White House Briefing on Inflation and Energy Remarks to Community Leaders.

Before I start talking about energy and inflation questions, which I know you've had described to you very well, I would like to say just a word about the Mideast peace effort.

Almost exactly a year ago, on the north side of the White House, we had one of the most exciting experiences of my life, when Begin and Sadat and I signed the Mideast peace treaty. At that time we made plans for the carrying out of the negotiations to establish full autonomy in the West Bank, to provide for Israel's security behind recognized borders, to let the Palestinian issue be resolved in all its aspects, and to let Egypt build on the Courageous initiative that Sadat took in going to Jerusalem for a better life for their people and to preserve peace in the Middle East.

This is still a major commitment of our country. It's a very complicated issue. It's a very difficult negotiating process in which I've been involved now for almost 2 years. It far transcends in importance the political season, and I'm looking forward the first 2 weeks of April to see both President Sadat and Prime Minister Begin to discuss the progress we've made so far, to have consultations with them about the common ground on which they can stand, to identify the remaining issues on which they differ, and then to turn over all this information to the negotiators, who I presume will be present at the discussions here. We will not have a negotiating session with Begin, Sadat, and myself, but we will prepare for continued progress by the negotiators.

This is intimately tied in with the Persian Gulf stability, with the threat to the region in Southwest Asia by the invasion of the Soviet Union, and with energy supplies for our country and also with an overdependence of our Nation on imports of oil from foreign countries. There's no way to separate these issues. A strong, a stable, a peaceful, a friendly Israel is crucial to the Nation's security that I represent, and the same thing obviously applies to Egypt.

To the extent that we can be successful in realizing the goals established in the Camp David accords, including the resolution of the Palestinian question, that will go a long way toward assuring or reassuring the world about the supplies of scarce energy in the future and the stability of the world's economic system.

I'd like to repeat a few things that I'm sure you've already heard from the speakers who preceded me. I'm sure they've made it plain that our Nation's national security is tied in intimately and inseparably with our economic future, and also that energy and inflation cannot be separated one from another.

We will this year import from foreign countries more than $80 billion worth of oil, $80 billion of hard-earned American money sent to foreign countries to buy oil that I hope in the future we will not be purchasing. Eighty billion dollars is a hard number to envision. But for every family in the United States this means that $1,500 will be paid to foreign governments for oil. This not only drains our economy of money that could be used to provide investments, jobs, a brighter hope for the future and inflation, but also makes us overly dependent on uncertain supplies of energy when our Nation ought to be much more self-reliant.

Again, this is an extremely complicated issue. There are no easy answers, and the inflationary pressures brought about by uncontrollable foreign oil prices on which we are dependent, along with our allies and friends, is a basic cause of inflationary pressures that are now sweeping the world.

We're not as bad off as most of our major trading allies, who in the past have had much more emphasis on controlling inflation, perhaps, than we have had to do. But we see, in the last 12 months, energy prices more than doubling, increasing 109 percent, and in our own Nation in the last month in the producer price index we saw energy prices going up 7 1/2 percent in 1 month. This is a 90-percent inflation rate. So, you see in dramatic terms, based on these statistics that I've thrown at you, how closely interrelated foreign policy, our Nation's security, energy supplies, and inflation all are.

Ours is the leading nation on Earth. Economically, other countries look to us to lay the groundwork for the future and to solve these apparently insoluble problems so that they can mirror in their own future actions what we do. We obviously learn also from other countries. But the burden of the responsibility is on us. We are not only one of the greatest oil-producing countries, we are by far the greatest oil-consuming Nation.

There are only two ways that we can cut down on oil imports, very simple. One is to produce more energy of all kinds in our country, and the other of course, is to save energy, not to waste energy, to have an increasing emphasis on conservation. In 1968 we were a net exporter of energy. The first year I was in office, 1977, we imported an average of 8.8 million barrels of oil every day. I hope that by the end of this year we will have cut that rate by at least a million barrels of oil per day. Now, we hope to halve that level of imports by 1990.

We've made good progress, as you can see, with the help of the American people, but it's only really been the last 6 or 8 months, maybe 10 months, that there has been a vivid realization on the part of the average American, "I have got to save energy and stop wasting it, not only for the benefit of my country but also for the benefit of my own family, which is heavily burdened by economic problems which are exacerbated when we waste energy that's so dear .and so costly."

I hope that you will help me with the anti-inflation program that I presented to the Nation in this same room last Friday. We've had remarkable consultations with the leaders of the Congress, unprecedented. One of the top leaders said we've set constitutional history the last 2, 2 1/2 weeks, because we have reached a consensus, not only on the fact that the 1981 budget must be and will be balanced but almost entirely on the specifics that will be included in the budget reductions that are necessary.

There are some differences, but compared to the total effort, they are minor. And even today and tomorrow I will be working, hour in and hour out, to reach an agreement not only with the leaders in Congress but with the agency heads in my own administration, who are now being consulted very rapidly. We have about 25,000 line item entries in the United States budget. So, when we make decisions about what can and cannot be cut, we have to get an exact estimate of how much can be saved. And then when we get through with that, we have to balance the budget, in effect, before it's presented to the Congress, because my voice is the final one representing the administration.

I would like to say that in addition to balancing the budget, which is only one element, we also are continuing a strengthened price-control program and a wage or salary or pay program, on a voluntary basis, that is strengthened by the fact that we have not only the Government but also the top labor leaders represented, the top business and management leaders represented, and representatives from the public. So, we have a cooperative attitude, committed in writing, as a matter of fact, among these various elements who are decision makers, to make sure we don't exceed the goals that we've set for ourselves. And I'm committed to do my best to make sure that wage increases will not exceed the 8 1/2-percent average, which is a common commitment of the groups that I've just described to you.

On credit, under the law that was passed in 1969, I've authorized the Federal Reserve to act, and they've acted on their own initiative to try to restrain the wildly escalating levels of revolving or consumer credit that don't really apply directly to the productivity of our country. And we're trying to orient those credit restraints to enhance the opportunity for others to borrow money in a highly competitive market. Those who are making productive investments, buying homes, buying automobiles, farmers, small business people—those are the ones that will be benefited.

The last thing I'd like to say is that on the long run we've got to increase productivity, the savings of American people that go back into investments to give us an enhanced or stronger economy, and of course, research and development. But I am not going to consider at all any overall tax reduction program until after we are all assured that the 1981 budget will be balanced.

Finally, let me say that we must tell the truth. There cannot be any dissembling, any misleading statements, any equivocation, any falsehood, any false hopes raised in the minds of the American people. The credibility of this entire process is crucial to its success. The process is going to be difficult and painful. That is the truth. There are no easy or simple answers, no magic formulae. That's the truth. The people that we're going to help most by controlling inflation are the ones who need it most, the ones on very low income or fixed incomes, the ones that don't have the flexibility to change jobs or to move to a new neighborhood. Those are the ones that will be benefited most by controlling inflation. That's the truth.

The fact that we must have cooperative efforts between myself, the Congress, and all of you leaders in our Nation, that is also the truth. There must be an acceptance of the program, an acknowledgement of its complexity and difficulty and a common realization that what we do the next few months will indeed shape the quality of life for our people.

I am absolutely convinced that our Nation is strong enough to succeed. I feel good about the future. I think the latter part of this year we will see the inflation rate and interest rates going down substantially. I don't have any doubt that we'll succeed in having a balanced budget. We are making the adjustments in the budget very carefully to protect those who are most in need and most vulnerable and also to make some accommodation in the recommendations that I will make to the Congress to protect the communities or cities that are most troubled by economic difficulties. We will meet the budget cuts. We will be at least as stringent in the total level of budget reductions as has the Budget Committee in the House, already having announced some of its programs.

And the final thing is another truth. We've got two choices: either to exercise self-discipline on the Federal Government, State and local governments, business, industry, private families; or the other choice is to continue to be suffering from an ever-increasing and rampant inflation, which is the most cruel tax of all.

Our Nation is so strong and we are so blessed that sometimes we forget those two basic facts. We've got four times as much energy in this country in reserve as all the OPEC nations combined. And with the innovation and the confidence, the educational level, the capital reserves, the freedom that enhances the contribution of each person in our country, we have a chance to change and to improve the American way of living so that we can go through this temporary inconvenience and transient disappointment time and come out not weaker, but stronger. That's my responsibility as President. It's a responsibility of the leaders like Charlie Duncan, who work with me in the Cabinet; it's the responsibility of the Congress, as you well know; it's also a responsibility of all of you.

I'm very grateful that you would come here to have this briefing on what problems our Nation faces, but I also want you to go away from here with the realization that when our country has been united—and it certainly is now—we have never faced a major question that we could not answer. We have never faced a major problem that we could not solve. We have never faced a major obstacle that we could not overcome in this greatest of all nations, which I'm determined, along with you, to make even greater in the future.

Thank you very much.