White House Forum on Inflation Question-and-Answer Session by Telephone With Participants in the Forum in Hartlord, Connecticut.

AMBASSADOR STRAUSS. Mr. President?

THE PRESIDENT. Yes, Bob.

AMBASSADOR STRAUSS. Can you hear us all right?

THE PRESIDENT. I hear you fine, yes.

AMBASSADOR STRAUSS. Mr. President, we're in, as you know, in Hartford, Connecticut, and Charlie Schultze, Fred Kahn, Ray Marshall, Esther Peterson, Lee Kling, and myself are here for our second inflation forum, much the same format we had in St. Louis.

Before we begin, Mr. President, I want to tell you that I was very brief when I opened this meeting, and I asked everyone to be exceedingly brief. And Schultze told this crowd that I didn't have the nerve to say that to you. Now, Mr. President, f do want to say to you that we were all a little lengthy in St. Louis, even including our Washington call. [Laughter] So, now I've shown this crowd I'm not afraid to say that to you, Mr. President.

I'll begin with the first question. The first question will be asked of you, Mr. President by Johnny Driscoll, whom you know, who's president of the Connecticut State Labor Council, AFL-CIO.

Mr. President, before he takes his question to you, would you make such statement as you would care to make?

THE PRESIDENT. Bob, you've taken up so much time telling me to be brief, I think I'll go just right directly to the question. [Laughter]

John Driscoll, go ahead.

MR. DRISCOLL. Mr. President, we sympathize with you in the tremendous problem that you're trying to deal with in the matter of inflation. And I'm very pleased that you have decided to take your case to the country in this way, to ask how people feel about it.

When you were sailing out of New London with the Navy, I don't know whether you had much of a chance to find out how Connecticut people act, but I hope you did find out then, or since then, that we do like to have questions answered. And I'd like to pose one to you which occurred to me after I read your proposals on this matter; and that is, in connection with wages and prices, you've proposed a pretty self-monitoring plan with regard to wages.

Every employer will be making sure that wages are held down to that 7 percent, compensation of all kinds held down to that 7 percent. But there isn't that much of an incentive or that much of a monitoring process, as I can see it, for prices.

The question is, why did you not use the same kind of built-in control by using the Federal income tax to either give an incentive to management to hold prices down, or to in effect "disreward" them, if I can use that term, if they fail to hold the line.

THE PRESIDENT. John, I think it's obvious that the people of Connecticut have spoken very clearly about tough government budgeting and management, with the results of the election yesterday.

Also, I think it's good to point out that in the last 21, 22 months since I've been in office, the people of your area have benefited substantially because of our economic policies. I think in January of '77, when I became President, you had about an 11-percent unemployment rate in the city of Hartford, and that's been cut almost exactly in half, down to 5.6 percent. In fact, in Greater Hartford, the unemployment rate is less than 4 1/2 percent. But inflation for the last 10 years has been holding at about 6 1/2 percent average. The 3 years before I became President, as you know, it averaged about 8 percent.

We tried to provide a very balanced program and believe we succeeded. The labor wage standard increase would be 7 percent, which is some reduction over previous years' experience, and, of course, we've asked business throughout the Nation, employers who set prices, to hold their own price increases 1/2 percent below the average increase for the last 2 years, which works out, if everyone could comply, to about a 53/4-percent increase.

So, the standards on prices are a little bit more stringent than labor; I think well balanced. We will be monitoring constantly about 4 or 500 of the top businesses in the country to make sure that they do comply. We will use every legal means at our command to induce them to comply-the arousal of public interest, the awarding of contracts on Government purchases, which consist, as you know, of enormous billions of dollars each year, about $85 billion a year.

And of course, the income tax incentive was designed to help labor by assuring any employee group that if they do comply with the 7-percent wage increase standard, that they will be guaranteed that their real wages will not fall. If the inflation rate goes above 7 percent, of course, there will be an income tax reduction credit for them.

So, I believe that in general it's a very well-balanced program. I'm going to do my share by holding down the budget, by holding down the Federal work force, by holding down Federal pay, by reducing the deficit down to less than half .what it was when I ran for President, by reducing unnecessary Federal regulations, and I intend to be tough and persistent. And if I can get the help from labor and business, I can succeed as the leader of our country.

So, it's a well-balanced program—tight constraints on business and labor, voluntarily imposed, some tough Government actions that can be taken against business on prices. But in general, John, if you all will help me, I think we'll be successful.

AMBASSADOR STRAUSS. Thank you, Mr. President.

Mr. President, the next question will come from Mr. Edward Bates, who is chairman of the Connecticut Mutual Life Insurance Company of Hartford.

Mr. Bates.

MR. BATES. Mr. President, certainly for our company there is a very strong commitment to your voluntary program. And I believe a similar commitment prevails among our business community generally here in the Hartford area.

I have an equally strong belief that the success of the program will depend on what government does in its own area. You've made reference to areas that may require additional legislation. Could you share with us those areas that might be under consideration, either legislation to control inflationary Government spending or to alleviate the inflationary cost of legislatively mandated regulation?

THE PRESIDENT. Mr. Bates, I appreciate your promise to help us with this program. And I think you accurately represent the attitude of most business leaders in our Nation as well.

It's too early for me to outline in any specific terms what the legislative proposals will be. Both through regulation, administrative decision, and legislation, however, we will do everything we can to carry out the purposes that I've described. To reduce budget expenditures is one thing that's directly under my control, and the 1980 fiscal year budget will be very tight, very tough, very closely patterned to meet the needs of our people without inflationary pressures.

One very important success that we had in the Congress this past year—and we intend to build on it—is the deregulation of major industries, the insertion of higher degrees of competition into our free enterprise system. I think we've had proven success in the airline area. The ICC is moving on its own initiative to deregulate other aspects of transportation, and we'll persist in this same effort through legislation there.

On taxes, I outlined in my anti-inflation speech the fact that we would not approve reductions in general income taxes in the future until inflation is under control. I think that Charlie Schultze, or others there with you, Alfred Kahn, can better outline details of what we might do. But I can tell you ahead of time, before they even talk, that this package is still in a formative stage. But we'll try to put it together in an anti-inflation effort.

Some of the efforts will be repetitions of what we attempted unsuccessfully to get in 1978. A notable example is in hospital cost containment, which I'm sure would be very favorably supported by the insurance industry, and also by all those who need medical care.

AMBASSADOR STRAUSS. Thank you, Mr. President.

Mr. President, the third and final question will come from Mary Heslin, who's commissioner of the department of consumer protection, State of Connecticut.

MS. HESLIN. Good morning, Mr. President. I appreciate this opportunity to speak to you. I feel that the thousands of Connecticut consumers that voice their concern to us here have now the opportunity, I think, in turn to be voiced nationally.

We hear repeatedly at the various consumer forums that we have provided throughout the year two major consumer concerns, one being that of the increased food prices and the second one being that of health care costs. In these two areas, people are most vulnerable; consumers feel most frightened and most frustrated. And I should like to ask at this time what government actions are planned to assist the consumer in restoring some of that confidence.

THE PRESIDENT. Miss Heslin, I know you've done a great job in Connecticut in protecting consumer interests, and I'll try to do the same thing from the White House on a nationwide basis.

One of our top priority legislative efforts in 1979 will be to pass hospital cost containment legislation. As you know, it was approved by the Senate. It was blocked by the special interest groups in the House, in committees. And I think an arousal of public interest in this legislation will prove that it is needed and will make our efforts successful.

In some major States, I'd say notably New York State, also Connecticut, of course, we have had good, proven results there when State legislation on hospital cost containment has been implemented. The hospitals' medical-care providers have not been suffering, and consumers have benefited greatly. In New York State, as a matter of fact, last year hospital costs actually went down 6 percent. And this is a very fine achievement and, of course, Connecticut had very good success as well.

In food prices, of course, this is something that's very difficult to regulate. And I don't have any intention of imposing price standards on food. This would be a very serious mistake, in my opinion. The market forces, however, on the worldwide basis, will determine food costs in our country.

I think it is accurate to say that in some of the major areas of the world, recent estimates show that there will be bumper crops this year. Our own Nation has had the best corn crop in history. Stocks of food in storage are fairly high. They are primarily under the control of farmers.

I think food prices will be much more stable than they were in the past. We will monitor very closely any sort of international decisions to make sure that inflation is not pressed upon us too highly. My own guess is compatible with most economists', and that is that food prices will not increase in 1979 nearly so much as they did in 1978.

So, in my decisions as President, I'll try to do the best I can to moderate food price increases, to stabilize price levels, and on hospital cost containment, go all out, with your help, to pass beneficial legislation.

AMBASSADOR STRAUSS. Thank you, Mr. President.

Mr. President, do you have a concluding statement that you would care to make?

THE PRESIDENT. Yes, Bob, I do, very briefly. This is an effort that has not been successful in spite of many attempts in the past to control inflation in our country. I am determined, as I said earlier, to be persistent and tough in my own leadership role in controlling inflation from the responsibilities that I have as President of our country.

I need to have voluntary aid and support in many hundreds of decisions made by private citizens in our country, leaders in labor, leaders in business. We are asking mayors, county officials, Governors, and others to support our program. And I believe that if we can arouse the interest of Americans, which already exists, accentuate this interest, let them know that the fight is not hopeless, that we can succeed.

This is a major battle, and as Alfred Kahn has said and you have said, many others have said, it's a battle that we cannot afford to lose. And I do not intend to lose this battle against inflation in our country. And I need all the help I can get, and I'm sure, with your help, we will succeed.

AMBASSADOR STRAUSS. Thank you, Mr. President.