White House Forum on Inflation Remarks and a Question-and-Answer Session by Telephone With Participants in the Forum in St. Louis, Missouri.

AMBASSADOR STRAUSS. Charlie, may I interrupt you now and ask if you would take your seat. President Carter is coming to the phone now and is just on the phone. Good morning, Mr. President.

THE PRESIDENT. Good morning, Bob. How's the meeting going so far?

AMBASSADOR STRAUSS. Well, Mr. President, I'm joined here by Charlie Schultze and Ray Marshall and Fred Kahn and Lee Kling, Esther Peterson, and probably a thousand people here under the sponsorship of the Regional Commerce and Growth Association in St. Louis. And we're going to have a good day, Mr. President. Everyone here is optimistic and everyone is—well, they've got the kind of looks on their face you'd like to see. [Laughter]

THE PRESIDENT. Bob, that's good to hear.

I think everyone knows that we've had excellent response so far from our anti-inflation effort, following up a very successful first 20 months in getting the unemployment rate down. I noticed that in St. Louis, for instance, the unemployment rate has gone down at least 25 percent. And we look on that great city as a model for good labor-management relations and a strong center for business locations that affect not only our country but the entire world.

But we've had inflation preying upon our American economy now for 10 years with an average inflation rate of 6 1/2 percent, and of course, it's gotten worse in recent years. And I finally decided that we needed to move in a bold and aggressive way throughout this country to recruit volunteers to help me fight inflation.

The Congress has done a good job. We've been able to cut the unemployment rate on the one hand, but also we've cut taxes drastically, $28 billion, and also cut the deficit down by $25 billion in the brief period of time I've been in office.

We had two basic decisions that we could have made. One was to impose Federal mandatory wage and price controls throughout the free enterprise system, which I think would be a very bad thing to do and which I do not intend to do; and secondly, to deliberately create a recession, which would throw millions of people out of work. This is what did occur shortly before I became President. But as I announced the other night, we chose instead to invoke a series of voluntary actions by both business and labor, hoping to recruit as many Americans as possible to join in a crusade.

I'm determined, Bob, and everybody there, to make this program work. It will be my top responsibility on domestic affairs in the months ahead. I do not intend to see it fail. We have an excellent team committed to make it work, not only in our own administration but throughout the Congress and the Government, and we've had good response from responsible labor leaders and also from the rank and file of workers throughout our country as well as the business community.

I might say that I'll do my share or more. I've pledged to cut the Federal deficit further, which we will do. I've pledged to freeze Federal employment, only filling one out of two vacancies that occur. We will have lower Federal employment in the future. I've pledged to cut down substantially the percent of the gross national product of our Nation that the Federal Government spends and to cut down unnecessary regulations and the cost of regulation itself without causing a deterioration in the quality of our own lives.

I think the only chance this program has to work is for it to be an extended, deep, permanent commitment by a wide range of groups. It has to be a nationwide, team effort. We're not going to have immediate success. Trends are in the right direction, however.

I think we have taken bold action this morning to sustain the value of the dollar in international markets, and I believe that this will have a beneficial effect in controlling inflation. It was a difficult decision for me to make, but I have no doubt that it was the right decision to make. And it's typical of the kind of action that is going to be taken regardless of political consequences to control inflation in our country.

I would like to add once more, before I take questions, Bob, that I need from everyone assembled in St. Louis and, in fact, throughout the country, not just a .nodding of one's head and saying, "This is a good program; we hope it works," but I need active support. I need positive support. And I need well-publicized support from all the leaders that are assembled there together with you.

And I hope that this first meeting of its kind in St. Louis will act as a pattern for us to copy throughout the country and as a massive demonstration of American support for a much needed and effective program to control inflation in our Nation.

Now, Bob, I'd like to take questions that anyone there might have.

AMBASSADOR STRAUSS. Mr. President, thank you very much.

To be certain that we secured representative questions, Mr. President, we have asked three people to participate in this part of it. The first gentleman from whom you will hear is Mr. Robert Kelly, who's president of the St. Louis Labor Council, AFL-CIO. Mr. Kelly not only has a question, Mr. President, but Mr. Kelly this morning advised Lee Kling and me that he also had a statement that he wished to make. And I now will ask Mr. Kelly to proceed. Bob Kelly.

MR. KELLY. Mr. President, first let me thank you for trying to tackle this very huge problem.

Yesterday the executive council of the AFL-CIO expressed a number of concerns with your proposed plan to halt inflation. The officers of the St. Louis Labor Council, along with you and the executive council, do agree that inflation is our number one enemy. We in St. Louis also share many of the same concerns voiced by the executive council in Washington. Yet the executive council does not determine the collective bargaining goals of the affiliated unions in Missouri. In the final analysis, the members of our public and private sector unions who will negotiate contracts over the next year must determine for themselves what they need to provide food, housing, energy, medical care for their members and families.

In St. Louis we've already proven that we can work in harmony with industry to the mutual benefit of the community. As a result of this reasonableness shown on both sides of the bargaining table, you will find that our recent contract settlements here have on an average already come well within your suggested wage guidelines.

If industry will do its share to hold down the prices at or .below the guidelines in levels in the future, we in the area labor movement have already demonstrated that we will hold up our end of the bargaining on the wage side.

Now, my question is twofold: Your program calls for all Americans to make a sacrifice, and particularly on workers to bite the bullet on their wage requests and businessmen to limit their price hikes. What most workers would like to know, however, is what assurance you have that prices and that the other factors that cause inflation can be controlled. And second, judging from the press reports of Congressmen's negative reaction to your safety-valve tax credit program, what are the realistic chances of congressional approval of that plan?

THE PRESIDENT. Mr. Kelly, that's a very fine statement, and I appreciate what you had to say.

We got about as much support for our program from Mr. Meany as we had anticipated. We knew that he preferred mandatory wage and price controls, which I do not intend to implement. But he also said that he was willing to cooperate and, of course, was not demanding that the international unions refuse to cooperate with our voluntary program. And I believe that there will be a growing cooperation, not only as you've already demonstrated in Missouri but throughout the country, from the working people of our Nation and also, of course, the organized labor movement itself.

It's my responsibility to carry out my part of the bargain, Mr. Kelly, and this is in answer to your question. I don't intend to violate any of the commitments that I made in my speech last week. We will cut down the Federal deficit. We will maintain a commitment to good programs for the American people. We will protect the interests of the average consumer and the average working person in our Nation. We will eliminate waste. We will make sure we have adequate regulation, but without unnecessary burdens that would cause jobs to leave our country and without causing the price of American products to go up.

The first proof of acceptance, of course, will come from the business community. We are in the process now of contacting the 500 largest employers in our Nation to get them to agree to comply with the standards that we've prescribed, which is roughly 53/4-percent increase on an average in prices, but one-half percentage point below the average increase in price for the last 2 years. And I think that as we go along, as contracts are negotiated by labor, you will be able to see the degree of compliance by the business community itself.

I'm very determined that the Congress will pass the real wage insurance program that I advocated. My own assessment of the telephone calls that we've made to. key Congress Members has been very positive. This will be a top priority of ours, and I believe the Congress will realize that one of the bases on which we can have success in controlling inflation is to give workers a guarantee that they will not lose if they comply with the 7-percent guideline standard. And I don't believe Congress will fail, because there's a general, broad support in our country for controlling inflation.

This will be a very simple request to the Congress. We will have the legislation drafted before the Congress goes into session in January. It will be thoroughly discussed with the key Members of Congress and individual Members before the Congress convenes, and I think I can assure you that we will be successful in getting this legislation passed to be an insurance program for real wages for American workers who comply with our standards.

MR. KELLY. Thank you, Mr. President.

AMBASSADOR STRAUSS. Thank you, Mr. Kelly.

And now, Mr. President, the next gentleman from whom we will hear is one of America's most distinguished business leaders, a man you know, Hal Dean, chairman of the board of Ralston-Purina, and who's president of the City Progress Association of Missouri. Hal, would you stand up when you ask your question, please?

MR. DEAN. Good morning, Mr. President.

THE PRESIDENT. Good morning, Mr. Dean. It's good to hear from you.

MR. DEAN. Thank you very much. I know you've had a busy morning. We would like to say thank you for choosing St. Louis yourself, and your administration coming out here and saying hello to us.

I certainly applaud Bob Kelly's remarks. I cannot speak for all of the business leaders of either St. Louis or the country, but I can assure you that I know the character of the business leaders of St. Louis, and we are going to cooperate with you on your program. And I can say for my own company that you will receive complete cooperation.

You have consistently said that our problems of inflation did not have single nor short-term solutions. Mr. Bill Miller, head of the Federal Reserve System, has also advocated the necessity of the longer range approach. He has outlined a specific 8-point program dealing with what I feel are basic and fundamental issues. He addresses fiscal and monetary restraints, including the ultimate balancing of the Federal budget, regaining productivity by encouraging capital formation, reducing the role of government in our economy, restricting present burgeoning regulatory issues, and becoming less dependent on foreign energy.

My question: Do you agree that these corrective actions, approached forcefully and consistently, will be successful in bringing inflation under control, and can you politically stand behind such a program?

THE PRESIDENT. The answer to both your questions is yes. I'd like to go down and explain very briefly each one of those items I jotted down hastily as you asked your question.

Fiscal and monetary responsibility is very important to me. I believe the action that we've taken this morning to sustain the value of the dollar will be well received in international markets and also in domestic markets as well. We have a need to keep the dollar strong. We're not going to try to fix an exchange rate and hold to it, but we want to eliminate aberrations in the international markets. My own belief is that the dollar is now undervalued. We have not yet benefited in our foreign exchange adequately from a lower priced dollar, but this will come along.

Fiscal responsibility in budgeting is something that I've espoused over and over, and I think we've already proven it by lowering the Federal deficit by the end of the budget I'm preparing now, more than 50 percent below what it was when I was running for President.

Secondly, I want to reduce the percentage of the gross national product spent by the Federal Government. This answers two parts of Bill Miller's standards. One is that we have fiscal responsibility. The other one is that we keep Government's nose out of the affairs of the free enterprise system and individual persons' decisions as much as possible.

On deregulation, I think that Alfred Kahn, who's with you this morning, has shown vividly that to utilize the free enterprise system in a highly competitive way, as it's designed to be and as it ought to be, is a very beneficial thing, not only for the consumers of our Nation but also to control inflation in general and also to provide higher profits for well-managed and competitive industries.

The budget that I'm preparing for 1980 will be a tight one. It will be adequate. I think part of it, as I've described publicly in my directives to all agencies, is that we need to increase productivity. One means for that, 'as you well know, being the head of a major corporation that's used this effectively, is in research and development. And I have directed in the preparation of the 1980 fiscal year budget that basic research and in research and development in general should not be reduced as a percentage of the total Federal budget.

Regulation, unnecessarily, is a very great and costly burden on American business, on our economic society. We've now got a council of regulators. I appointed a Chairman yesterday, Doug Costle, and they will make sure that regulations are actually needed, that unnecessary ones are eliminated, that they be simple, nonintrusive, and that whenever one is issued to protect the quality of Americans' lives, which is very important, that we have a very careful assessment of the economic cost.

On energy, the Congress has finally passed, after an excessive delay, the basic elements of our energy plan. We will continue to improve upon it as time goes on, and I think you will see in the coming weeks that our administrative actions based on the law that now gives us this authority will be very forceful in cutting down the imports of oil.

I might point out that the tardiness of the Congress action may result in high import levels of oil in this particular quarter, but this is an action on the part of our importers that can be corrected and will be corrected in the future.

So, Bill Miller's basic thrust in fiscal responsibility in all its elements are feasible. They are the kind of commitments that I have undertaken. I think the Congress itself, Democrats and Republicans, liberals and conservatives, agree that we've got to comply with these basic premises in order to control inflation, to keep our economy growing, to keep people's jobs intact, and to give us a vigorous influence around the world as the great strength of our country warrants.

Mr. Dean, I want to thank you again for your question and a chance to answer those specific elements of it.

MR. DEAN. Thank you, Mr. President.

AMBASSADOR STRAUSS. Mr. President, the final question will come from Mr. William E. Douthit, who is president of the Urban League of St. Louis. Mr. Douthit, will you please ask your question?

MR. DOUTHIT Mr. President, as we all know, inflation hurts the poor and the unemployed more than anyone. And your program calling for wage and price restraints confronts, in my opinion, the excess money side of the inflation equation. On the other side we need to increase production and put more people to work. Under your program, what incentives does business have to do this?

THE PRESIDENT. Well, I think for business, Mr. Douthit, to have an assurance of stability in the future, the value of the dollar, sustained economic growth, responsible government actions, increased opportunity for exports, these kinds of assurances to business are the best guarantees that we will have investments in new equipment, new factories, new jobs, and higher productivity that would ensure success for all our efforts.

In the past, I think there's been too much doubt in the business community about the attitude of government, about the sustained growth, about research and development, about export opportunities, about excessive imports of fuel, about stable prices of fuel, higher productivity in our country of fuel these kinds of questions are the ones that we've tried to address already since I've been in office with the full cooperation of the Congress.

The sustaining of the value of the dollar is also a very important element, because as you know, when the dollar decreases in value overseas, the indirect but very predictable consequence of this is a higher inflation rate here at home. And this is a combination that's very complicated. Although the Federal Reserve is an absolutely independent agency, I can tell you that there's a very close coordination between the Congress leaders in tax policy, between the executive branch of Government, represented primarily by the President, and by Bill Miller, who's the Chairman of the Federal Reserve. And we have a commitment to keep these three branches of Government independent, but we do coordinate our efforts and we share responsibilities and we share problems.

So, I think that it's important that we have this sustained, constant, long-range commitment with a maximum degree of harmony within the government itself. I'm sure of that.

What we need now is a public profession of support from the hundreds of business and labor leaders throughout the country that can either make or break this program. I'm determined as President to make it successful, to make it succeed. Our Country needs it. The American people support it.

And it was no accident that we chose St. Louis as the place for this first conference on inflation, because you are the center for nationwide distribution systems, you're the headquarters for some of our most important corporations. And I think the relationship there between labor and management has been very good in the past, setting example for the rest of the country.

The question that you asked is a good one, and I think that the answer is that we can succeed in controlling inflation if we all cooperate. I'm determined as President to provide that leadership. I have no doubt that the Congress, labor, business, and the American public will support it.

I want to again express my thanks to Bob Strauss, for the members of my own team who are there with the St. Louis leaders, and hope that this example, having been set in St. Louis, will be followed throughout the country.

I believe we've got an opportunity now to capitalize on the tremendous economic strength of our country to solve this serious but, I believe, transient problem of inflation if we all work together. And I have no doubt that we will work together in the true spirit of Americans who are willing to sacrifice special advantage for the benefit of our country.

Thank you very much, Bob, and everybody who's assembled there.

AMBASSADOR STRAUSS. Thank you, Mr. President. Thank you.