Memphis, Tennessee Question-and-Answer Session at the National Democratic Conference Workshop on Inflation.

LIEUTENANT GOVERNOR O'NEILL. The President would like to entertain questions. [Laughter]

FOREIGN TRADE

Q. We're still operating under our international trade agreements that were devised in the late 1940's, and, of course, they were originated to rebuild industry in Western Europe and Japan. And they did a magnificent job of it.

However, at the present time, Germany and Japan and Western Europe and all these manufacturing nations are still operating under the systems that we helped them to build in the 1940's, to build their industry. Consequently, our industrial complex is continuously being, not actually reduced, but reduced in comparison with our competitors.

So, what I want to make a strong pitch for is that we place the same restraints on imports into the United States, say, reciprocal restraints as those nations place on our imports into their countries. If we did this, I have a strong feeling that our industry will become much healthier; it would reduce inflation, because our system flourishes on the supply-and-demand theory. It seems to me the only way that we can really stop this business.

I would also like to have this workshop consider the possibility, if they could, of placing some restraint on the increase of interest rates. If 8-percent wage increases are inflationary, then what is a 113/4 percent interest rate? The banking industry can increase their profits by 800 percent. And our purchasing power is being continuously reduced. Thank you.

THE PRESIDENT. That was not in the form of a question, but let me say this: Our administration, primarily under the leadership of Robert Strauss, the Special Trade Representative, has been laboring ever since I've been in office to conclude a multilateral trade negotiation in Europe, to make sure that restraints on shipments from our country to other countries in the world are fair and equitable and balanced. And we have made bilateral agreements—that is, between our country and just one other country—to protect American manufacturers in several areas of production—color television sets, shoes, textiles, and so forth.

We'll continue to do this. But overall, we believe that our Nation is best protected and our workers have a better prospect for progress, higher wages, more jobs, if these international protective devices in the form of tariffs and other obstacles are reduced and not raised.

Our country only exports about 7 percent of our gross national product. There's not a deep commitment on the part of manufacturers in this country to depend upon exports, because we have such an enormous domestic market. A country like Japan has many, many more times of their portion of their production destined for export. Germany exports between 25 and 30 percent of their gross national product.

But what we're trying to do is to lower trade barriers to make more equal those that have discriminated against American production in the future. And there is a difficult negotiating effort being carried on now.

Bob Strauss is reasonably confident, and we'll continue this effort. We want to have more jobs in our country, more sales overseas, less protective barriers, and equality in treatment, and no dumping of foreign goods on American markets. That's what we're working for.

THE NATION'S ECONOMY

LIEUTENANT GOVERNOR O'NEILL. Yes, sir.

Q. Thank you. My name is Jack Scott from the State of Louisiana, the 8th District. I'm a member of the Louisiana legislature in Louisiana. And I'd like to present a viewpoint that hasn't been stressed as much as I would like it here today.

You know, the community I'm from is a small town. We don't have any giant corporations; we don't have a lot of illicit, obscene profits, and things of that sort, where ! come from. But one thing we believe in, and where I do come from is we feel like an individual, a business, a government, what have you, cannot really spend more of its resources than it has. It seems to be a very simple principle. And I'd like to go into it in a little greater depth.

You know, so many people that have spoken today have seemed to blame a philosophy of trying to balance the budget for inflation, as though that's the status quo. But, ladies and gentlemen, we haven't had a balanced budget in this country in 10 years. We've only had one in the last 20 years in this country. So, balanced budgeting and applying the principle of your dollars have to somehow pay for themselves has not been the status quo in this country for many, many years. So, you certainly can't blame today's inflation on that philosophy.

Now, I'd like to go through what history can instruct us just a little bit. We had the first $100 billion budget in our country's history in 1946. It took us about 176 years to reach that point. Then just 24 years later we had, in 1970, our first $200 billion budget. And then just 5 years later, our first $300 billion budget; and 2 years later, '77, our first $400 billion. And now we're right at half a trillion dollar budget per year.

Now, if you look at a graph of spending at the Federal level, you'll see that it's running fairly parallel in the early 20th century, starts rising midway, and by the time you get to the seventies, it's going straight up. So, for those of you who feel that spending a great deal through government at the Federal level will cure inflation, you're getting that right now, and you're paying for it.

Now, let me just—I've got two questions, but I'd like to premise it with these remarks. I have a chain of thought I'd like to share with you. It seems to me that when we have a deficit budget, somehow or another government has to cover that deficit. They have to pay their expenses, their costs, their salaries, to do business. So, somehow, that deficit has got to be covered. How is that done?

Number one is by borrowing, selling bonds, securities, what have you, at a high interest rate, so that private investors will buy them. And that bids the interest rates up all over the country. Number two is we print more dollars, and we've been printing dollars, increasing the money supply to something in the neighborhood of 9 percent, as I understand it, per year, the last couple of years, which means that as we print more dollars through the Federal Reserve and put them into circulation, we're watering down the value of all the dollars that are already in circulation, not just in the United States but all over the country, all over the world.

And so, the dollar goes down and declines in all the money markets, the dollar bills that you and I have in our pockets are worth less and less. So, prices go up, because the merchants who are providing goods and services need to get more dollars to cover the same purchasing power they were getting before. And so, when their prices go up, the people start demanding pay raises to keep pace with it, and they get their pay raises, and so, then we do have the spiral that results.

I say wages and prices are a symptom of inflation; they're not inflation themselves, and that's the reason why controls cannot work. That's the reason why I certainly support voluntary plan, because that can't do any great harm. It may even help, but it certainly isn't the solution to inflation. It's right up there in Congress. Now, our politicians cannot blame the farmers, they can't blame the labor unions, you can't blame the oil companies, you can't blame anyone else in the private sector for the very core, root cause of inflation, because the true cause is up in Washington, D.C., with the policy we've had for so many years, of not just deficit spending, but since 1974, we haven't had a single deficit that was less than $30 billion. So, that is—Q. Question?

Q. All right. With those, my two questions are this: First of all, why was the Nunn amendment to the tax cut bill rejected when you had both the Senate and the House supporting it overwhelmingly, and it called for a balanced budget over a 5-year plan with spending limitations and with tax reductions that would go into effect only if those spending limitations were met?

And secondly, my second question is, how will the wage insurance plan—that's part of the administration's anti-inflation program—how will it be paid for? My understanding is that you'd be paying something like 1 percent over a person who gets no more salary raise than 7 percent, through his salary, which, in my under- standing, is that the national payroll and private sector is around a trillion dollars. And if you work it out, it comes out to somewhere in the neighborhood, just on those very basic pieces of mathematics, to about a $10 billion cost of that plan. So, how will that be paid for?

LIEUTENANT GOVERNOR O'NEILL. Thank you very much.

THE PRESIDENT. Let me try to answer the statement first.

We are cutting down the portion of our gross national product that is collected and spent by the Federal Government. I inherited, as you know, a 1976 deficit that was $66 billion. At that time, the Federal Government was taking out of the American economy and putting back 23 percent of our GNP. We are cutting that down to 21 percent, a substantial reduction over what I inherited.

We believe that we are contributing to inflation when we have a high budget deficit. That's one of the reasons that I have pledged myself to continue the downward trend.

The Nunn amendment was not rejected by me—although I did not support it—it was rejected with good unanimity among the House and Senate conferees when the tax legislation was proposed to me.

I think it might be good to let Fred Kahn follow up very briefly and then perhaps either cover the wage insurance question or let Charlie Schultze cover it very quickly. But the essence of it is that the more wage earners and manufacturers who agree to reduce both wage demands and prices, the more that we will be guaranteed that the insurance cost will be minimal or nonexistent. And, of course, the fewer people that agree to hold down wages, the fewer that will be eligible for insurance, if we are not able to control inflation.

Our goal is to control inflation, not to pay off on high insurance payments. But this is a good inducement and a good guarantee for those enlightened workers who say, "We do want to control inflation. We're willing to make some small sacrifice, but we don't want to pay if others don't agree."

So, this is what the wage insurance will do. I hope the Congress will pass it. Perhaps Kahn and Schultze can make brief additional comments.

LIEUTENANT GOVERNOR O'NEILL. Well, Mr. President, we've got a rule that we're going to let the panelists participate and summarize in the last 15 minutes of the segment.

THE PRESIDENT. Very good.

LIEUTENANT GOVERNOR O'NEILL. I'd like to give everybody an opportunity to come up and ask a question. And if you could hold yourselves to a very brief question, I would certainly appreciate it.

MEAT IMPORTS

Q. I'm going to answer the same way-tell you who I am as I did in 1975, fall, to candidate Jimmy Carter then, at Joyce Van Dusen's house in Cedar Rapids. He walked up to the mike and says, "I'm going to be your next President." After he give us the answer period, I told him who I was.

I'm Harry G. Powell, Senior, from Newton Township, the Cannon County, the Third District of the State of Iowa.

LIEUTENANT GOVERNOR O'NEILL. Sir, will you speak right into the microphone, please?

Q. I never had—only twice in my life have I ever talked in one of these. [Laughter]

My county is next to the largest porkproducing county in the United States. Delaware is first. Now, agriculture, to me, is one of the greatest part of the economy. You may wonder why I don't go to the Agriculture Department here.

First, my question is going to be directed to Bob Graham, the Governor of Florida, but now I must add our President because he's here. I want to say this before I forget it. This is one of the greatest honors in my life, my 55 years working for the Democratic Party, to be before this great group of people.

[n this foreign beef supplies—may fall short of quotas—this is from the Des Moines Register, December 1. I'll be very brief about this, because maybe you and I can help out the President on a veto. The Governor of my State, reported, sent him a wire to not veto it.

This is in the mid-term conference. "No matter"—they're talking about-"No matter what he decides"—that's President Carter—"on the nearest meat import question, Carter could anger either consumers or farmers."

I live on what we call an average size farm, 470 acres. My son farms it, and I help him now, very active in it. Now, we raise corn, beans, cattle, and hogs—and a supplier of meat. How would you—the Governor of my State sent—I believe it is reported—President Carter a message or wire to veto the bill.

How would you, Governor of Florida, you told us here that you raised beef, that you built houses—and I forgot the other one. [Laughter] But as a beef grower, how would you—I'll answer you first if you want me to, what I would have done. [Laughter] Politically, I don't think it would have been very sound for a President to have signed it. And I don't feel that I would want any of my Presidents to ever have his hands tied on a little thing like this when the meat supplied in now is 1.5 billion. He only raised it to 200 million.

What did you do on this bill—do you send the President? Would you have signed it, vetoed it or not? Now, you raise cattle.

LIEUTENANT GOVERNOR O'NEILL I've got to stop you, sir.

Q. Okay, sir.

LIEUTENANT GOVERNOR O'NEILL. The Governor-elect will have an opportunity to answer it when we're summarizing. And I'm going to come over to this side of the room and provide the next person an opportunity. Thank you very much.

FEDERAL SPENDING

Q. Good morning, Mr. President, distinguished panelists. I just have four short questions. My name is James Fite from Baltimore, Maryland.

First is that it appears to me that both the Revenue Act of 1978 and the inflation policy, as Mr. Kahn has explained it, are discriminatory, depending on how one carns one's income. For instance, I am an hourly worker and earn my income in that manner. I can't debate the policy. My boss just told me I'd get a 7-percent raise; there's no question in my mind what's going to happen got to go along with it. Right? I want to know what controls are going to be made on profits, number one.

Number two, I don't understand the economic thinking that says that a continual decline in real wages, which appears to me would mean that the only way we can continue our standard of living is with the extension of consumer debt, which seems to be on the increase—I don't see how that decline or policies that continue to enforce that decline can pull us out of inflation. I just simply don't understand it from your point of view.

Third is, I don't understand how this distinguished panel can sit here and give the presentations they gave to us today without once discussing the military budget and its purposes and reasons for inflation.

My fourth question, sir: I have an internal memorandum from the board of directors of National Association of Manufacturers, which was put out long before your statement was made public on inflation. I also have the statements from the Brookings institute. Now, I understand that in the past the Brookings institute has been very contributory to the policy and thinking and things like that of the government.

I want to know, since the statement of the National Association of Manufacturers is almost word for word the inflation policy as it was described and announced in your speech, I want to know, does this show a shift of thinking away from the policy-type thinking of Arthur Okun, et cetera, toward the National Association of Manufacturers and that type of economic thinking?

LIEUTENANT GOVERNOR O'NEILL. Sir, Thank you very much.

THE PRESIDENT. I won't try to answer all four questions, but I would like to answer the concern about the military budget.

As I said last night in my speech, the number one responsibility above all else of any President is to ensure the safety of our country. Also, a major portion of my time, a substantial portion of my time, is spent in analyzing how the benefits of the influence of a strong United States can be invested economically and politically throughout the world to bring peace to other regions, and to ensure that alien philosophies which absolutely wipe out human rights do not triumph.

I have to match American military strength with that of the Soviet Union. It is a constant problem for me, a constant challenge. It's one I accept readily. Any President in the past or future would have to meet that commitment. The Soviet Union does not have the advantage of idealism, of freedom, liberty, of honoring independence or nationalist trends in foreign countries. They don't have a commitment to a better life for people built on freedom. They depend substantially on their influence to challenge us on military strength.

We spend about 5 percent of our gross national product on the military. It's been reducing year by year for a long period of time—5 percent. The Soviets spend between 13 percent and 15 percent of their gross national product on the military. We have tried and are trying, not desperately, but with determination, to cut down on the allocation of resources to the military. We can't do it by unilaterally putting ourselves in a vulnerable position versus the Soviet Union.

We have proposed drastic cuts in missiles. We are negotiating in Vienna for what we call mutual and balanced force reductions in the European theater. We are working for a comprehensive test ban. We're trying to eliminate the proliferation of nuclear weapons. We are trying desperately to bring peace and not divisiveness to the Mideast, to Nigeria, to Rhodesia, to Nicaragua, other places around the world.

In the meantime, though, we have got to have a strong defense. We can't bear it alone. We've got to inspire our own military allies to stay strong themselves. We are not trying to take over anybody's territory or run anybody else's affairs, but we cannot afford to be vulnerable.

Now, I hope that every weapon that we purchase will eventually rust. We are not buying weapons to use, and the degree to which we can be demonstrably strong means that we can have peace for our own people and for those around the world.

I do not have any apology to make at all for maintaining a strong defense. As long as I'm in the White House, I will keep a strong defense.

I just want to add one other sentence. My own assessment in history, my own political fortunes will be determined by Americans' judgment. When I make decisions, for instance, on the 1980 budget-has Jimmy Carter been fair; has he been conversant with and sensitive to the social needs of our people; and has he balanced this equitably between defense and other domestic problems, between domestic and international problems—I want to take that responsibility.

And I can guarantee you that I'll do the best I can to have a well-balanced budget and a fair budget. And, as I said last night, if I do make a mistake, it will be on the side of those who are most dependent on the Government, the poor and the deprived and the disadvantaged who are looking for a better life and who can only find a better life, in my opinion, with a Democratic administration.

LIEUTENANT GOVERNOR O'NEILL. Thank you, Mr. President. We're alternating from one side of the room to the other. Sir?

ANTI-INFLATION PROGRAM

Q. Mr. President, Mr. Chairman, ladies and gentlemen of the panel, ladies and gentlemen of the audience, I'm Victor Bussie, president of the Louisiana AFLCIO. I'm a life-long Democrat, a man who has never voted for a Republican in his life.

I also come to this conference with even better credentials than that. When the national press and all the polls said that Jimmy Carter could not carry Louisiana, I said that he would carry Louisiana. And we worked the State very hard to make sure that Louisiana did go in the right Democratic column, and we helped to elect Jimmy Carter President of the United States.

I also believe strongly in a military service. I served my country during World War II, and would serve again, age permitting, if it became necessary. So, I don't want to be listed as one of those that vacillates between the Democratic and Republican Parties, nor one of those who feels that we spend too much money for defense.

I simply want to say to you that I have a very deep concern, Mr. President, about your program. I'm concerned about the workers, those I represent and those I don't directly represent, but whom I speak for here today. And I feel that I can speak for them, because as I said, when all the polls said that Louisiana would not go for Jimmy Carter, I said it would, because I go among the poor, those who belong to unions and those who don't belong to unions, and I go among the wealthy, those who accept me, from time to time. [Laughter]

And I try to find out what goes on in my State so that I can truthfully stand before any audience and say that this is what the people in my State honestly believe. And I want to say to Mr. Scott, who is a very distinguished representative from Louisiana, that if Jimmy Carter balances the national budget under the existing circumstances, Louisiana and every State in the Union and every municipality and every parish or county will go bankrupt the next day, because you cannot live under those conditions. It simply cannot be done. As much as everyone wants the budget balanced, it must be done in a long period of time and under certain considerations, or else the problem will be too great.

I'm concerned about the exemption from the present anti-inflation program, Mr. President, of the cost of food, the cost of energy, the interest rates, the medical care, and things of that type. I'm concerned, too, about your apparent efforts to remove the controls over the cost of gasoline and the cost of natural gas and things of that type, even though I come from a State which produces a substantial amount of that energy.

Nevertheless, I am concerned about what it's going to do. Every man and woman in the country today, with the exception of a few who may have a bus line that runs within several miles of their home, must depend upon gasoline to go to work and to come back home and to do the things that's necessary for the livelihood. They simply cannot, Mr. President, pay a dollar a gallon for gasoline if their wages are going to be limited to a 7-percent increase, and from the 7 percent, we deduct what we call the fringe benefits-the cost of hospitalization, the cost of the money that the Federal Government says the employer must put in the retirement system in order to make it actually sound, and the many other things that the program either does or does not cover, based upon who's explaining it to me and what it's supposed to mean in the final analysis.

I can't get a good explanation of what the program is. But from what I've read in the information I've been able to get-and I've diligently sought all of the information that I can get, Mr. President-the program will work to the detriment of the poor working people of our country. And I hope that you will take into consideration our plea that drastic changes be made in the program. We want to share our responsibility. We want to cover that responsibility, but we want everyone else to do the same thing.

We don't want the big corporations-

LIEUTENANT GOVERNOR O'NEILL. Mr. Bussie, I'm going to have to rush you a little bit.

Q. I'm rushing fast as I can, Mr. Chairman. [Laughter] We don't want the big corporations of America to go scot free, and that's what they're going to do, if I understand the program. And I say that sincerely, because they can shift profits from one production line to another, and they have many ways of getting by. Don't let them by, Mr. President; make us all do what we have to do in order to make this program a success. That I beg of you, as a man who was your supporter, a longtime Democrat, a good American, I believe-because I've never advocated anything except the free enterprise system, a representative of working men and women and one who tries to speak honestly and sincerely on their behalf.

LIEUTENANT GOVERNOR O'NEILL, Thank you, Mr. Bussie.

I'd like to thank Mr. Bussie for his statement. And then we're going to come back over here. If you have a question, if you could bring it to a conclusion very quickly, again, I'd appreciate it.

THE DEMOCRATIC PARTY

Q. I'm a delegate from northern California and also a staff member of the California Campaign for Economic Democracy, whose chair is Tom Hayden.

The reason I came up here—I think most of my concerns have already been stated—but I joined the Democratic Party when I came back from Vietnam, because I believed it was working for the working people and the poor people of this country. And as I listened and watched this panel criticize, one after another, wages and government, and then I read the white paper put out by the White House on October 24th, which says excessive wage increases were not the cause of the current inflation, but wage moderation is an essential part of the cure—well, I hope the Democratic Party will forget about going after the poor people and the working people and take on the corporate greed in this country, especially in regards to defense and energy. And I would just like a statement from someone at the end about this.

LIEUTENANT GOVERNOR O'NEILL. Okay. Thank you very much.

CONSUMER AFFAIRS

Q. Mr. President, the question that I have is directed mostly to Mrs. Peterson. And I feel somewhat like David in the lion's den, because I've heard from labor, business, et cetera, and I'm espousing the concerns of the consumers out there.

Mr. President, you've shown an interest in the consumers in the recent legislation that was defeated. But I would hope that that interest is going to continue. As an attorney—and I represent the 10th Congressional District of Pennsylvania—I see what inflation is doing to the American family. I do a lot of domestic relations work and see the problems that inflation causes—alcoholism, the inability to pay one's bills. And I suggest that it's the consumers' ignorance as to how to deal in the marketplace that is one of the greatest problems facing the free enterprise system.

Mr. President, you have at your disposal the United States attorneys' offices all over the U.S. And if the Congress of the United States won't give you a consumer advocate, I suggest the Attorney General should put one in every U.S. attorney's office. Problems such as land fraud, problems such as the automobile used-car dealers, clocking odometers, they go beyond the basis of one State to another. We need this help in the marketplace desperately, Mr. President, because I suggest if we can create an atmosphere where our consumers know how to deal in the marketplace, we can stretch that shrinking dollar. And we can save many families, and you can keep your commitment to the American people that you've been doing such a wonderful job with thus far.

Thank you very much.

LIEUTENANT GOVERNOR O'NEILL. Esther, maybe you'll handle that at the end.

ANTI-INFLATION PROGRAM

Q. Mr. President, I don't have a question. I'm a delegate of Democrats Abroad. And we represent 1.8 million Americans outside the United States. One of the things which has struck me about this discussion has been the fact that nobody has stressed how much the introduction of your anti-inflation program meant to the world outside the United States. Up to that time, and up to Camp David, the rest of the world didn't know where the United States was going. And it was only when Camp David took place, and when the anti-inflation program was introduced, that the rest of the world knew that the United States and the Carter administration was not going to take the same route which has destroyed so many countries around the world, where countries—I travel in Africa, I travel in the Middle East, and I travel all over Europe, and I know countries where there's not double-digit inflation, but there is triple digit inflation. And those are the countries which now are convinced that the United States is going to be a strong country and it's going to live up to its leadership obligations, and the rest of the free world is now certain that we are going in the right direction.

Thank you, Mr. President.

UNEMPLOYMENT

Q. I am Susan Garner Koenigsberg from Miami, Florida, delegate for the 13th Congressional District. What I came prepared to state, there is no time to state. However, I will say this is a hard act to follow.

Yes, the Consumer are unaware, and Esther Peterson has said it very well. And there are problems, social problems, economic problems. But I do want to say one thing, that if we are just looking at inflation alone without concern for the high unemployment rate, we're looking at people, and we are saying, "Oh, you're a consumer, you have to be educated." But do we really realize that if you're working, you're in a recession? If you're not working, you're in a depression':' If you don't have the purchasing power, you can't do anything?

The city of Miami has endorsed a proposed bill. I hope that this panel here would take some time, as well as my Governor, who has worked a hundred jobs, and we'd like to provide hundreds of jobs to help to implement the funding of the Humphrey-Hawkins bill. The centerpiece of this bill is actually the priority use of our money supply. And I cannot take the time on this floor to go into it, but we have a great deal of material. And I was wondering if President Carter's attention had been brought to the fact that there is a proposed bill to fund the Humphrey-Hawkins bill, and the name of this proposed bill is the socioeconomic growth act.' I don't know if he's aware of it. [Laughter]

LIEUTENANT GOVERNOR O'NEILL. I think he's aware of it.

Q. Thank you very much.

THE PRESIDENT. Let me tell the delegates assembled here that I have to leave. I'm trying to go to as many of the sessions as possible.

I have really been impressed with this one. I think that all of you have seen the intense interest in the economic future of our Nation, and the delicate .balancing of conflicting issues is one that ultimately arrives on my desk. But you are expressing' your views clearly to me in the brief time I've been here. I'll read very carefully a summary of everything that you say. I've listened to it with an open mind and an open heart, and, of course, participating in the panel are very close advisers for me that I see every day on consumer affairs, economic development, all kinds of economic affairs, and the control of inflation.

But I'm grateful that you've come. I don't believe anyone in this room thinks that the mid-term conference is a waste of time, because we learn from each other. And I think we'll have a greater future as a Democratic Party and a nation, because you have come and contributed your time to teaching us, to learning from us, and to sharing a consistent and a continuing partnership.

Thank you very much for letting me be part of it.