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IXKCifTIV^ MEMORANDUM / •i■ i /X 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 \rJ 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 ). A pprove D is a p p r o v e £ ‘ I""' £ t * V i . 1J ~S" , ■ *3 » ■ ' / f t > L - & M - ^ \ $X h A I . ^ i " .j; , ?! « ?: V 1 * i, *? <' u J ! . < jT . W ? -% A A x\ . 1 X ?} ? ? &C* r f~ -L-Not' h el'SS "5 B f J L r lW a o r-trai F i l e s as n COPY LBJ LIBRARY J -rw s e . / ^ .--r~ T~ J W C' ac //s'f'-eT'*^ J / U , r*- e^Wf\^ <£ ^';yJ ^T^(h ^ <^s ■tcv,l/v3 ^ ^ ’eo'^ . MEMORANDUM FOR MR. JOSEPH A. CALIFANO December 17, 1965 FROM JOHN DOUGLAS v*" RE: SUGGESTED ACTION PROPOSALS ON PRICES I. Agricultural Prices - 1. Eggs. Agriculture predicts a price decline of yy 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. *4" , | A i H 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 2T^r. 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, $ i v ~ r copy LB) UBRARY - 2 - 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 /w** trickle. t jQ T ---------------- • i ^ \ a /U* 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. r _ COPY LflJ LIBRARY v 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 ll 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 s 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. w rn vn s 4. Defense should try to slow up or defer its current/ 4 purchases of m e a t . i L 3 125 5. President should appoint blue-ribbon committee to ' 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. f . _ . COPy LEU UBRARY m o i u Q x n Froa: vqr n « quuosimi John W. Souglu Suggestions re Prices Z. 7000 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 jgg "gniii1 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. r*s* ’ r eceiv ed JU L S 1966 £zMTBAl FiLEB " _____ ___ _ > COPY LBJ UBRARY II* 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. r ____________ ____ copy LBJ LIBRARY