth is particularly included--and prognostications of gross national product figures indicate that we will have a better year in terms of absolute growth than 1965, if the forecasts hold up.

I think the general pattern over the last few months has been that both private and public economists have tended to upgrade their forecasts from early autumn into the recent weeks, and, in general terms, we expect a rather big year for 1966.

Q. Do you think the new Federal Reserve Board action will have any kind of a brake on this burgeoning economy?

SECRETARY FOWLER. I think it is much too early for me to have any opinion on that. You may wish to ask Chairman Martin his views.

MR. MOYERS. Thank you, Mr. Secretary.

MR. ACKLEY THE PRESIDENT. Next is Mr. Ackley. Gardner, do you want to review some of the area you went over this morning?

MR. ACKLEY. Mr. President, I think you and Secretary Fowler have covered it pretty well. I tried to review for the president the recent progress of the gross national product and the factors which affect the outlook for the year ahead.

As Secretary Fowler has said, the outlook is extremely strong; a healthy progress of the kind we have had seems to be in the cards for the year ahead.

MR. MARTIN THE PRESIDENT. Mr. Martin?

MR. MARTIN. I was glad to have an opportunity to review with the President the statement which the Federal Reserve Board issued yesterday with respect to the action which the Board took on Friday.

I think that it was a welcome opportunity for me to explain to the President that I had nothing to add to that statement and I made no predictions with respect to the effect of that action.

I told the President that I thought he had made a very fair statement yesterday, very fair indeed. And certainly apart from that statement, in which he in no way placed me in the role of defying the President or the Johnson administration, I want to make it clear I don't think the press ought to cast me in that role.

I am very grateful to be a part of this Quadriad setup and I can assure you that the Federal Reserve System wants to work as closely as it can with the President and with his administration.

QUESTIONS Q. Mr. Martin, I wonder if you and the President are any closer in accord on the rise of the interest rate as a result of your meeting this morning?

MR. MARTIN. I made no predictions and the President didn't ask me to make any predictions.

Q. What is your opinion of the economic outlook for the coming year, Mr. Martin?

Mr. MARTIN. I am optimistic about it.

Q. How do you view the present inflation?

MR. MARTIN. I think it is a very real one but it is one that I believe we will have the resources to contain.

Q. Was that the primary reason for raising the discount rate?

MR. MARTIN. I don't want to add to what I said in the statement, as I already indicated. I think you can see that it was directed toward the domestic economy and I don't want to add to that statement.

Q. You're not concerned, sir, about the timing in advance of this disclosure of budget figures?

MR. MARTIN. This is a matter of judgment and you can have positions in either way, but the Board by a split majority, as you know, after careful consideration decided that it should go ahead.

Q. Was there any key factor, sir, in your decision? Viet-Nam, for instance?

MR. MARTIN. No, other than the problems that the money market is resolving.

Q. Mr. Martin, what do you expect, if things go as you hope they will--what will be the effect of your increase in the discount rate ?

MR. MARTIN. It will improve the flow of funds, make possible sustainable advance. It is directed toward helping, not hindering in any way, the advance.

Q. Will it not then slow down the flow of funds in any way?

MR. MARTIN. It depends on what the demand for funds are, and I am not going to make any prediction on that.

Q. Mr. Martin, would you say that you are in any way in basic disagreement with the President on the economic policy ?

MR. MARTIN. I think the President and the Federal Reserve System have exactly the same objectives, and I know I speak for the entire System when I say that we are doing everything in our power to promote the President's program. We sometimes have differences in our particular field with respect to what is the most effective way to promote that program. This is only in the Federal Reserve's specific field and is not in any way intended to defy the administration.

THE PRESIDENT'S CLOSING REMARKS AND QUESTIONS THE PRESIDENT. Thank you for coming out. If you have any questions of me I'll be glad to attempt to answer them.

Q. Mr. president, are these gentlemen staying over for your meetings tomorrow or have they concluded ?

THE PRESIDENT. No, they will return when our discussions are finished today.

Q. Mr. President, do you feel that you and Mr. Martin are any closer together in your views on this discount increase now?

THE PRESIDENT. I think both of our positions have been clearly and fairly and accurately stated, and as Mr. Martin so well said, it is a matter of judgment as to whether you would act Friday, or next Friday, or next month, or whether you would act at all or not.

We all recognize the Federal Reserve is a board of experts in money and marketing, and I make no pretense of being a monetary expert. But even the experts have a division of opinion, 4 to 3, and we do have divisions all the time within the Government. One Cabinet officer may see one matter from one viewpoint and another from another. But there is one thing you can be sure: I believe the public is served by competent and dedicated men in the Federal Reserve and in the Treasury and the financial agencies, fiscal agencies of the Government. And we are going to continue to exchange views and express differences and try to reach agreements and promulgate policies and do what we think is best for the country. This meeting has been very helpful, very fruitful. They always are.

I am not here to discuss post mortems. I am here to talk about how we can make this country better in the next year. Your job is to provoke a fight. Mine is to prevent one.

Q. Mr. President, do you see the action by the Federal Reserve Board as posing any serious threat to the current economy?

THE PRESIDENT. I expressed my views yesterday on the action of the Federal Reserve Board and I don't think I'll add to it.

[3.] Q. Mr. President, do you have any plans for the future, this month, on where you will meet President Ayub and Prime Minister Wilson?¹⁰

THE PRESIDENT. Yes, we are working on those plans now, and as we have told you over and over and over again, we will explain them to you in detail just as soon as a decision has been reached between the governments concerned.

¹⁰President Mohammed Ayub Khan of Pakistan and Prime Minister Harold Wilson of the United Kingdom (see Items 648-650).

[4.] Q. Mr. President, did anything that Mr. Martin said this morning change your mind about the statement you issued late yesterday ?

THE PRESIDENT. No, no. He did not address himself to changing my mind, nor did I address myself to changing his.

[5.] Q. Mr. President, do you have any plans for changing the oil imports program regulations?

THE PRESIDENT. That is a matter that Secretary Udall ¹¹ has under consideration and when he makes his recommendations they will be acted upon.

¹¹Stewart L. Udall, Secretary of the Interior.

[6.] Q. Mr. President, do you feel there is a need for stronger legislation to ensure service on interconnected power systems?

THE PRESIDENT. That will depend, I think, on the recommendations that the people who are studying it will make, and as the Chairman told you, they have not completed their study. They have not made any recommendations as yet. We will have to examine them when they do and act on them.

[7.] Q. Mr. President, is there any possibility of your going to the AFL-CIO convention this week?

THE PRESIDENT. NO. I explained to them at the time they invited me that I did not think I would have a very heavy speaking schedule between now and the first of the year.

[8.] Q. Mr. President, would you entertain a question on Viet-Nam?

THE PRESIDENT. Yes.

Q. There have been some reports that the total amount of Americans--

THE PRESIDENT. What reports? Now let me get this clear, these reports and rumors. I have got to identify them before I can comment on them intelligently.

Q. Do I have to say it's one of my colleagues?

THE PRESIDENT. I want to just be sure it's reliable.

Q. Mr. Mohr,¹² of the New York Times, as you know, reported recently from Viet-Nam that there were discussions there of increasing the American commitment up to the capability of the Korean war perhaps. Is there a possibility of that?

THE PRESIDENT. I wouldn't want to make any predictions or prognostications or question Mr. Mohr's judgment. I think I'll go back to my July statement and say that we are very anxious to have peace in that area in the world, and as soon as folks there are willing to leave their neighbors alone, why, we can have peace. But until we do have peace we are going to continue to help the people of South Viet-Nam resist aggression and we are going to supply whatever men may be needed in that effort.

¹²Charles Mohr, New York Times correspondent in Viet-Nam.

Now, from day to day those numbers will change and we no doubt, between now and the first of the year, will have to make plans for what changes will take place. But so far as I am aware, those plans have not been made yet, and those decisions have not been made.

Maybe Mr. Mohr has some information I don't have. It takes time to get in. And sometimes our reports don't come as fast as you newspaper people.

Q. Will that be taken up tomorrow, Mr. President, at this meeting you are going to have with Secretary McNamara?

THE PRESIDENT. I would doubt that Mr. Mohr is on the agenda. We will discuss the defense needs rather fully.

[9.] Q. Mr. President, can you give us your expert political opinion of what happened to General de Gaulle?¹³

THE PRESIDENT. No.

13 President Charles de Gaulle of France.

[10.] Q. Mr. President, we had a report the other day from your doctors on how you're feeling. I wonder if you could give us a personal measure of your physical condition and your outlook for the next few weeks?

THE PRESIDENT. Well, I feel as well as I expect to feel. I don't feel as good as I did before the operation,¹⁴ but I have no reason to feel that I won't be up to my normal operating strength the first of the year.

14 See Item 549.

I think each day I get a little stronger and I have about reached my objective so far as weight and exercise and everything is concerned. I think things are going well.

Reporter: Thank you very much, Mr. President.