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UNITED STATES OF AMERICA
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DEPARTMENT OF TREASURY
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MARCH 27, 1980
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REMARKS OF:
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The Honorable G. William Miller,
Secretary of the Treasury
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BEFORE THE:
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Federal Reserve Bank of St. Louis
National Press Club
Washington, D.C.
(Transcript prepared from tape
furnished by the Agency)
NEAL R. GROSS
COURT REPORTERS AND TRANSCRIBERS
1330 VERMONT AVENUE, NW
WASHINGTON, D.C. 20005
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SECRETARY MILLER:
Thank you very much, Mr.
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President.
Members and guests of the National Press Club.
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We're meeting today when inflation is the topic of the day.
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It's the subject on the lips of all Americans, it's the
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subject on Main Street, in homes, in offices, in factories
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throughout the nation; because inflation is our most sen6
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ous problem.
On March 14, President Carter launched an inten
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sified campaign in the continuing war against inflation.
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Rapid changes in world events and economic prospects had
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made it necessary for the President to act decisively m
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countering heightened inflationary expectations, which were
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contributing to the disturbances in financial markets.
It
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is very difficult to identify the exact event that triggere
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the rush early this year to spend and to borrow.
It may
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have been the Soviet invasion of Afghanistan, with concern
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about instability in Southwest Asia, and additional demands
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upon the Federal budget;
it may have been the price indexes
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which reflected the large increases in oil costs and in
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home financing charges.
It may have been the unfounded
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rumors that we were on the verge of wage and price control
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that set off anticipatory reactions of various kinds.
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But whatever the cause, there was an unexpected
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surge of credit demands and of spending actions.
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The
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expected
slow-down
just did not materialize.
ties of economic behavior, undeterred by whatever may have
been the expected outlook last December.
Inflation is our most serious problem; it is a
threat to the economic security of our nation, and to the
And because our total security depends upon a
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world.
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strong and productive economy, inflation is a danqer to our
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nation itself.
The war against inflation is not new.
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For the
past two years, the two years that I have been in Washing
ton, the Administration has been busily engaged in mobili
zing an array of policy weapons to carry on the battle.
Our purpose has been to strike at the root causes of infla
tion, rather than just attacking the superficial signs.
This has meant persistent efforts to impose greater fiscal
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restraint, to maintain monetary discipline, to assure a
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sound and stable dollar, to seek moderation in wage and
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price decisions, to forge a comprehensive national energy
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It was, therefore, necessary for
the President to act promptly and forcefully on the reali
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-- expected by almost all economists
policy which will reduce our dependence upon foreign oil,
address the structural problems which impede
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and
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economic efficiency and progress.
The President's new initiatives will reinforce
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and intensify these policies by introducing greater disci
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plines in five areas.
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Second, by restraint on credit availability.
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improving the voluntary program for wage and price moder
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ation.
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fifth, by structural improvements to make our economy work
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better.
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iate action on his own authority, on areas that could work
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immediately.
First, by balancing the budget.
Third, by
Fourth, by greater conservation of energy.
And
Wherever possible, the President has taken immed
In areas that require congressional action,
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particularily in balancing the budget, the President's
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proposal has been developed through close consultation
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with Congressional leadership.
Let me briefly review some of the major elements
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of this intensified activity.
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A balanced budget in FY 1981 will mean the first
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balanced budqet in 12 years
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First the budget.
after 20 years of only one occasion of having a
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surplus.
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balanced, the United States has built up one half trillion
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dollars of federal debt to pay for the cumulative deficits.
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And so it is an important turning point, an important water
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shed for us to reverse a long period of two decades of
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living beyond our means and financing the federal deficit,
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financing the federal spending through borrowing, for us
During
the 12 years since the budget was
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GROSS
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last
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to now face up to, and to achieve, a
balanced budget.
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There are certain principles that we will pursue in achiev
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ing this balanced budget. The first is that the balance will
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be attained through spending and program reductions, and
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not through additional revenues.
Because there will be
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some additional revenues from such sources as the gasoline
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conservation fee, this means that the revised budget that
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will be presented next Monday will show a surplus.
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A second principle is that the reductions that
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we must make in spending and in programs will be spread
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widely over the budget areas.
Austerity in federal snendin
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will be fairly shared; no area will be asked to bear an
undue burden.
A third principle is that, we are committed to
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maintaining, in full, the essential government services.
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We do not intend in this budget reduction to cut into the
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verv necessary programs that make our government go and serv
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the American people.
A fourth principle will be that we will protect
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those in our society who are most disadvantaged and most
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in need.
We will not balance the budget on the backs of
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the poor and the indigent.
A fifth principle is that the President will
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present a budget that will be sustained.
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That will be
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approved by Congress.
The purpose is not merely propose.
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but to fulfill
and
implement the concept of a balanced
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budget.
Therefore, the procedures for developing this
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program have involved delay.
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It involved extensive con-
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sultation with Congressional leadership.
This was a his-
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toric event.
Never had members of the House and Senate
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and the Administration sat in such long sessions over such
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an extended period to hammer out and determine a consensus
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for achieving the reductions that will bring about a
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balanced budget.
We spent eight consecutive days, and
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over eighty hours of consultations in order to achieve a
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budget that can be presented by the Administration with
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great support in the Congress.
A sixth principle is that, in balancing the bud-
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get, the President will not consider any tax cuts until the
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balanced budget has actually been achieved or approved.
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Tax cuts, even meritorious tax cuts,
must be earned first
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by demonstrating our commitment to fiscal responsibility.
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It'S too easy to fall back into the easy course of giving
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away money before we are able to put in the disciplines of
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fiscal restraint.
Now the effects of balancing the budget will
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be analyzed in various ways.
I think it is important
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remember that balancing the budget is not an isolated part
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of the war against inflation.
It’s part of a larger
pattern, a larger array of weapons that
carry on this war.
is
necessary to
It is important to balance the budget,
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not only because of the reductions in spending and the
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demonstration of our ability to contain spending, but tore5
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store the confidence of the American people that their govern
ment can live within its means.
are going to change expectations about inflation, and
change behavior patterns to support a non-inflationarv
program.
The reduced credit demands from balancing the
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That is the only way we
budaet are significant.
We are now in a period
which approaches tax day in 1980, April 15, when all
individual taxes come due.
And during the period of tne
next few weeks, we will be sending out large amounts of
money to Americans as tax refunds.
And during that period,
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€
we’ll have to borrow some money in the credit markets.
But from April 15 on, the federal government will have very
little demand for the rest of FY 1980 in the financial
markets.
And by balancing the FY 1981 budget, we will very
substantially reduce those demands for the following 12
months.
So we can look ahead for 18 months of a very sign
ificant reduction in federal government demands in financial
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markets.
This is the way in which we can relieve the pressure
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on those markets and hasten the day when we can turn to
more normal conditions and more appropriate levels of
interest rates that will sustain the normal activity of
our economy.
So this balancing of tne budget is to be looked
in terms of the reduction of spending, but
at not only
=,c—- - «»•
a reduced
demand
1°
of the federal government for borrowirg
and, therefore, a very much improved condition for capital
to be available for small businesses and farmers and the
enterprises that create the investments and build the gobs
that are necessary for our economic progress.
The second area I want to comment about, briefly^
is the area of credit restraints.
The action in this area
was taken by the President under his own authority, anc by
the Federal Reserve under its own powers.
The actions by
the President were intended to strengthen the Federal
Reserve, to give it greater capacity to deal with the
growth of money and credit within the banks and depository
institutions.
The Fed has been authorized to extend some
of its normal techniques for control to the nonmember
banks, and therefore, to become more forceful in its effort.
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to restrain excess credit.
But beyond that, the President activated the
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Credit Control Act in order to give the Federal Reserve the
capacity to restrain credit in areas where it was bubbling
up and surging beyond a healthy level.
not touch the areas of the economy that are already weak.
There are no new restraints on lending for home mortages.
No new restraints on lending for purchase of automobiles,
an area of the economy that is weak.
But there is restraint at the margin on continued
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We, of course, did
use of consumer credit, and continued use of certain kinds
of intermedaries that are draining resources out of the
normal flow of funds.
The President acted, and the Federal
most flexible method of
apply
Reserve acted, to
controlling credit.
The actual restraints deal with mar
ginal requirements for reserve deposits on the further
growth of these credits.
There was no restraint on the
outstanding credit balances.
It's merely that if the credit
grow further, it will be less convenient.
And the decisior
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was to do this in a way that left it to every financial
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institution to decide whether it wanted to merely take this
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inconvenience, make these deposits, or whether it wanted t<
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restrict its own activity.
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individual account.
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There is no restraint on an
There is only a requirement that each
institution adjust its activities in credit extension to
take account of this necessary restraint.
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And the Federal Reserve also acted to establish
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a special credit restraint program with all of the major
banks they deal with, encouraging them on a voluntary basis
to help in this effort to dampen the excess demands and to
take the pressures off the financial markets.
A third area that I might mention is the area of
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energy.
There is no way that we are going to solve the
problem of inflation, long-term, unless we deal with the
issue of energy.
For historic reasons, we have come to the
point where we are far toodependent upon foreign oil.
now have 45 percent of all of our oil coming on a very
fragile, thin, uncertain supply line from parts of the won
that are not secure.
And that dependence in our economy is
a very serious threat to us.
We must move as rapidly as
we can to reduce that dependence on imported oil.
Tor
three years, this nation has been engaged in an extensive
debate to change 40 and 50 years of policy, and to shape a
new national program on energy that will hasten the day
when we are more more self-reliant, less dependent on
foreign sources.
The programs and the priorities to do
this are extensive, and they are beginning now to move
rapidly through the Congress, so that we’re on the verge
of seeing this major new policy put into place.
This is important for many reasons, but if an\
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We
NEAL R. GROSS
COURT REPORTERS AND TRANSCRIBERS
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1
would be illustrative, it is merely to point out that in
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this year of 1980, we will send 85 billion dollars abroad
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to pay for oil.
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abroad.
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it doesn't take much analysis to see how difficult our
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path would be.
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will be, under the programs that have been worked out in
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the coalition between consuming and producing parts of
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our nation aimed
(
And if in 10 years that kind of increase continued,
By 1990, that’s got to be reversed, and it
at changing the directions that have
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guided us in the past, but need to be adapted to this
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changing environment.
In order to accelerate the incentives for con
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{
And in 1970, we sent 3 billion dollars
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servation, the President acted upon his own to impose a
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gasoline conservation fee that will increase, starting in
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May, the price of gasoline by 10 cents per gallon.
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obviously is not popular.
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President had he passed
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determined—the Administration
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work on the most discretionary
part of our energy use, and
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that is the use of motor fuel.
There's the place where
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we can do the most to save.
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where
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the saving, iniatially, of 100 thousand barrels a day, and
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over the next couple of years, to be saving some 250
It would be better for the
by
this opportunity.
has
And that is the place
we’ve targeted this charge, so that we can create
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But he has
determined—that we must
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This
WASHINGTON, D.C. 20005
12
1
thousand barrels of oil per day.
2
to Congress, that this particular charge be incorporated
3
into a new advalorum gas tax that would include the present
4
four cent tax, plus the ten cent tax, and become a perman
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ent part of our system of restraint.
Gasoline in the United States is selling far
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7
We also intend to propose
below its price almost
everywhere else in the world,
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and most major countries have taxes that run from 75 cents
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to a dollar and a half a gallon, while we’re paying less
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for our gas than the tax in most European countries.
They
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have imposed those taxes to create
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need also to take steps in this direction.
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be popular, but it is necessary, and we hope that everyone
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will cooperate, and redouble their efforts to spend no
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more for gasoline by using 10 percent less.
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restraint, and we
This will not
It costs no
more, and everyone can enjoy the same standard of living.
The program involves other elements, but I will
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not take your time to outline them, because I believe most
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of you are familiar with the other activities that we are
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intensifying.
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I merely want to point out, that this progr
is powerful, it is tough, it will impose some pain. It wil
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be seen most quickly in credit restraint, it will be
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seen quickly in the gasoline charge; but the effects of
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the budget action will become also very powerful as they
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1
begin to reduce the government presence in financial
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markets.
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it may be, it is fair.
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burden not shared equally by all Americans.
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transitory inconvenience there may be, will be far out
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weighed by the greater benefit we all will receive by
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beginning to unwind inflation, and return to the kind of
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price stability that is the only way that we will have real
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incomes- and real values and real progress in our economy.
But, tough as the program may be, and painful as
It is not asking anyone to share a
And whatever
The war against inflation will not be won quickly.
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It will not be easy to win the war.
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on for a number of years.
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March 14 is not putting inflation to bed.
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continuing war, it's part of the continuing campaigning
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There will be other features, other initiatives, there will
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be adjustments, tactical adjustments as there are in any
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war.
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in the field is only the beginning of a campaign, and there
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will be advances and offensives and there will be setbacks
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and there will be action.
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keep our purpose, that we maintain our consistency, and we
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not be deterred from the ultimate purpose of winding down
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inflation, which is the only way that we can assure to all
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you and to all Americans and to all of the world, the
And the war will go
The President's announcement on
Fielding an army doesn't win a war, putting the army
But what is essential is that we
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Its part of the
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,utlook for peace and prosperity that is out ultimate goal.
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Thank you very much.
2
As you can imagine, we have a
.
3
number of questions that came up, the first is, Hr. Secre
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tary, if the accumulation of half a trillion dollars in
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national debit is so bad, why in the world has the Carter
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Administration supported two tax cuts in the past three
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years, and why would you ever consider a tax cut after the
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fiscal '81 budget is put into balance?
SECRETARY KILLER:
This question was intended
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for Pavarotti, obviously.
It's been misplaced.
The answer is that when the Carter Administration
12
we were suffering from the greatest
first came into office
13
recession that we had had since the Great Depression of the
14
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Federal Reserve Bank of St. Louis
30's.
We had been at a level of almost nine percent un-
mployment.
I think when the President was inaugrated,
t was still over eight percent.
And the economy needed
;o get going again in order to avoid the continuation of
iccumulated deficits.
The results of the Great Recession of '74 - '75,
,as that the year before the President took office
the
deficit was 67 billion dollars— the largest deficit we
ever had in peacetime.
And if it would have been helpful
to continue that process rather than getting the economy
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going, I’m sure the President would have considered it.
2
was not here at the time, but I think the first priority
3
was to get that deficit down by getting jobs and getting
(
incomes and tax receipts up
I
rather than to continue
Once that
5
to drain the economy of its productive capacity.
6
had happened, then we must move as rapidly as we can toward
7
the concept that in normal times when the economy is opera-
8
ting normally, we should be in balance.
9
cession, we will go into deficit, if we have a boom, we
If we have a re_
10
should have a surplus in order to bring us back to normal
11
And that is the philosophy we must return to after
12
20 years of believing that it should just be deficits.
13
there should be a normative period for balance, there shoul d
14
be deficits, and there should be surpluses.
QUESTION:
15
And
Two questions along the same line.
I6
If you are confident that after April 15 the federal goverr
17
ment will not have to borrow new funds, will that then
18
result in the interest rate dropping, and, if so, how soon
19
do you see the interest rate dropping?
SECRETARY MILLER:
20
Let me take the opportunity
21
to thank you for the question, because I
22
that we would have less credit demands after April 15, not
23
none.
24
with—we may borrow from month to month a little—but it
I
said
For the balance of FY '80, I suspect we'll net out
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hope
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will net out With very little demand for credit.
And then,
1
over quarters there may be variations, but
in FY '81,
2
over the whole year there should be very little demand for
3
credit.
I hone you won't write zero, but write low.
And
4
the answer to that is yes, over time that reduction of de5
mand in credit markets
as against the supply of resources,
6
means that like any other supply-demand equation,
7
pressures would come off
and one would expect that as the
8
demands of government abate, as inflation abates,
9
interest rates themselves will begin to come down.
When
,
10
and how much, I've learned a long time ago not to predict.
11
because everybody runs for the phone and we lose the audieh ce
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and then you don't have anything to talk about.
13
QUESTION:
Will the Administration actively
14
oppose the House Budget Committee's to set aside funds for
15
16
a tax cut?
SECRETARY MILLER:
The President is firm in his
17
conviction that we should not consider tax cuts until we
18
have a balanced budget in hand. And, in that sense, the
19
non-binding actions of the Congress to indicate that, in
20
due course, funds that are in surplus might be used, are, :E
21
think,
merely statements of hope and purpose and are
22
not binding.
1 don't think it's inconsistent for the
23
Congress to have that hope and that expectation someday, a nd
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for the President to say, but not until we have together,
2
the Congress and the President and the Administration, giver
3
the American people a balanced budqet.
4
way toward the time when we can begin to relieve the burder
5
on American people, which we must do and we want to do.
6
But we can’t mislead people, there’s no way to have a fret-
7
lunch, and we’ve got to keep the discipline upon ourselves
8
to hold down spending before we take the dividends and the
9
rewards.
QUESTION:
10
We must earn our
What sacrifices and pain will the oil
11
companies in the United States be expected to sustain,
12
along with those of the people in this country?
SECRETARY MILLER:
13
Well, today, after what seems
14
like six years of work—although as I recall it’s six month
15
it seems like six years of my time—the Senate passed the
16
windfall profits tax by 6G to 31; and I guess now we will
17
have that bill
18
erences of opinion about that bill, but it does represent
19
a very important policy decision of the President, which
20
is correct.
21
suppress the real values of energy, because we will supress
22
the production of energy if we try to artificially hold
23
down the prices for oil and gas.
on the Presidents desk.
That is, we must recognize that we cannot
So the President has acted to de-control the
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There may be dif:-
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omestic price of oil over the period between last dune and
1
.eptember 1981.
That means all those who are producing
2
,il would be able to get higher prices, and that would
3
:reate a windfall, not from their prior decisions and in
4
vestments.
The whole purpose of this tax was to fairly
5
share that increased revenue with the national interest,
6
so that, some of those revenues can be used to reimburse
7
Poor people who cannot afford to pay the higher price of
8
oil.
Some of it will be used to finance the development
9
of unconventional sources of energy, to begin to build ou.
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domestic alternative to imported oil.
And some of it used
to support conservation, public transit,
and the conver
sion of utilities from oil to coal.
we asked for more.
The Congress in its actions
has resolved it in a way which we believe accomplishes thn
substance of what we sought to achieve, and I believe
ais is a great victory for the Administration and for the
3ngress and for the American people to have a fair sharing
f these resources so that we can accomplish the broader
urposes.
The oil companies, therefore, are going to be
sked to share, and not to merely benefit.
,oing to expect
And we are
them to reinvest all of their availat
resources to help build American independence in energy,
ind to reduce our
dependence on imported oil.
HEAL R. GROSS
COURT REPORTERS AND TRANSCRIBERS
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19
QUESTION:
1
You said on Face The Nation that the
inflation rate in 1980 would average 11 percent.
In light
2
of the latest CPI figures, do you still believe the 11 per
3
cent estimate is realistic, and if so, could you offer a
4
general rundown of how we can average 11 percent?
5
SECRETARY MILLER:
The increased inflation that
6
we've seen in the first part of the year is very much in
7
fluenced—as you've noted in the reports out this week
8
for the CPI for February—has
9
10
11
12
been very much governed by
•
rsii Anr) pnerav prices, and increases in the
increases in oil ana energy
,
home financing charges, higher interest rates on mortages,
if you will.
Both these factors should be slowing down.
We've had in 1979 the greatest increase in oil prices
13
in history.
In fact, through all of the history of using
14
oil, oil had gotten, by the beginning of 1979, to 13 dollar
15
a barrel.
And in 14 months it's gone up 18 dollars a barrel
16
So while it had grown over all of the history of oxi up tc
17
13 dollars
in 14 months it went up 18 dollars per barrel
18
mre.
And that's what is showing up in all of these inflation figures.
19
We do not believe that that rate of increase will continue.
(
20
21
|| We believe that there will be a much smaller, increase in world
22
II Oil prices this year, so that those factors, as they work
23
II into our economy and show up in all of the prices of ener .
24
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Federal Reserve Bank of St. Louis
and finally show up in all prices, will begin to wear down.
25
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1
2
3
We believe the pressures in the credit markets
will be relieved later in the year, and that interest rates
So we believe
4
will not contribute to additional increases.
5
that that sector -also will begin to give us seme relief.
6
meantime, major areas such as food have been in a very
7
neutral stance.
8
in food that we had a year ago.
9
lief on the food that was the main factor maybe four or
In the
We have not been having the large increase
So we’re getting some re-
10
five quarters ago, and now we're going to see some relies
11
from these
12
13
14
other areas.
And, as there is generally a damping in economic
activity and a slowdown in the economy, we think that alx
prices will begin to stabilize.
It appears in our wording
15
a dynamic review of the economic outlook, that it is qi.ite
16
possible to target—and I said on Face The Nation we would
I didn't promise that we
17
try to target in that direction,
18
would achieve— but we do believe that it is realistic -or
19
us to target for an 11-12 percent rate of inflation, measures
20
by the CPI for this year,
21
single digit inflation numbers in 1981, if we don't have
22
any more international events that interrupt the progress.
23
We always have to hedge that view, because if there is seme
24
change of government, some shutdown of oil production, some
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and that we will be back in
25
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COURT REPORTERS AND TRANSCRIBERS
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21
disturbance, some war, this could all be changed.
But on
1
the present circumstances, I think it is quite realistic
2
because of these factors, these special factors that have
3
driven up inflation, will begin to abate, and I think we
4
will see some relief, although inflation will continue at
5
a completely unacceptable level.
And our job beyond 1930
6
and 1981 is not just to get down to 11 or 12 percent ano
7
then on to single digit, but to keep the pressure on, so
8
that ovet four, five, six, seven years, we bring it down
9
and finally make it a commitment of this nation to have
10
11
aq it can possibly be maintained,
inflation as near to zero as it
f
Your comments about the internations_
QUFSTION:
12
scene lead into the next question.
If additional economic
13
sanctions against Iran were considered desirable, what
14
measures might be candidates for effective action?
15
SECRETARY MILLER:
Well, as you know, the UH
16
resolution was vetoed that would have had an international
17
program of sanctions against Iran.
Because of developments
18
Since that UN vote, which looked like there were various
19
channels and promising prospects for some movement in
20
dealing with the hostage issue, this subject of sanctions
21
has been laid aside.
Now that there has been some dis
22
(
appointment in the recent initiatives, I suspect this will
23
have to be reviewed.
But I believe it would be more
24
25
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22
appropriate for it to be dealt with by the President and
1
2
3
4
the foreign policy advisors rather than for the Secretary of
Treasury to announce foreign policy here today
altho
I'm always happy to do that if I have the opportunity.
QUESTION:
5
In the interest of national and econ
omic security, if voluntary restraints are not adhered to,
6
7
Will we have price and wage controls by 1981 or by when?
SECRETARY MILLER:
8
We will not have mandatory
wage and price controls-^riodl
We are irrevocably committed
9
10
to avoiding mandatory controls for a very simple reason:
they don't work.
'
They don't work in peacetime, they never j
11
12
13
have, and they never will.
What happens in a complex
economy like ours, if we should put in wage and price con
trols, is in the first place,
we can't control food production.
Never have been able to.
Second is, I don't think OPEC
14
15
16
17
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Federal Reserve Bank of St. Louis
would abide by it.
a dike.
Third
And that's a little bit of a leak in
, those kinds of comodities that are sale
able in the world, if their price is restrained here,
they
will be sold elsewhere, and we'll be denied products. You
create shortages, you begin to have disruptions- and this
happened in '71 and '73 when we had controls.
We had shortages of fertilizers because they were
being sent abroad.
In '71 coal companies wouldn't make
contracts with utilities because thev didn't know
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1
whether they would be frozen at some unreasonable
2
price for coal.
3
their plants, and you had shortages there.
So utilities couldn't build extensions of
There was a liquidation of beef herds because
4
5
ranchers couldn’t make any money.
6
for beef today than we would have if we had not had controls
7
in '71 and '73.
8
term and give the illusion of controlling inflation, be
9
cause it looks good for a period.
And so we're paving more
And it's very nice to do it for short
It would be very con
10
venient to go through an election date with controls, but
11
it would do irreparable
12
our nation, and that's not the way we are going to operate
13
this economy.
QUESTION:
14
damage to the economic fabric of
Has the Treasury decided to completely
15
forego gold sales, even in the form of coins, as Represen
16
tative Reuss
17
consideration of a return to the gold standard be an issue
18
in the campaign this year?
has proposed, and also, should Ronald Reagan's
SECRETARY MILLER:
19
The Treasury does not foreco
20
its right and privelege, and possible action from time to
21
time to sell gold.
22
striking of a certain number of medals which will be on
23
sale, when did they say, next summer—it starts in June,
24
Bette, thank you.
As you know, Congress did require the
Starting in June, there will some gold
25
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24
medals that have been authorized
1
by Congress.
In terms
of coins, we do not favor going in that direction, but frorr
2
time to time we may, when we feel it appropriate,
sell
3
4
gold.
He don't forego that possibility.
I don't think the gold standard will be an issue
5
in the campaign, unless Governor Reagan makes it an issue.
6
7
And, it may be helpful to the President if he does.
QUESTION:
8
If the oil companies are to be taxes
for windfall profits on higher prices, does the Administra
9
tion intend sometime in the future, to tax homeowner's on
10
11
the windfall gains in housing prices?
12
SECRETARY MILLER:
QUESTION:
13
No.
Do you expect, in return for
-
tration and Congressional effort to balance the budget,
14
15
16
that the Federal Reserve will be less restrictive than
otherwise would be on credit?
SECRETARY MILLER:
The Federal Reserve will have
17
18
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Federal Reserve Bank of St. Louis
to continue to be prudent in endeavoring to restrain the
growth of money and credit.
The growth of the money agg
regates should be appropriate to the progress of price
stability in the economy.
As a result of balancing the
budget and relieving pressures in the financial markets,
the job of the Federal Reserve
the pressures will be somewhat
will be much easier, and
less.
However, there is no
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25
1
quid pro quo, because the Federal Reserve has to work
2
within the environment that exists from time to time, and
3
that will be part of the total fabric of our economy.
4
there’s no question that as a general proposition to the
5
degree that we have greater fiscal responsibility, and
6
greater fiscal restraint, there is correspondingly,
7
pressure on the monetary system.
9
10
less
If gold fell below 500 dollars an
QUESTION:
8
But
ounce today, and will it continue to drop, and drop below
400 dollars, do you believe?
SECRETARY HILLER:
11
Will Rogers is a great American
12
hero, and he said, "These kindsof things, they will fluc
13
tuate."
14
continue to be so, because of the very nature on which the
15
gold market operates.
16
to predict, and if I did I would be wrong: and I'd rather
17
be right, so I will say merely that probably there will be
18
changes in gold
Gold has been erratic, and it will probably will
prices
QUESTION:
19
I think it would be unwise for me
from
time
to time.
How do you foresee budget cuts affect
20
existing social programs, particularly the disproportionate
21
effects on minorities and disadvantaged groups?
SECRETARY MILLER:
22
I believe that the budget cut
23
that are in process, the expenditure and program reduction
24
that are being approved by the President, will have minima
25
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CT
26
1
effect on those who are disadvantaged, those who are dis
2
tressed in our society, and the effort is being made to
3
4
sustain those programs which go those least fortunate in
our society, most in need of help.
We are going to maintain the youth training empldy
5
6
ment program, we are going to maintain the basic social
7
services, we are going to tighten up on waste and areas
8
where we can merely be more efficient, and we are going to
9
deal with programs, many of which are worthwhile, but whicj
10
are less directed toward these constituncies,
11
who are in most need of help.
12
you see it on Monday, will be very responsible in this
13
regard, and I think that we will see that great effort has
14
15
16
17
I believe the budget, when
been made to share, to deal with the matter on a basis that
fairly shares the burden, but which does not direct any
burden at all who are at the scale where they need our help
and need our assistance.
QUESTION:
18
(
. and those
I think this question came
from a
It says, with the CPI goinq up at a
19
government employee.
20
current IS percent annually, how will government employees
21
maintain themselves at an average annual cost of living
22
increase of five percent?
SECRETARY MILLER:
23
24
There is no doubt that we neec
to reduce inflation so that all of us can share again in
25
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(
One of the sacrifices that we
1
real increases of income.
2
will have to make, and I guess those in government are
3
called upon particularly to set the example for the natior
4
is being willing to see some erosion in real income in orde
5
to gain more opportunity for real income in the years ahead
If we try to index everyone to transitory infla
6
7
tion figures, which incidently are overstated in terms of
8
cost of living, we will rachet the whole society up into an
9
endless pyramiding of geometric progression.
So I’m afraid
10
we are all going to have to suffer some, and I suspect
11
government employees will have to bear a special responsi
12
bility to set the example.
The 18 percent inflation does not, however, re
13
14
flect the change in cost of living
15
the cost of living in some ways.
16
Consumer Price Index.
17
might buy.
18
goods, they buy something else, the cost of living is
19
affected by what they really buy, not what they might buy.
20
The best example
21
buys a new house at current prices and current mortgage
22
rates every month.
23
at current prices and current market mortage rates every
24
month, so it greatly overstates that component.
because it overstates
The CPI is correctly a
It's an index of things consumers
But since consumers don't buy that basket of
is that
the CPI assumes that everybody
But very few Americans buy a new house
25
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And,
28
1
obviously, we’ve had, in a period of rising home financing
2
charges, considerable distortion.
3
a half to three percent in these figures,
4
one factor alone that overstates what really is costing
5
consumers.
6
sured, is higher than we're likely to see pay increases
7
this year for government employees, and for many other
8
employees.
9
show and accept, fairly, so that we can wind down inflatior
10
and return to a period where we can expect annual increases
11
in real incomes.
12
for increases in real incomes in the future will be very
13
dim indeed.
14
we'll never get there.
15
wind down that inflation factor, we'll be surprised how
16
rapidly we can return to a time when we can achieve real
17
increases in income.
18
It runs about two and
just from that
But the point is that inflation, however mea
And that's part of the austerity we need to
If we don't do it now, then our prospects
If we just put off the day of reckoning, then
QUESTION:
But
if we will tighten down and
Chrysler has been having difficulty
19
getting additional bank financing to meet requirements for
20
federal loan guarantees.
21
include the default on a 10 million dollar loan to a
22
Belgium bank, and the weak economic outlook for the auto
23
industry, do you expect Chrysler to ask for additional fed
24
eral aid, or a waiver of some of the provisions of the loan
In view of these problems, which
25
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guarantee act, so it can draw on the federal loan guarantee):
1
2
immediately?
SECRETARY MILLER:
The process of
negotiating
3
the Chrysler
financial package has been going along now sine
4
the beginning of the year.
Originally, it appeared that
5
Jhrysler
would need funds as early as January.
Bu ,
6
each month has come by,
Chrysler has put a piece of its
7
package together and been able to raise and complete parts
8
of the financing package required by the loan guarantee
9
act, and therefore, has been able to sustain its cash flow
10
at a very satisfactory level -^11 of which is contributing
11
12
toward the final financing package.
The banks are negotiating with Chrysler now for
13
, ,
t
ran't tell you the final out-'
14
their part of the packaae.
15
cone, but I believe that it will probably
,ork out,
that they will find accomodation and find a way
16
-o work out that piece of the puzzle.
The puzzle involves
17
contributions from Chrysler employees, most
of which has
18
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Federal Reserve Bank of St. Louis
□een accomplished already.
It requires some sales by Chrysler
of surplus assets, and they’ve done some of that alreaay
It requires some help from their dealers and their suppliers,
and they have some help, but they are offering now a
debenture, you may have read in the paper today, to those
suppliers in order to finance that part-
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an aAH
WASHINGTON, D.C. 20005
30
1
3
What are your plans for the Susan
QUESTION:
2
Anthony dollar?
Is it to be altered or suspended?
SECRETARY MILLER:
4
We have Undersecretary Bette
Anderson to answer that, because she’s in charge of the
5
6
Susan B. Anthony dollar.
Well, with this radio broadcast and telecast going
7
out everywhere, I can just say to everybody, if they would
8
just start demanding the Susie B's when they go around, the
9
problem would take care of itself.
But if you don’t demand
10
the Susie B, we’ll have to change its color or punch a nol
11
12
13
14
in it or something, so it will get your attention.
prefer just to keep the nice, vanilla ice cream Susie B's
that we now have, so we hope you'll support the use of the:
UNDERSECRETARY ANDERSON:
15
16
17
18
19
20
21
And we
I'm delighted to have
this chance to share with you the fact that in the past fiv
z/eeks, we have put an additional ±5 million Anthony coins
in circulation through the assistance of the United States
on a voluntary basis.
Post Office,
Our hope is that
we will continue to do that, and that you wili ask for then
at your local bank.
You know, the reason this coin was
introduced was for economic reasons, saving you as America:
22
23
24
taxpayers, and we really have a responsibility to help
circulate this coin. So we’re not going to discontinue it,
25
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Federal Reserve Bank of St. Louis
31
we're going to continue to try to promote it, and encour
age you, the American people to use it.
SECRETARY MILLER:
worth noting.
Thank you.
You know, what Bette says is
The paper dollar wears out.
Paper wears out
so tne average life of a dollar bill is about 18 months, and the
we have to reprint it and recirculate it.
of a coin is 15 or more years.
The average life
And so, obviously, there’s
more sense for taxpayers to use something that will have
long life, that will not have to be replaced.
So there is
quite a saving if we can achieve it.
But they are very convenient, those of you who
are golfers pay off your Nausau’s in Susie B's, and you car
get this thing going.
Why in the time of the energy shortage
QUESTION:
and pollution
problems did this Administration choose to
cut 265 million dollars from mass transit aid?
SECRETARY MILLER:
The Administration of course
has not announced its budget.
It will come out Monday, so someone is looking at some
preliminary figures.
But it's true that there may be
adjustments in the funding for mass transit.
I think when
you see the results you’ll find there is some rescheduling
some deferrals, and that you’ll find the fundamental prog
ram and support for moving toward more public transporter!
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But I think we can schedule in a way
1
is solidly in place.
2
that takes pressure off
3
4
5
hope you'll reserve judgment
8
9
I
on this, because I think
you'll find this program is and will be fully supported.
It
a question of timing and how we go about it.
QUESTION:
6
7
the budget.
Before asking the final question, Mr.
Secretary, I'd like to present you with a certificate of
appreciation from the Press Club, and also a Press Club
tie .
It says,
10
The final question is a very good one.
11
in light of your comments about inflation and the interest
12
rates, have you
13
you haven't do you want to do it now?
14
SECRETARY MILLER:
ripped up your credit cards yet, and if
Well, Mr. President,
I than*,
15
you for the certificate, I thank you for the tie.
16
time I was here I got a windbreaker, and considering the
17
chill about our program, I should have gotten a windbreaker
18
today.
19
credit cards, I've ripped up my wife's credit cards.
The answer is, of course I have not ripped up my
20
21
22
23
24
25
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