To Restore Confidence

May 14, 1962

The speech of the President before the U.S. Chamber of Commerce was gratifying not only for its conciliatory tone but for its recognition of the crucial role of profit in the American economy:

“We want prosperity and in a free enterprise system there can be no prosperity without profit. We want a growing economy, and there can be no growth without the investment that is inspired and financed by profit. . . . Our primary challenge is not how to divide the economic pie, but how to enlarge it.”

Yet, as the response of the stock market has shown, it will take more than verbal reassurance, no matter how well phrased, to restore the confidence so badly shaken by the President’s outburst of April 11 and by some of his subsequent actions. Here are seven measures that might help:

1—The President should abandon all hints that price and wage controls may be desirable or necessary unless labor and management act, in his judgment, “responsibly.” It is not enough for him to say that “We [in Washington] do not want the added burden of determining individual prices for individual products.” He must recognize that the task is impossible, and that it would do immeasurable damage to the economy for the government to attempt it. There are millions of separate prices and billions of interrelationships of prices, wages, and costs. These ever-changing interrelationships determine how much of thousands of different commodities are produced, and when, and how many workers are employed, and where. Arbitrarily to hold down the price of one commodity must reduce its production and disrupt the production of scores of others.

The President must also abandon the belief, sold to him by his Council of Economic Advisers, that any “scientific” formula has been found for fixing prices and wages. He must above all abandon the delusion that wage hikes of 3 percent a year, combined with a price freeze, is such a formula. Any attempt to apply this crude formula would be disastrous.

2—The President should stop asking for increased discretionary powers for himself. Congress should stop abdicating its legislative responsibilities and stop granting him such powers.

3—There should be no more anti-business taxation. This applies particularly against the new tax proposals that would penalize the competitive position of American firms operating abroad. The proposed withholding tax on dividends and interest should be postponed for additional study.

4—The Administration and Congress should halt reckless “welfare” spending. They could begin by slashing a few billions out of farm price supports and foreign aid. If this gross inflationary spending were cut, the Administration would not have to impose still more growth-choking taxation to “balance the budget.”

5—In addition to refraining from measures that shake confidence, the Administration should take positive measures to instill it. Far better than the proposed 8-percent investment tax credit, for simplicity, justice, and incentive, would be to permit an initial depreciation write-off of 30 or 40 percent in the first year, and 10 percent in subsequent years. In the long run, precisely because it gave a strong incentive to new investment and growth, the government would gain not lose revenues.

6—The jungle of our antitrust laws should be re-explored. It has become impossible for the heads of big corporations to know when they are violating one of these “ten thousand commandments,” most of which are ambiguous and many of which conflict with each other. Their enforcement has been haphazard, selective, and discriminatory. Government officials have been able to use them for harassment and intimidation. We might begin by eliminating criminal penalties and by repealing the Celler-Kefauver and Robinson-Patman acts.

7—The double legal standards in dealing with big business and big unionism have led to disorder. But the way to curb unreasonable union demands is not to make the unions subject to the antitrust acts, as so widely proposed, nor to give the President more power to intervene in strikes or set wages, as recommended by a Presidential panel, but to stop tolerating union violence and intimidation and imposing one-sided bargaining compulsions on the employer that force capitulation to strike demands.