October 11, 1974
Page 35318
THE ECONOMY BELONGS TO THE PEOPLE
Mr. MUSKIE. Mr. President, last week I had the pleasure of participating in a special session of the 60th Annual Meeting of the National Conference of Catholic Charities in Boston.
The purpose of the special session was to discuss and to debate the President's Economic Summit Conference, held a few days earlier. The universal concern of those attending was that the human element of inflation – the personal tragedies caused by the effects of inflation on the poor, the sick and the elderly – not be ignored as the President and his economic advisers look for opportunities to reduce federal spending.
It was a valuable and, for me, a rewarding discussion. I would like to share with my colleagues the formal statement which was adopted at the conclusion of the session.
Mr. President, I ask unanimous consent that the response of the National Conference of Catholic Charities to the White House Economic Summit Conference, "The Economy Belongs to the People," be printed in the RECORD.
There being no objection, the statement was ordered to be printed in the RECORD, as follows:
THE ECONOMY BELONGS TO THE PEOPLE
President Gerald Ford has recognized that the economy of the United States belongs to all of the people of the United States, not just to certain special interests. Thus he invited a range of public interest groups to join in the recent discussion on inflation and the devastating recession and growing unemployment hitting our country. The National Conference of Catholic Charities was invited and took part in the President's "economic summit" meeting.
The Conference disagreed with the Administration's identification of federal spending as the root cause of the inflation and its push to cut the budget as the solution. We particularly disagree with the emphasis on cutting appropriations for domestic social programs which are designed to serve the very people who are already bearing more than their share of the burden of inflation. The Conference is concerned for the victims of both the inflation and the recession: the worker, the elderly, the needy, those on fixed incomes. The Conference is concerned for the health of the whole economy, because the economy belongs to the people.
We wish to call attention to some basic facts about the economy which have been obscured in the White House summit conference and by the Administration's economic planners. We suggest some practical steps President Ford can take now and in the near future to combat inflation and to protect the people from the ravages of recession.
Below we outline why the Federal budget for social programs should not be cut though we do agree that "not all Federal programs are sacrosanct." Rather, we urge a necessary increase in appropriations for the social programs for the worker, the elderly, the children and the needy, not only to overcome the inflationary impact which has cut these programs, but to protect the most vulnerable people in our country against the consequences of the recession. In addition we outline what the President can do now about oil costs, about food costs, about housing interest and utility costs. We also state how we believe the tax system should be corrected to increase revenues to meet the social costs of inflation and to ease the burden of inflation on the average worker and the poor.
The mean income of 96% of our country's families has leveled off and declined since 1969, and that doesn't even count the added burden of inflation. Nearly 6% of our workers are unemployed. The people want President Ford to take action on the problems in our economy now.
What are the problems and what can the President do about them?
UNEMPLOYMENT AND WAGES
The unemployment rate is approaching the 6% figure! One of the notable aspects of the present unemployment is that it is not only the unskilled but the skilled craftsman who is suffering, and particularly Blacks, Mexican Americans and Puerto Ricans.
The Administration suggests acceptance of high unemployment to cut demand for goods and services as the cost of controlling inflation. But such a proposal is literally exploitation of workers and their families. It is based on the highly questionable assumption that inflation in the United States today is due to excessive demand, an assumption questioned by many of the nation's leading economists.
A more realistic analysis of our present inflation would note the general lack of confidence in government, the role of world wide hunger and consequent need and demand for goods, increased oil costs, and profiteering in some industries.
President Ford can respond to the problem of unemployment. The Comprehensive Employment and Training Act of 1973 provides a very limited $350 million for public service jobs in communities with unemployment rates of 6½%. This could perhaps provide jobs for 40,000 people. There are over 5,000,000 unemployed in the United States looking for work, and countless more who have been demoralized and given up the search.
Senator Javits has proposed amending the Act to provide $4 billion for public employment. President Ford should use his influence to obtain passage of this amendment before the election, and thereby seek to lower the unemployment rate. He should not accept the advice of his economic counselor, Mr. Greenspan, who thinks that a 5% unemployment rate should be accepted as normal and healthy because it increases the "worker's freedom to search for better jobs."
The President should. also urge quick. Congressional action to improve the unemployment insurance system. In 1973, for example, the average weekly benefit was only $58.50, less than the poverty standard for a family of four, and unemployment insurance covered only 38% of the total number of unemployed workers.
Finally, some have been calling for wage and price controls. We want to say that a return to the kind of wage and price controls we recently had is completely unacceptable. Those were only wage controls, with no one to enforce controls on galloping prices.
While public service employment is essential now to protect the families of the worker, it seems obvious to us that as old jobs in our economy disappear, new forms of work in the service field must be created. In addition a fair income program designed to guarantee an adequate standard of living for all workers and for those who cannot work because of disability, dislocation or social needs is long overdue.
ENERGY COSTS
The steep increases in gas, oil and coal prices permeate the economy. 40% increases in gas and oil costs and 60% in fuel oil and coal affect families directly as they attempt to light and heat their homes and operate their cars.
Action must be taken now to control energy and fuel prices, and where appropriate, roll them back. Profits of 22 of the largest U.S. oil companies increased over 50% in 1973 and could reach twice this level in 1974. If this should happen, after-tax profit rates on equity of large oil companies would reach almost 30%, roughly triple the rates for other industries.
President Ford has means at his disposal to avert such profiteering and he should use them. In this context a staff paper of the Federal Energy Administration recently urged utility commissions to permit rate increases that would provide a return on common stock equity of 15 %. Such action brings into question the sincerity of the Administration's desire to combat inflation.
FOOD COSTS
Food prices have risen about 14% in the past year. And the government's own statistics show that the cost of living for the poor has climbed nearly 20% higher than for the rest of the nation. Since food is a substantial part of the budget of the average family, the increase here accounts for 30% of the total increase in living costs. Yet the farmer's share of the consumer's retail food dollar, after increasing briefly to $.52 has dropped to about $.39. Food processors and retailers have not passed on these lower farm prices to the consumer, but have kept prices up to maximize their profits. In many food lines – for example, bread, cereal, meat – three of four corporations or conglomerates dominate the market, controlling over 60% and as high as 87% of the product. With such control they can fix prices artificially high.
These same mammoth corporations also have the buying power to force farmers to accept depressed prices, hurting especially the small and medium size farmer – but they do not share such lower costs with the consumer. In addition they have been quietly buying up huge chunks of the nation's agricultural land.
President Ford should press detailed investigation of the dominant food corporations and pursue vigorous anti-trust action where indicated if meaningful competition is to be restored to the food industry. For several years the Department of Justice has seemed ready to pursue fair and vigorous anti-trust enforcement against the conglomerates, and we strongly urge that the Department not be held back any longer.
HIGH INTEREST RATES
High interest rates encouraged by the Federal Reserve Board have seriously hurt many families, small businesses and local governments seeking to raise funds. They have especially hurt the housing industry which is in a serious depression. The increase in the cost of buying a $25,000 house at 10% interest rather than 6% is $19,800 over the 25 year life of a mortgage. How many families with children can afford that increase?
A combination of the highest interest rates since the Civil War plus other building costs have virtually excluded three out of four families from the home buying market and led to high rates of unemployment in the building trades – up to 30% or more in some major cities.
President Ford should not wait to urge the Federal Reserve Board to ease further its restraint on credit, especially for the housing industry. And the President can give leadership to require banks to channel a meaningful share of their loans to finance low and middle income housing at reasonable interest rates. The Nixon Administration's action which shifted interest subsidies to upper income people must be rolled back to aid those hurting most.
THE FEDERAL BUDGET
The above subjects represent major problems in the economy today. The solutions we have proposed for them are designed to begin to reduce inflation without increasing unemployment and without reducing Federal programs specially designed to help the needy or the unemployed.
We vigorously oppose wholesale trimming of Federal spending, and in fact see as necessary appropriate increase in Federal spending to protect the people most vulnerable in our economy.
The Administration's spokesmen have recommended cutting the Federal budget to slow down inflation. Such action seems ill advised for a number of reasons.
Government budgets, combining federal, state and local, are not in deficit. In calendar 1973, all governments ran a surplus of $3.5 billion, made up of surpluses at the State and local level of close to $9 billion offset by a $5 billion-plus deficit at the Federal level, just about the amount turned back to the states and local government by general revenue sharing. In other words all public spending together was lower than revenue and actually deflationary.
At present with rising prices and a recession the gross national product actually declined in the first two quarters of 1974, and the federal budget in a deficit position helps offset further economic decline. A federal surplus now would magnify the recession and contribute to higher unemployment and even less production.
In addition the proportion of public spending in relation to the total gross national product has been decreasing since 1968. It is presently at approximately the same ratio to the gross national product as it was in 1958. Government spending is not outpacing all other spending as many opponents of social programs argue.
Agreement is spreading among non-government economists that the federal budget should not shoulder the major responsibility for inflation. Many other far more important causes have produced the present situation. OMB Director Ash had to admit, at the summit kick-off meeting of economists, that a $4-$5 billion budget cut would affect overall price movements only to a minimum extent.
So we think the arguments against many of the budget cuts the Administration has in mind are sound and we believe the arguments justify increased spending in carefully selected programs which would reduce the effect of inflation and recession on the workers, the children, the needy, the elderly.
To do this and keep the budget in balance the Administration should ask Congress for sensible adjustments in the tax law by reforming the regressive social security tax which places an unfair burden on low income workers, by providing tax relief for modest income earners, by increasing revenues through plugging loopholes such as oil depletion and capital gains, and by placing a temporary, modest surcharge on high incomes and excess corporate profits.
HEALTH CARE
Finally, we are convinced that the push to adopt catastrophic health insurance and federalized medicaid this Fall will not control rapidly increasing health costs. The cost control necessary in the health field can come only through rationalizing the health delivery system and retaining top quality health care under a comprehensive health insurance program covering the total population – and with a strong emphasis on preventive care. We so testified before the Ways and Means Committee on July 2, 1974.
CONCLUSION
Through his summit conference and the mini-summits which preceded it, President Ford and his officials gave and got a lot of talk. But the country needs more than talk. It needs more action now.
The meetings of the last few weeks were mostly stacked with special interests: they were stacked against the worker, against the elderly, against the children, against the women, against the consumer, against the needy and against those on fixed incomes.
The people, comprising some 95% of the population of the country whose incomes have leveled off or have begun to decline since 1969, and those experiencing unemployment, don't need talk. At the supper table, the people know what is wrong with the economy.
We think that President Ford sincerely wants to do something about our economic problems and we support him in this. But we don't think he is getting the kind of advice he should have at this time. The economic advisors and spokesmen selected by his predecessor still are the advisors to President Ford today. They have demonstrated their insensitivity to the worker and the needy in our society. Therefore, we call upon the President to form his own team of economic advisors. In this way Mr. Ford can exercise his own leadership in serving the country and in serving the economy which belongs to the people.