Ford Broadcasts, 1965-1966: 12237637

Read from the scan by GLM-OCR; expect the odd misread word.

quarter of a million men with all the incumbent costs in Vietnam? How can you project with a war like that?

MR. ACKLEY: Indeed, it is very difficult to project under these circumstances, and that is one reason why we have to be very much on watch and ready to move if things change.

Things could change either in the international scene, with the necessity for increased expenditures in Vietnam. They could change in the domestic economy. But we are not going to base our policies on some imaginary possibility. We have to concern ourselves with the way things are and our best judgment as to how they look immediately ahead.

MR. VANOCUR: But being in the position of having to advise the President on what may be, wouldn't you think personally it is desirable to have the stand-by tax authority that has been kicking around in Congress for years—not just to lower, as it was originally projected, but to raise it too? Wouldn't it be wise to have that passed by the Congress so the President could have this mechanism?

MR. ACKLEY: It might be nice for the President to have that authority, but in the first place I don't think Congress is likely to give it to him, and in the second place, I am not at all clear that it is necessary.

Congress has demonstrated several times that it can act quickly on tax matters. The tax bill which was signed ten days ago was passed in a very short period of time—requested at the end of January and signed on March 15. The excise tax reductions last year were completed in six weeks.

Congress can and, I think, would act quickly if the President made a clear recommendation explaining why what he asked for was necessary.

MR. VANOCUR: Mr. Ackley, what is the next signal that you are going to be looking for so that you can make a determination on what the economy is going to look like for the next nine months?

MR. ACKLEY: I don't think there is any single signal that we can use on the basis of which to call our shots. We are going to have to look at what happens to employment, the utilization of capacity, the backlog of orders, the advance of production, the advance of employment, what happens to prices, obviously, what happens to inventories. These are all statistical things. Then in addition we have to keep as best judgment we can of the psychological attitudes which are developing, which are important. I think there is no single index that we can use to decide whether and when additional fiscal restraint might be necessary. That doesn't mean that we can't recognize it if and when that time comes.

MR. DALE: Mr. Ackley, Secretary of the Treasury Fowler has said that he regards last year's rate of price increase of about two percent as tolerable—not desirable, but tolerable.

MR. ACKLEY: No. I don't think that we could maintain a six percent price increase for very long and tolerate it. As a matter of fact, we don't seek, we don't approve, we don't wish for any price increase. We'd like to have stability.

Clearly the rise in the past few months has been sharper than could be tolerated. It has, however, some rather special aspects to it, and I think we want to be very careful that we don't confuse some special circumstances, particularly in agriculture. Most of our price increase in the last few months, in the last year, has been in farm and food prices. That situation is changing, and we are fairly confident that it will change from here on.

Do you think that the recent rise in wholesale prices which for four months—November through February—was at an annual rate of six percent, is tolerable?

Over two-thirds of the price increase in wholesale prices and, I guess, in retail prices, too, in the last year has been in farm and food prices. But beginning about the middle of February and extending to this time, farm prices have stopped rising and indeed have begun to decline. Now that hasn't shown up yet in our price indexes. This coming week we are going to get the consumer price index for February, and that is going to be up, I am sure. And probably in March it will still be up. But we have to look at what is really going on now on the farm, and I think we are going to see a very different picture on farm prices in the months ahead.

MR. DALE: Are you suggesting that we consumers can hope for possibly no further increase in food prices this year?

MR. ACKLEY: That may be a bit optimistic, but certainly the kind of price increase that we have seen in the past 12 months, we definitely do not expect in the next 12.

MR. DALE: In the overall, the Council in the Economic Report suggested that this year we could get by with a price increase no worse than last, which would be broadly two percent overall. Do you still stand by that forecast?

MR. ACKLEY: I think it is too early to tell how we will stand at the end of the year. The fact that we have had as much price increase in the last few months as we have had already is going to make it more difficult to achieve that forecast.

MR. FERTIG: Mr. Ackley, you referred to fiscal restraint, and fiscal restraint has two aspects: Government spending and the other aspect of fiscal restraint.