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MEMORANDUM

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THE W H ITE HOUSE
WASHINGTON

8 :1 5 p . m . , F r id a y
D e c e m b e r 17, 1965

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F O R TH E P R E S ID E N T
FROM

J o e C a lifa n o

A t t a c h e d is o u ; p r o p o s e d p la n f o r ta k in g a c t io n s that w i l l h e lp r e d u c e
the p r i c e s o f it e m s m e n tio n e d in G a r d n e r A c k l e y ’ s m e m o r a n d u m to
y o u e a r l i e r th is y e a r . A g r ic u lt u r e , I n t e r io r and D e fe n s e c o n c u r in
th e p o r t io n s o f the m e m o r a n d u m that a f f e c t th e m .
I h a v e w o r k e d out the r e s id u a l o i l s itu a t io n s o that t h e r e w i l l b e s u b ­
s ta n t ia l r e la x a t io n (but n ot d e c o n t r o l o f im p o r t s ) a n n o u n c e d b y S e c r e ­
t a r y U d a ll e a r ly n e x t w e e k . T h e r e w i l l b e n o in d ic a t io n o f te r m in a t in g
th e p r o g r a m and it s h o u ld k e e p th e c o a l p e o p le and the N ew E n g la n d
p e o p le b o th f r o m g ettin g t o o u n h ap p y . It is a s te p th at w i l l e n a b le us
to ] if t c o n t r o ls a b ou t a y e a r f r o m now i f that is the r ig h t th in g to d o .
W ith r e s p e c t to a ll the o t h e r it e m s in th e a tta c h e d m e m o r a n d u m , w ith
y o u r a p p r o v a l I p r o p o s e to t e ll Joh n D o u g la s to m o v e ou t and g e t th e m
d o n e (a fe w a r e a lr e a d y u n d e r w a y ).

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MEMORANDUM FOR MR. JOSEPH A. CALIFANO

December 17, 1965

FROM JOHN DOUGLAS
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RE:

SUGGESTED ACTION PROPOSALS ON PRICES

I.

Agricultural Prices -

1.
Eggs. Agriculture predicts a price decline of
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about 10% in the second quarter of 1966. Defense is now
1 1 — 'deferring some egg purchases because of high prices and
will continue to be careful.
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2. Soy Bean, Animal Feed. After discussion with
AID Agriculture should reduce or defer CCC purchases of
edible oils for shipment abroad under K l . 480. This will
have some effect on soy bean and soy bean oil prices.
Agriculture should also sell cotton seed oil from its
stocks with similar effects on prices.

3.
Dairy Products. Agriculture expects price decline
with impending seasonal increase in supply. Agriculture
^ should:snouia: continue tobutter;outter; suustitute oleomargarine
continue to sell s e n
substitute oleomargarine
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for domestic donation program in order to conserve butter
for sale to reduce upward pressure on butter prices.
4.
. Sales of Wheat, Feed Grains. These sales, which
are being announced this week, will help stabilize and
possibly reduce many farm prices, especially cattle, hogs,
poultry products, dairy products, and prepared animal feeds.
II.

Gasoline -

1. Increase state allowables. Secretary Udall has
talked to Texas Commission, w h i c h h a s just announced another
increase from 31.4% to 32.6%. More crude will mean downward
pressure on gasoline prices. Talks should continue with
the Commission.
2. Modify restrictions on residual fuel imports as
promptly as possible. This will tend to lower residual
prices and should induce refineries to increase output of
some additional gasoline.
3. In working out the details of oil import program,
Interior and CEA should explore: admission of higher pro­
portion of unfinished oils which, by conversion to gasoline,
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w o u l d increase the supply of gasoline; adm i s s i o n of additional
g a s o l i n e from Puerto R i c o . Adm i s s i o n of significant amounts
of gasoline from P.R. w o u l d have immediate, downward effect
o n domestic gasoline price.
Either of these steps would be
h i ghly unpopular with large segment of domestic industry.
III.

Machinery -

1.
Defense has several billion dollars w o r t h of m
tools.
A great p r o p o r t i o n of it is in active use in conJ/
t r a c t o r s ’plants or in reserve for mobilization.
Defense will,
njtrlyjw however, see if more can be d i sposed of than the present
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trickle.
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2. Secretary Conn o r s h ould stress w i t h industry the
i m portance of price stability, p o i n t i n g to present p r o f i t s ,
future industry prediction, importance to defense effort,
a n d bonanza they have gotten and are g e t t i n g from investment
tax credit.
3.
Labor Department is p u s h i n g tr a i n i n g program for
this industry, whose employees are h i ghly skilled. This
can and should be stepped up e v en more.




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December 24, 1965

MEMORANDUM FOR MR. CALIFANO
From
Re:

W. Douglas
inary Suggestions on Food p r 4—

The following are tentative statements and proposals on
food prices, to which CEA attributes about 80%-90% of the
prospective increases in the consumer and wholesale price
indices. I ’ give you a final list of food proposals by
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Tuesday morning (December 28) after Eckstein and I go over a
detailed Schnittker memorandum promised for Monday noon.
1. Public emphasis should be put on recent price declines
which occurred too late to be included in the soon-to-be-released
price indices. For example, wheat is down 1 1/ve to
since
the middle of December. Butter is down 2/. Eggs are down 5/.
Soybeans are down 2/10^E from 11.22/ to 11.02/. Boilers (poultry)
are down 1/ - 1 1/2/ to about 25/.
2. Agriculture predicts a general seasonal downturn in
January or February. Agriculture’ predictions should be
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publicized before the new price figures come out'. The same
notice should be given to predictions of increased production.
3. Agriculture should consider a moderate step-up of
sales of feed grains. Recent sales of feed grains and wheat
have been effective; a large step-up would break the grain
prices with an eventual sharp decline in cattle, hog prices.
Agriculture predicts that even without any such break hog
prices will recede from $30 to $25 by mid-year and believes
that any reduction below the $25 price would have bad tJSTItical
impact in mid-west farm belt.
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4. Defense should try to slow up or defer its current/
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purchases of m e a t .
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5. President should appoint blue-ribbon committee to
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suggest ways of assuring that consumers can get food at decent
prices. Food Marketing Commission Csparked by Senator McGee)
is a possibility but does not seem suitable vehicle because it
is concerned with margins of processors and stores whereas
present increases are attributable to prices at the farm. Further­
more, Agriculture believes that the Commission's involvement
would be bad because Congress - which is heavily represented on
Commission - would then get into the act and get things confused.
6. Agriculture should slow down food purchases for school
lunch program.



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quuosimi

John W. Souglu
Suggestions re Prices

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1. Public emphasis ttoild bo gut on rtctat pric* declines
which occ«rr«i too iiit to be lacKMMwi in xmm «ooa»

price indices, for example, wheat in elown 1/ «iact tne nlonxe
of December. Butter in down 3/. Kggs ere down 6/. Soybean*
are down 1/4/ free 11.22/ to 11.00/. Broilers (poultry) are
down 1 1/2/ to about 25/. Corn in down fractionally.

2. Agriculture predicts a general seasonal downturn by
February. Agriculture's predictions should be publicised before
the new price figures cone out, iae m — notice should be given
to predictions of increased production.
3. Agriculture should continue salon of feed grains nt
level sufficient to achieve tneix target redaction ox nog
pricen"frCTB‘ W W r .geceil 'VU m rfTm Bi'S
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lna"lheat
have' been effective; a large step-up would break the grain prices
with an eventual sharp decline in cattle, bog prices. Agriculture
predicts that even without any snob break hog prices will recede
fron $30 to $25 by nid-year and belleven tint any reduction below the $25 price would have bad political iapact in nid-went
faro belt.

5. Agriculture should slow down food purchases for school
lunch progran.




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JU L S
1966
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CLOTHING, SHOES
1, Defense should be more sensitive about garcfcaaing program. -

2. Agriculture should tie announcement ef aaxfc y«ir't cottoo
price* to industry commitment oa textU* price*.
S* C^araamerce, Labor, CEA and State «to«td Again review
A dsrsinistration posUioa on textile, shoe importt,
4.
Agriculture should keep i» miad long-range eilect of feedgrain price# oa shoe*.

IH.

CONSTRUCTION

I, Labor Department, FHHFA should have program ea holding
dawn construction labor costs. There iff a shortage of labor hare.
IV

CAES

Although recent rise appears wholly MManaApt seasonal, prospective
January reduction ia exeise taxes should he followed closely to make
sure eosnsnitmeat to pass on savings is observed. This should produce
jjrice drop of 0, 7 percent.
V.

COPFEB

1. Treasury should insist on another increase la Garaxnodity txs
E x c h a n g e m a r g i n requirements.

2. Commerce should tighten expert restrictions da as to better
insulate the Americas market from LM £.
Vt

COAL

I, Eliminate at earliest feasible date all restriction* oa residual
fuel imports.




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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102