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264 Address to the Nation Outlining a New Economic Policy: “The Challenge of Peace.” August 15, 1971 Goodtvtning: I have addressed the Nation a number of tunes over the p u t « yean an the prob lem* of ending a war. Because of die progress we have made toward achieving that goal, this Sunday evening is an ap propriate time for us to turn our attention to the challenges of peace. America today has the best opportunity in this century to achieve two of its great* est ideals: to bring about a full generation of peace, and to create a new prosperity without war. This not only requires bold leadership ready to take bold action—it calls forth the greatness in a great people. Prosperity without war requires action on three fronts: W e must create more and better jobs; we must stop the rise in die cost of living; we must protect the dollar from the attacks of international money speculators. W e are going to take that action—not timidly, not half-heartedly, and not in piecemeal fashion. W e are goiqg to move forward to the new prosperity without war as befits agreat people all together, and along a broad front The tone has come for a new economic policy for the United States. Its targets are unemployment, inflation, and interna tional speculation. And this is how we are going to attack those targets. First, on the subject of jobs. We all know why we have an unemployment problem. Tw o million workers have been released from the Armed Forces and de fense plants because of our success in winding down the war in Vietnam. Put ting those people back to work is one of the challenges of peace, and we have be gun to make progress. Our unemployment rate today is below the average of the 4 peacetime years of the 1960’s. But we can and we must do better than that The time has come for American in dustry, which has produced more jobs at higher real wages than any other indus trial system in history, to embark on a bold program of new investment in pro duction for peace. To give that system a powerful new stimulus, I shall ask the Congress, when it reconvenes after its summer recess, to consider as its first priority the enactment of the Job Development A ct of 19 7 1. I will propose to provide the strongest short term incentive in our history to in vest in new machinery and equipment that will create new jobs for Americans: a 10 percent Jo b Development Credit for 1 year, effective as of today, with a 5 per cent credit after August 15 , 197a. This tax credit for investment in new equip ment will not only generate new jobs; it will raise productivity; it will make our goods mote competitive in the years ahead. Second, I will propose to repeal the 7 percent excise tax on automobiles, effec tive today. This will mean a reduction in price of about $*00 per car. I shall insist that the American auto industry pass this tax reduction on to die nearly 8 million customers who are buying automobiles this year. Louver prices will mean that more people will be able to afford new cars, and every additional 100,000 can sold means 95,000 new jobs. Third, I propose to speed up die per sonal income tax exemptions scheduled for January 1 ,19 7 3 , to January 1 ,19 7 9 — so that taxpayers can deduct an extra $50 for each exemption' 1 year earlier than planned. This increase in consumer spend ing power will provide a strong boost to the economy in general and to employ ment in particular. The tax reductions I am recommending, together with this broad upturn of the economy which has taken place in the first half of this year, will move us strongly forward toward a goal this Nation has not leached since 1936, 15 years ago: pros perity with full employment in peacetime. Looking to the future, I have directed the Secretary of the Treasury to recom mend to the Congress in January new tax proposals for stimulating research and de velopment of new industries and new techniques to help provide the so million new jobs that America needs for die young people who will be coming into the job market in the next decade. To offset the loss of revenue from these tax cuts which directly stimulate new jobs, I have ordered today a $4.7 billion cut in Federal spending. T ax cuts to stimulate employment must be matched by spending cuts to restrain inflation. To check the rise in the cost of Government, I have ordered a postpone* ment of pay raises and a 5 percent cut in Government penonneL I have ordered a 10 percent cut in for eign economic aid. In addition, once die Congress has al ready delayed action on two of the great initiatives of this Administration, I will ask Congress to amend my proposals to postpone die implementation of revenue sharing for 3 months and welfare reform for 1 year. In this way, I am reordering our budget priorities so as to concentrate more on achieving our goal of full employment. The second indispensable element of the new prosperity is to (top the rise in the cost of living. One of the cruelest legacies of the artificial prosperity produced by war is in flation. Inflation robs every American, every one of you. The so million who are retired and living on fixed incomes— they are particularly hard h it Homemakers find it harder than ever to balance the family budget And 80 million American wage earners have been on a treadmill. For example, In the 4 war yean between 1963 and 1969, your wage increases were completely eaten up by p ik e increases. Your paychecks were higher, but you were no better off. We have made progress against the rise in die cost of living. From the high point of 6 percent a year in 1969, the rise in con* sumer prices has been cut to 4 percent in the first half of 19 7 1. But just as is the case in our fight against unemployment, we can and we must do better than th at The time has come for decisive action— action that will break the vicious circle of spiraling prices and costa. I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days.1 In addi tion, I call upon corporations to extend die wage-price freese to all dividends. I have today appointed a Cost of Liv ing Council within the Government1 I have cBrected this Council to work with leaders of labor and business to set up the proper mechanism for achieving con tinued price and wage stability after the 90-day freese is over. Let me emphasise two characteristics of this action: First, it is temporary. T o put 'ExecutiveOrder 11615. the strong, vigorous American economy into a permanent straitjacket would lock in unfairness; it would stifle the expan sion of our free enterprise system. And second, while the wage-price freeze will be backed by Government sanctions, if necessary, it will not be accompanied by the establishment of a huge price con trol bureaucracy. 1 am relying on the voluntary cooperation of all Americans— each one of you: workers, employers, con sumers— to make this freeze work. Working together, we will break the bade of inflation, and we will do it with out the mandatory wage and price con trols that crush economic and personal freedom. The third indispensable dement in building the new prosperity is closely re* lated to creating new jobs and halting inflation. We must protect the position of th& American dnllftr aj g pillar of moostary stability around the world. In the past 7 years, then has been an average of one international monetary crisis every year. Now who gains from these crises? Not the workingman; not the investor; not die real producers of wealth. The gainers are the international money speculators. Became they thrive on crises, they help to create thaw. In recent weeks, the speculators have been waging an all-out war on the Ameri can dollar. The strength of a nation’s currency is based on the strength of that nation's economy—and the American economy is by far die strongest in the world. Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend fh f dollar against the speculators. I have directed Secretary ConnaQy to suspend temporarily the convertibility of the dollar into gold or other reserve ■watt, except in amounts and conditions deter mined to be in the interest of monetary stability and in the best interests of the United States. Now, what is this actian-^which is very technical—what does it mean for you? Let me lay to rest the bugaboo of what is called devaluation. I f you want to buy a foreign car ot take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy Ameri can-made products in America, your dol lar will be worth just as much tomorrow as it is today. The effect of this action, in other words, will be to stabilize the dollar. Now, this actum wiH not win us any friends among the international money traders. But our primary concern is with the American workers, and with fair com petition around die world. T o our friends abroad, including the many responsible members of the inter* national banking community who ate dedicated to stability and the flow of trade, I give this assurance: The United States has always been, and will continue to be, a forward-looking and trustworthy trading partner. In full cooperation with the International Monetary. Fund and those who trade with us, we will pros for the necessary reforms to set up an urgendy needed new international monetary sys tem. Stability and equal treatment is in everybody's best interest I am determined that the American dollar must never again be a hostage in the hands of inter national speculators. I am taking one further step to protect the dollar, to improve our balance o f p a y ments, and to increase job* for Americans. As a temporary measure, I am today im posing an additional tax of 10 percent on goods imported into the United States.* This is a better solution for international trade than direct controls on the amount of imports. This import tax is a temporary actum. It isn’t directed against any other coun try. It is an action to make certain that American products will not be at a disad vantage because of unfair exchange rates. When the unfair treatment is ended, the import tax will end as well. As a result of these actions, the product of American labor will be more competi tive, and die unfair edge that some of our foreign competition has will be removed. This is a major reason why our trade bal ance has eroded over the past 15 years. A t the end of World W ar I I the econo mies of the major industrial nations of Europe and Ana were shattered. T o help them get on their feet and to protect their freedom, the United States has provided over the past 25 years $ 1 4 3 billion in for eign aid. That was the right dung for us to do. Today, largely with our help, they have regained their vitality. They have become our strong competitors, and we welcome their success. But now that other nations are economically strong, the tame has come for them to bear their fair share o f the burden of defending, freedom around the world. The time has come for ex change rates to be set straight and for the major nations to compete as equals. There is no longer any need for the United States to compete with one hand tied behind her back. The range of actions I have taken and * Proclamation 4074. proposed tonight— on the job front, on the inflation front, on die monetary front—is the most comprehensive new economic policy to be undertaken In this Nation in four decades. W e are fortunate to live in a nation with an economic system capable of pro* ducmg for its people the highest standard of living in the world; a system flexible enough to change its ways dramatically when circumstances call for change; and, most important, a system resourceful enough to produce prosperity with free* dam and opportunity unmatched in die history of nations. The purposes of die Government ac tions I have announced tonight are to lay the bans for renewed wmfiifaiy#, to " f t * it possible for us to compete fairly with the rest of the world, to open the door to new prosperity. But government, with all of its powers, does not hold the key to the success of a people. That key, my fellow Americans, is in your hands. A nation, like a person, has to have a certain inner drive in order to succeed. In economic affairs, that inner drive is called the competitive spirit Every action I have taken tonight is designed to nurture and stimulate that competitive spirit, to hdp us snap out of the self-doubt, the self-disparagement that saps our energy and erodes our confidence in ourselves. Whether this Nation stays number one in die world's economy or resigns itself to second, third, or fourth place; whether we as a people have faith in ourselves, or lose that faith; whether we hold fast to the strength that makes peace and free dom possible in this world, or lose our grip—all that depends on you, on your competitive spirit, your sense of personal destiny, your pride in your country and in yourself. We can be certain of this: As the threat. of war recedes, the challenge of peaceful competition in the world will greatly increase. W e welcome competition, because America is at her greatest when she is called on to compete. As there always have beat in our his tory, there will be voices urging us to shrink from that challenge of competition; to build a protective wall around our selves, to crawl into a shell as the rest of the world moves ahead. Tw o hundred years ago a man wrote in his diary these words: "M any thinking people believe America has seen its best days.” That was written in 1775, just before the American Revolution--die dawn of the most exciting era in the h i* tory of man. And today we bear the echoes of those voices, preaching a gospel of gloom and defeat, saying die same thing: “ We have seen our best days." I say, let Americans reply: “ Our best days lie «head.” As we move into a generation of peace, as we blaze the trail toward the new prasperity, I say to every American: Let us raise our spirits. Let us raise our sights. Let all of us contribute all we can to this gn at and good country that has con tributed so much to the progress of rw lrm . tw H Let us invest in our Nation’s future, and let us revitalise that faith in ourselves that built a great nation in the past and that will shape the world of the future. Thank you and good evening. kotz: The Fretident spota at 9 p ja . ia iht Oval Office at the White House. Hi. adAms was broadcast live on radio and television. On the same day, the White House released an advance text of the President’s address and die transcript of a news briefing on the new economic policy by John B. ConnaHy, Secrotury of the Treasury, George P. Shults, Direc tor, Office of Management and Budget, and Paul W. McCracken, Chairman, Council of Economic Advisers. In Dallas, Ttat, on August 19, 1971, Press Secretary Ronald L Ziegler read a statement about the reaction of the Governor of Texas to die wage-prioe freexe. It is printed in the Weekly Compilation of Ptesidantiai Documents («oL7,p. 1x04). On August 90, the Whits House released die transcript of a news briefing by Caspar W. Wdnbeiger, Chairman, Regulations and Purcharing Review Bosid, and Deputy Director, Office of Management and Budget, on the efforts of the Board to insure that die sup pliers of Government purchasss are in full compliance with the wage-price fame.