Statement About the Termination of the Economic Stabilization Program

FOR MANY years, inflation has been the major economic problem facing the United States. It continues to be our number one economic challenge today, and it must be fought vigorously and on many fronts.

More than e months ago, the Administration proposed legislation which would provide for the temporary continuation of mandatory economic controls in two important areas of the economy: medical care and construction.

In addition, our proposals would have assigned the Cost of Living Council a continued role in a number of nonmandatory activities. The Council would have been responsible for working on problems of increasing supplies, especially in areas where governmental policies have a significant impact such as agriculture, transportation, and construction; it would work with the private sector to increase capacity and productivity; and it would seek to improve the structure and performance of collective bargaining without mandatory controls.

These proposals, which were based on our experience in combating inflation since the first overall freeze was imposed in 1971, were to serve a vital but limited purpose. They were not intended to place the entire economy under continuing controls or under the shadow of standby controls. As I said on August 15, 1971, when the first freeze was begun, we must not commit the American economy to a straitjacket of controls. The record since has affirmed the wisdom of that philosophy. Mandatory wage and price controls of the last 3 years have served a useful function, especially in their early stages, but increasingly they have become obstacles to the effective performance of the economy. We have therefore been reducing the coverage of direct controls, gradually at first and rapidly in the last few months. Our continuing goal is to liberate the entire economy so that it will grow and adapt, free of controls or the threat of controls.

Nevertheless, we believe that the inflationary forces which still exist in the medical and construction sectors justify the temporary continuation of controls in these two special areas. These forces are powerful, and without some means of maintaining a tight lid, medical and construction prices are very likely to jump to much higher levels. It is thus a matter of disappointment and regret that the legal authority for the Economic Stabilization Act has now expired without the enactment of our proposals by the Congress.

The Administration will also continue to do everything within its power to press the struggle against inflation. We will strongly resist all unnecessary increases in Federal expenditures. We will resist proposals to cut taxes, or more accurately, to substitute the hidden and unfair tax of inflation for public taxes which are at least open and imposed by the people's representatives. We will count on the Federal Reserve to conduct a firmly anti-inflationary policy. And we will direct Federal policies to expansion of the supplies of goods and services, especially the supplies of food.

I am also today issuing an Executive order [11781] to provide for the orderly termination of the Cost of Living Council on June 30, 1974, and authorizing the Council to continue nonmandatory monitoring functions during this e-month period.

This overall course of action, if it has the support of the Congress and the people, will reduce the rate of inflation. If we fail to follow this course, nothing else we might do will succeed.