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1977 JUM 10

PM 3 2 2

June 10, 1977
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&0GG1SI,
MEMORANDUM FOR THE PRESIDENT
FROM:

Charlie Schultze-^^

SUBJECT

CEA Weekly Report

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Economic Outlook. I testified last week before the
Joint Economic Committee on the general outlook for the
economy during the rest of the year and into 1978, and
about our longer range economic targets and plans for
19 81.
Consumer Agency. In a marginal note to last week's CEA
report, you asked me to look into eliminating a section of
the Senate ACA bill that mandates cost-benefit analysis on
all major regulations. Staff from CEA, OMB and the Domestic
Council met with Senate staff members to discuss this prospect
It appears that removal of this section of the bill would
cause Senator Percy to abandon his support for the ACA bill,
sharply diminishing its prospects for passage. But the
likelihood is good that we can work with the Senator's staff
to rewrite the section to make it more acceptable to us. We
are proceeding to develop such a compromise.
European Trip. Several members of my staff have been
preparing me for an extended visit to Europe next week. I
will be attending meetings in Paris of the Economic Policy
Committee of the OECD, following which I will speak at a
meeting in Bonn. USIA is arranging visits for me with
senior officials of the German Government while I am in
Bonn. In my absence, Lyle Gramley will be Acting Chairman.
Response to Kirbo. Before I leave, I will send to
Charles Kirbo a response to a letter on the inflation
problem that he forwarded to you recently. If you wish a
copy, I will be glad to provide one.




-2 Breakfast with Arthur Burns. This morning I had
breakfast with Arthur Burns. We had a wide-ranging
conversation. Burns is very sensitive (and defensive)
about recent criticism of interest rate increases from
Administration officials. I stated that from my own
viewpoint, the problem is not so much the Fed's recent
action, but at least the possibility that their targets
for monetary growth may, over the next 18 months, be
incompatible with our economic growth targets. While
Burns reiterated his general willingness to be flexible,
there was all sorts of indirect evidence in the subsequent
conversation that he will be extremely loathe to raise the
targets in order to prevent substantial interest rate
increases.
Water Pollution. Members of my staff are working with
the EPA analyzing proposed revisions in the Federal Water
Pollution Control Act.
Aluminum Prices. On Thursday, the President of
Kaiser Aluminum told us they were going to raise
aluminum ingot prices by 6 percent (after an earlier
6 percent increase three months ago) and increase
fabricated prices selectively for an overall increase
of 3.7 percent. After briefly looking at their data,
I told him we had some major questions about the action
and asked for a postponement until we had a chance to do
our homework on the numbers. He agreed to a very short
postponement, and will meet with Blumenthal on Monday,
June 13.
(I will be out of the country.) Aluminum
companies probably do need some increases to restore
very low profit margins, but I think they should do
so more gradually than Kaiser proposes. Also, we plan to
question the need for such large increases on ingot.
Ongoing Activities. Members of my staff continue to be
involved m interagency committees developing the Trade
Adjustment Assistance program, welfare reform proposals,
cargo preference proposals, and tax reform proposals. We
are also progressing on our study of past investment behavior
and future investment needs in the U.S.




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