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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.

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