Des Moines, Iowa Remarks to the Iowa State Association of Counties.

President Al Ohrt ; distinguished members of the Iowa State Association of Counties; my friend Lynn Cutler, who brings to the deliberations of our National Government a constant, forceful, experienced, and effective voice for Iowa. No matter what the subject may be—taxation, welfare, agriculture, education, local development-Lynn Cutler has been one of the very few, but leading county officials who has been involved in every decision made which impacts on municipal and county government. You are fortunate to have her and so am I. Congressman Smith, a strong, forceful voice for this district and for the State; Tom Harkin, an outstanding man who has his feet firmly planted in the soil of Iowa, but whose effective and practical representation of American ideals has given him a nationwide reputation; and Ambassador Dick Clark, who is one of the finest men I have ever known; guests, friends:

I'm very glad to be back here in Iowa. My political life began in county government. And I and my father before me, my father's only brother have all served for many years in local county government. I feel a kinship with you.

There are many difficulties involved in public administration, particularly in these last few years. Sometimes the controversial issues are such that there's no way to win, no matter how hard you try. When food prices go up, the city dwellers are raising Cain; if food prices go down, the farmers are extremely unhappy. Sometimes I don't know whether it's harder for a President to try to establish peace in the Middle East or peace in the Middle West. [Laughter]

But I think there is an interesting, I think encouraging sign that among the farm families of this State, the Secretary of Agriculture is more popular than the President. [Laughter] So this, I think, bodes well for the status of the Iowa farm family and for those you represent in the cities as well.

Today I want to discuss two very important and major issues from a perspective which I think would suit you. There's no doubt that Americans are afraid that we're going to wind up with worthless money and no gas. And as these fears grow, based on daily headlines and based on daily experiences, so do the demands grow for some quick, simple, and painless solution. So, now Washington is full of people selling snake-oil cures for inflation, or telling science fiction stories about how the energy crisis might be resolved overnight.

You know, there are times when I wish that Washington was Iowa's 100th county. [Laughter] But I'm sure that you don't want it. [Laughter] So, I will continue to assume that responsibility for you.

But county officials and other local officials, so close to the people, daily accountable, have to tell the truth to people about whether a road can or cannot be resurfaced, about whether a water or sewage line can or cannot be extended, and about where the money to pay for those things is going to come from. That's exactly the kind of directness I have tried to bring to the Federal Government to practice, and that's why I'm here today.

Let's start with the truth about 10 years of inflation. It's a sickness born originally from overindulgence, too much spending with tax reductions combined, and sustained by years of neglect. It's been a long time developing. In the short run, inflation may even get worse. There is no miracle cure, and the measures that will work are going to hurt.

Inflation cannot be fought by the way people usually expect the Federal Government to address a problem—by appropriating vast sums of money for it. That approach had a lot to do with our present problem in the first place, and it's also one reason that I'm very proud that, working closely with your own congressional delegation, in less than 2 1/2 years, we will have cut the Federal deficit in half. And I am absolutely determined to balance the Federal Government [budget]. <sup>1

1</sup> Printed in the transcript.

But as you well know, also, the Federal Government cannot fight inflation alone. Either we do it together or it will not be done. And we need to learn some of these same tough lessons about energy.

The Federal Government has no secret, scientific miracle tucked away that will suddenly produce a cure for our longstanding overdependence on foreign oil. That's why we must use less and we will pay more for what we use, and that is why we must have passed by the Congress this year, without delay, a windfall profits tax and let the oil companies help us pay for the future.

This is important not just because it's not fair for the oil companies to profit from our pain, but because we must have the energy security fund established to develop long-term ways to ease the pain.

You may remember that a few weeks ago all the political experts were saying that we had no chance in Congress to pass a windfall profits tax. Now, the very same people have decided that a windfall tax is an accomplished fact and we can quit worrying about it. They were wrong then, and they are wrong now. Because the people have spoken on this subject, we do have a much better chance than the prophets and commentators thought we had just a few weeks ago.

The windfall tax that we proposed to the Congress will let the oil industry keep, to use for new production of domestic oil, about 29 cents out of every dollar they get because of decontrol. It may even be possible-and I would favor this—to get a stronger bill out of the House. But I warn you that the battle to get a windfall profits tax at all, and to get it under the terms that I have recommended to the Congress, is a battle which is not yet won. And I need your continued support to make sure that a real tax is passed and the important programs in the energy security fund will be financed.

On energy, just as inflation, we have to help ourselves more directly, more individually and, particularly, I'd like to discuss today, more locally.

One of the most frequent questions that I hear people ask is, "If we can put men on the Moon, why can't we figure out a way to furnish cheap energy?"

Well, that is just a dream if it means there is some dramatic, single solution to energy shortages. But it's a good thought if it means that thousands of smaller steps by individual people, by scientists, by researchers, by local officials, business, can lead to an eventual goal of energy selfsufficiency for our country.

Now, I know that small towns and rural counties and farms have a special series of problems that the rest of the country does not always understand. It's hard for many Americans to understand, for instance-but I know, as a farmer—that the production of corn crops in Iowa is greatly affected by the demands of distant Arab nations and giant oil companies for excessive profits on the very energy that you must have for crop-drying and for fertilizer and, also, for transportation and cultivation.

Last year, for example, Iowa agriculture consumed 360 million gallons of gasoline and an additional 200 million gallons of diesel fuel. But I also know that American agriculture provides for export revenues to pay for 18 times as much energy as the farmers use. Our Nation can indeed be thankful for Iowa farmers.

Shortly before we landed, a few minutes ago, Neal Smith proposed that we arrange with our friends in Mexico an exchange of corn for oil. It sounds like a darned good idea to me.

Tomorrow, coincidentally, I'll be meeting with the Foreign Minister of Mexico, Mr. Roel. I'll discuss this with him, Neal, and if we can't get an exact swap, which is what you proposed, then we will take action and are negotiating very enthusiastically to get an energy agreement with Mexico.

We already buy about 85 percent of all the oil that Mexico exports, and now, as you know, we are working out an agreement on natural gas. But I intend to take other firm steps to guarantee that you will have adequate supplies of gasoline and other fuel during this very difficult farm season. And you can depend on that. Let me explain these steps very quickly. First, I want to announce today that Secretary Bergland has determined, under the Natural Gas Policy Act of 1978, that 100 percent of current requirements for natural gas in Iowa agriculture will be maintained.

Second, we will have given authority to State energy offices to set aside 4 percent of the total diesel fuel supplies in every State to alleviate possible hardship cases in agriculture. And we've asked suppliers of diesel fuel to give first priority to agriculture.

And third, we are now reallocating proportionately larger amounts of oil to suppliers who serve rural and agricultural markets. This obviously applies to small towns. I will not allow agricultural production to be disrupted by a shortage of petroleum. And I will not allow rural America to run dry.

We will also authorize users and local suppliers to borrow temporarily during the planting and cultivating season against future allocations of oil and diesel fuel and, if necessary, I will use my standby authority to provide 100 percent not only of the natural gas requirements but also of other fuel requirements for farmers.

Now, rural areas have special needs, but they also have special opportunities, being the best places to apply the virtues of practical thought and local initiative, sometimes on a small-scale, experimental basis. You understand the values of individual effort and small-scale cooperative projects. I've seen this in the so-called hollers of West Virginia, the hamlets of south Georgia, the villages of New England, the pueblos of New Mexico, and the coastal towns of the Pacific Northwest. And I've seen these rural values all over Iowa, perhaps, as Lynn pointed out, in more cities and towns than you yourselves have visited in your own State. I've seen it in your communities, in your schools, in your churches—an attitude.

Some American communities can regain their self-sufficiency by doing things that we have almost forgotten, like burning wood and using small dams that were abandoned in the era of cheap oil. That doesn't apply to Iowa. But there are also new technologies like solar energy, that are a long way from being practical everywhere, but can help your communities toward energy security right now. And there are products like gasohol, methanol, and others that we've known about for years without ever tapping their full potential.

Let me tell you briefly what we are doing to encourage use of these kinds of energy supplies.

Gasohol is a classic example of American ingenuity. Fifty years ago, many Americans were manufacturing gasohol on their own farms or in their own homes and filling up their Model-T Fords with it. Gasohol was simple and practical, since it put our agricultural abundance to work in a new and exciting and different way for those times. But in the era of cheap oil, at a time when we never thought the wells would ever run dry, we stopped trying to harness or test its potential.

The Government forgot about gasohol, and so did the experts. But here and there, an individual American remembered the stories or rediscovered old books in the library, and with a little knowledge and encouragement from Washington or without, the idea has recently been spreading.

I'm today announcing that between now and 1981, we will assist farmers and farm co-ops to build as many as 100 plants to produce gasohol in varying sizes of plants. And I believe this will set an example for the rest of our country.

In the last year, we've already guaranteed loans of about $30 million to construct large gasohol plants in Florida and Texas. And this year, the Agriculture Department will be spending an additional $4 million on gasohol research at some of our leading land-grant universities, obviously including Iowa.

We're also creating economic initiatives for the private development of gasohol. Producers are now eligible for a special 10-percent investment tax credit that has been extended through 1983. And I've recommended that gasohol be permanently exempted from the Federal excise tax on gasoline, once Congress approves the energy security fund.

Everything from wood products to sugar beets to corn, wheat, food processing wastes, animal wastes can be used to make gasohol. The potential is great. Our best calculations are that our Nation can produce 300 million gallons of gasohol annually by 1982—and double that again by 1985.

Equally promising is our rediscovery of the potential of small-scale hydroelectric power. New England used to harness its streams to produce electricity, and it can do so again. We did the same thing in Georgia—so can the Pacific Northwest.

Here in Iowa, rushing, wild rivers may be as scarce as oil wells, but you should search even for those relatively rare opportunities to use water to drive small turbines.

I'm announcing today a reprograming of $300 million of existing funds to rehabilitate 100 rural hydroelectric turbines. The Army Corps of Engineers has identified nearly 2,000 places where we can build or restore this type of hydroelectric plant. Eventually, we should be able to produce enough electricity to save almost 140 million barrels of oil each year-enough to meet the energy needs of 8 1/2 million people.

Again, extracting natural gas from coal mines and from shale reserves is something else we need to do. Over 6,500 rural communities are located near coal or shale reserves, and many have existing gas distribution systems already in place. These communities could use these reserves to produce a steady, dependable supply of natural gas with a slightly lower Btu content, without damaging the environment.

Let me explain how this works. A portable drilling rig can tap the natural gas that exists around deposits of coal and shale. All you then need to do is to cap this well with a device about the size of a fire hydrant. With minimum 'processing, out comes gas of sufficient pressure and quality to heat the homes, light stoves, and power factories.

The Energy Department has already awarded $3.8 million in grant money to the American Public Gas Association to demonstrate that natural gas can be recovered from coal and shale and at competitive prices. If this experiment is a success-and I believe it will be—we will reprogram another $300 million in existing Federal funds to finance development of these new supplies of natural gas between now and 1981.

Last week I was in New Hampshire, and they were very excited to know that last year alone, 750,000 Americans bought wood-burning stoves to heat their homes. Right now, the energy equivalent of more than 500,000 barrels of oil is being produced by wood. We should be able again to double that figure by 1985.

I grew up with wood-burning stoves and open fireplaces, but the new designs of stoves are absolutely remarkable. They burn not only the wood, but the gases from the wood. They are highly efficient, have automatic thermostats, and two or three oak logs or hardwood logs will last for as long as 8 or 10 hours. By the way, I intend to install one quite soon, before next winter, in the White House, and I'll be using it next winter.

But in order to encourage this trend, which is very, very good, I will seek a tax credit for the purchase of wood-burning stoves to be funded out of the revenues from the windfall profits tax. Throughout the Government, we are now working on projects like this to enable us to improve the use of our forests for energy, and particularly the wood we now waste.

Two-thirds of all the home heating, for instance, in some New England States-the same would apply to Georgia and, obviously, to places in the Northwest-can be derived from the wood in our forests that's now left on the ground and completely wasted. This would provide enormous opportunities, as you can see, for additional employment.

The point I'm trying to make is this: Rural America is the best place to experiment with solar energy or with renewable products that come from the Sun. In my 1980 budget, I've proposed that we establish two research centers to work on applying alternative energy sources, including solar energy, to agriculture.

Already the Federal Government is supporting 50 separate experiments in this area. Iowa State University is one of the leaders in this field, a statement which I'm sure does not surprise this audience at all. And they are particularly working on the projects that relate to the better use of solar power to dry crops. It may even be possible to store energy that's received from the Sun during the summer months, and then use that same energy in the winter months. We are planning 91 additional projects, with particular emphasis on using solar energy to heat swine and poultry houses.

We all recognize how important a stable, secure supply of energy is for the economic development of rural areas and small towns. The first question anyone asks before building a plant in a rural community or small town is this: "Can you meet my energy needs?" The answer can be "yes" if rural America applies the same ingenuity and determination to energy that it has to agriculture.

Moving towards energy self-sufficiency in rural America has a very personal meaning to me. I remember how excited my family was by the arrival of the first electricity on our farm when I was 14 years old. It was the biggest single event of my childhood. It had the greatest impact on the way my family lived. It let us stretch our lives and our horizons and gave us the first glimpse of leisure time during the average day.

But I also remember how farms had windmills to pump water. The Sun dried our crops, our meal and our flour were water-ground, and we burned wood for fuel, and there was never a tractor on our farm until after I was old enough to go off to college. We hadn't thought about energy shortages then, or minimum tillage, or gasohol, but I'm sure we would have considered new energy ideas to be not farfetched, but farsighted.

And they now represent a return to our old principle: that government should encourage but never dictate the decisions made by American people or by local initiative. That's a philosophy of government that it's time to resurrect, in my opinion.

Since October of 1978, we've extended this good old principle to four other areas of rural life—health, the housing and social services for elderly citizens, water and sewage systems, and communications. And we're now working on transportation. The overall idea—which has been missing a long time with Federal programs, as you well know—is that by the time we are ready to announce the Nation's first comprehensive rural development policy this summer, many of these initiatives and programs will already have been tested and will already be in existence, here and now.

For example, on January 31, here in Des Moines, Jack Watson,² whom Lynn Cutler mentioned, announced a demonstration project to integrate social services with housing for old people. The response since then has been very successful. As a result, this concept will now be incorporated in all such housing throughout the country, and the demonstration has been expanded from 6 to 10 sites. I'm very pleased to announce today that one of the first sites to be chosen will be here in Iowa, in Decatur County.

² Assistant to the President for Intergovernmental Affairs.

The rural health initiative is resulting in the construction or the renovation of 300 primary health care clinics over the next 3 years. These clinics will provide accessible, low-cost care to more than 1,250,000 people who previously lacked any access to such primary health care.

On December 1, in the White House, I announced a fundamental reform of the way the Federal Government administers, each year, over $2 1/2 billion worth of rural water and sewage programs. Instead of 6 sets of 16 different Federal requirements, we've reduced it down to 1. And as a result of these cost-cutting reforms, I'm able to announce water and sewage grant awards of $6 1/2 million across the State of Iowa. And I might add that we're getting OSHA under control for the first time, and letting it serve its proper role of protecting the safety and health of American workers.

Well, to conclude, let me say that all of these initiatives directly address problems which are all too prevalent today in our country. But the knowledge that we can deal with these special problems, using proven, sometimes ancient principles which our ancestors would understand very well, gives me confidence that we can control the enormous, overall problems of energy and inflation.

Together we can overcome real obstacles-instead of just promising simple answers.

Together we can meet challenges—not by pretending that a cry of pain is a cure for a problem, but by drawing once again on the strength that we Americans have within us.

We've done it in our space programs. We've done it in our search for world peace. And we can do it in the toughest fight of all—finding new energy for ourselves here at home, because the greatest energy sources in the world are right here—in our country, in our towns, on our farms, in ourselves.

Thank you very much.