Ford Broadcasts, 1965-1966: 12237637

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

discussions and persuasion on the so-called voluntary controls. We have a vast complex of voluntary controls, on prices, wages investment abroad, loans abroad. My question is this: If our monetary policy was right, why should we need all these controls?

MR. ACKLEY: On the domestic side I am sure that we could achieve approximate stability of our general price level with no other effort, by keeping our unemployment rate perhaps about five percent and our utilization of industrial capacity down back around 85 percent.

We are not satisfied with operating our economy at half speed. There is a problem that when the economy is running full and making adequate use of its resources, manpower and physical resources, there has been in the past some tendency for wages to creep up faster than productivity increases and for prices to rise.

MR. FERTIG: Are you saying, Mr. Ackley, that it is essential to have monetary inflation and price rises in order to have a prosperous economy with low unemployment? That hasn't happened in Germany, for instance. Why should it happen here?

MR. ACKLEY: On the contrary, I am saying that our job is to try to achieve simultaneously both things, full employment of our resources with price stability. We are not willing to rely on a single tool for that purpose. We have a third objective, balance of payments equilibrium, and that too we want to achieve, but we are not going to do it just by depressing the domestic economy.

MR. KIPLINGER: Dr. Ackley, you seem to suggest there are some depressing factors that have not yet taken effect in the economy this year. If the recent rapid rise or heating up of the economy is not to continue through the remainder of this year, then there must be some other limiting factors that are not yet perceptible.

What do you foresee as some of these danger spots or possibly weak spots in the economy?

MR. ACKLEY: I don't think we are in danger of recession or slide-off in our rate of economic expansion, but I think we have to remember, we did have a major change in monetary policy in December which has been working its way through the economy and, really, is just now taking firm hold. It is beginning to bite. It is beginning to bite on capital spending and on a lot of areas.

We have a new tax bill which, although it is not a major tax bill, is not yet even in effect. I referred, in the case of farm prices, to the fact that the outlook there was different than it had been. This hasn't anything to do, basically, with policy actions.

It has to do with the fact that we had a very short pig crop last year, and this influenced the whole range of protein prices in the agricultural economy. That situation is turning around.

MR. SPIVAK: Mr. Ackley, at this point in our economy, would you say the chances are greater that we will have a tax increase, or the chances are greater that we won't?

MR. ACKLEY: I would not like to make a guess on that, Mr. Spivak.

MR. SPIVAK: Does the election have anything to do with your sense of timing on that, as some cynical politicians believe?

MR. ACKLEY: I am no expert on politics. My business is economics, but I have the feeling that the best politics is good economics. I think there is nothing that people dislike more than inflation and that sound fiscal and monetary policies are the best politics for anyone.

MR. VANOCUR: Mr. Ackley, if you are going to ask labor, as you have asked labor in the past, for restraint, would not it be a quid pro quo to ask for the temporary repeal of the 7 percent investment tax credit? Wouldn't this help you with the labor leaders, who are quite rebellious, as you know from your experience in New Jersey and other places?

MR. SPIVAK: Gentlement, we have about two minutes.

MR. ACKLEY: I think the quid pro quo for the restraint that we ask of labor is the restraint that we ask from business on prices, and just as labor feels that we have picked on them and done nothing about prices, businessmen, many of them, feel that we have picked on business to knock down prices and done nothing about labor.

I think we have and are trying to administer a balanced program in which we are asking everyone to be responsible.

MR. DALE: In that connection, the Council has always directed the guideposts of what you call monopolistic situations. Generally they are relatively concentrated, big industries, but isn't it true the great bulk of the price increases have come in sectors such as food where the guideposts hardly even apply?

MR. ACKLEY: I think that is right. The big price increases have been in food, farm products and a few internationally traded raw materials.

MR. SPIVAK: Mr. Ackley, we are coming rapidly to the end of our time. I think maybe on that note we should end. I am sorry to interrupt, but our time is up.

Thank you, Mr. Ackley, for being with us today on MEET THE PRESS.