[Delivered from the President's Office at 7 p.m.]
Good evening, my fellow citizens:
The Constitution of the United States states that on occasions the President shall report to the Congress on the state of the Nation.
I think it is also important that the President of the United States report to the American people because he is, with the Vice President, the only American official elected by all of the people in all of the fifty States.
Tonight I am going to talk to you about the American economy. I know that many of you have your eyes fixed in space and are interested and concerned about the extraordinary accomplishment of the Soviet Union in that area. I have said from the beginning that this country started late in the 1950's. We are behind and we will be behind for a period in the future, but we are making a major effort now, and this country will be heard from in space as well as in other areas in the coming months and years, but tonight I want to talk about our economy.
I know that statistics and details of the economy may sometimes seem dry, but the economy and economic statistics are really a story of all of us as a country, and these statistics tell whether we are going forward or standing still or going backward. They tell whether an unemployed man can get a job or whether a man who has a job can get an increase in salary or own a home or whether he can retire in security or send his children to college. These are the people and the things behind the statistics.
I have been in office now for a year and a half, 81 weeks. When I came into office in January 1961 this country was in a recession. We have made a recovery from that recession, but what we are concerned about now is where we have been, where we are now, and what we must do in the future.
First, where we have been: Tonight, looking back over the last year and a half, we can take some heart from these statistics and these gains which have been made.1 The gross national product, which is the story of all the things that we produce, has gone up 10 percent--over $50 billion in additional goods and services.
1A large chart, made up of several small ones and first referred to at this point, was used throughout the address to illustrate the President's comments.
The second chart, industrial production, which is the output of our factories, has gone up 16 percent in that period of time. The unemployment rate--and the unemployment rate is still too high--has gone down 23 percent in the last year and a half; and about a million people who were unemployed now have jobs.
The disposable personal income, which is the amount of income we have after taxes, has gone up $30 billion, 8 percent.
Wages and salaries have gone up 10 percent, $27 billion, and corporate profit after taxes since January 1961 have gone up 26 percent or a total of $10 billion.
So this is the story of our economic recovery. The pace thus far this summer, while not as good as all of us would have liked, has still brought further gains. Economic indicators which have been reported to me for July, which are just coming in now, do not warrant the conclusion that we are entering a new recession.
Pessimistic predictions to the contrary, the actual facts for the month of July, far from justifying a crisis atmosphere, show another new record high in industrial production, a new reduction in unemployment, and a significant rebound in department store, automobile, and other retail sales.
Employment and income have also continued to rise.
Looking ahead, moreover, there is every reason for confidence by the American people in the American system. American families are still spending a steadily increasing share of their personal income, which is steadily rising, to buy new cars and new homes and to enjoy a higher standard of living while continuing to put more money in the bank.
Our businessmen are investing more than they did last year, though not as much as we would like. While the sharp decline in the inflated stock market prices touched many homes directly and adversely, I think the stock market today rests on a sounder basis between the price of stocks and their earning potential than it did at the end of last year.
Our research laboratories are turning out new techniques and leading to new industries, and soon that crop of war babies, the boys and girls who were born during the war, the Second War and at the end of the war, will be going to schools and colleges and founding their own homes and buying their own cars, and helping to build our own prosperity.
Inflation, which is the archenemy of consumers and housewives, has not wiped out these gains. We have had in the past 18 months the best record on price stability that we have had since the end of World War II. And the additional $30 billion which we have here in this country in the last 18 months has not been robbed in any sense by an increase in the cost of living.
Inflation, therefore, remains no longer a serious threat. I think we can be proud also of balancing our international payments-at least the progress that we have made--but we still have some distance to go.
This [indicating on chart] is the amount of dollars in gold that we lose which affects our ability to maintain our security, commitments, and our troops overseas.
You will see that in the last 3 Years--1958, 1959, and 1960--the United States lost in dollars and gold nearly $12 billion. In 1961 that figure was cut sharply. The first half of 1962 we have had to cut still further, and we hope by the end of 1963 to bring our balance of payments into balance. Confidence in the dollar will be restored when we do this, and I think it will be obvious in the next 12 to 18 months, as I believe it is today, that the dollar is as good as gold.
All these things, of course, have been done by you and the support has been given by the American Government, but the major effort, of course, has been made in the local communities and in the States across the country. We have attempted to assist that recovery through new tax depreciation schedules so that business will invest more, which will make more jobs, to maintain industrial peace and collective bargaining, and we have had overall an extraordinary record in labor peace in the last 18 months and to encourage the increased participation in urban renewal and all the rest of the programs which bring prosperity to our country.
Finally, I think that you and I may have confidence in the long run strength of our economy because it is solidly built on the largest output, on the highest wages and profits and the most bountiful standard of living that any people have ever known.
Since the dark days when Franklin Roosevelt entered his office, we have constructed strong safeguards against depressions, against bank failures, against substandard wages and watered stocks, and widespread farm foreclosures. We know now much more than we did in the past about relieving the hardships of unemployment and about cushioning our economy against the business cycle. Every consumer and businessman in America listening to me tonight knows that he can safely spend and invest tomorrow with real confidence in the long-range future of the United States of America.
Nevertheless, of course, we cannot be cornplacent. I am satisfied with a good deal of the progress that has been made, but I don't think it is sufficient, and I am sure you don't either. I think we must strive to expand our economic expansion for the fact of the matter was that the economy in January of last year was sick, and it was sick not only because of the 1960-61 recession, but also because of the recession of 1958.
The fact of the matter is that there has been a slowdown in our growth and, therefore, in our employment, and therefore in our use of our present facilities, really since the beginning of 1957. We have had a 5-year period where we have been more or less standing still economically, at least in comparison to the countries of Western Europe and Japan. We have therefore been obliged to recover not only from the recession of 1960-61, but also from the recession of 1958.
And now we must be concerned with the forward movement of our economy. The level of our economy, as I pointed out today, is high but, considering all the resources which this country has, it should be higher. It should be at least $30 billion a year higher if we did not have unemployment and if we were using all the productive facilities that we had, $30 billion more we could produce.
Since January of 1961 that gap has been narrowed, but it could be and must be dosed altogether. We will not find full employment in this country, we will not find our factories producing at full blast, and we will not find businessmen investing in new factories until we make better use of the work force and the plants that we now have; until we have cleared away the effects not only of two recessions but 5 years of slow-down.
Employment, income, profits, construction, and investment must all move up more quickly than they have been doing this summer. And the greater wages and profits which full capacity could bring to all of our American citizens must soon replace the most extravagant waste, which is to have men searching for jobs which they cannot find and factories which have a percentage of their machines unused.
Therefore, I am asking your help, the help of the Congress and the American people, in pushing to enactment before adjournment those measures which I think would speed up our economy, which are designed to give us more jobs and more growth. There is still time to close this gap, and close it we must.
Specifically, I think before the Congress goes home in September, we should enact these measures: We need enactment of the investment tax credit which will stimulate business outlays for modern machinery, the kind of taxes which they have used successfully in Western Europe to stimulate their economy.
As we produce more, businessmen buy new machines. This makes for new jobs. Combined with our new depreciation allowances this should put us in a better competitive position.
Secondly, we need enactment of the bill to step up federal help to State and local public works, increasing this year the building of those products in parts of our country which most urgently need them, where there are many of our fellow countrymen out of work, and where there is a good deal still to be done. That bill has passed the Senate. I hope it passes the House.
Third--and I think this is most important-we need enactment of our bill to provide for youth employment opportunities. You know today that we have in this country one million boys and girls who are out of school and out of work. In the next 8 years of this decade, according to some predictions, we are going to have 8 million boys and girls who are going to leave school before they finish, and they are going to be around looking for work. They are going to be unskilled and they may have trouble finding jobs. The youth employment opportunities bill would give them a chance to work in our forests, in our parks, and I think it is better than having them standing on a street corner without hope. That bill awaits final action by both Houses of the Congress.
Fourth, we need to renew our temporary federal backstop to unemployment compensation. There are 100,000 men who want to work and can't find a job, who every month exhaust their unemployment compensation benefits. Then they have to look for public assistance in order to support their families and themselves. I think that this of the Presidents bill should be carried out before this Congress goes home.
Fifth, we need to enlarge our export markets through the trade expansion bill so that we can sell abroad, so that we can get into the great Common Market which is being built up, so that we won't have our money going abroad to invest in plants overseas but invest here in this country.
Then we need a bill to assist our schools and universities, a bill particularly for higher education. There are going to be twice as many of your sons and daughters trying to get into college in 1970 as in 1960--7 1/2 to 8 million. Our schools and colleges can't take all of them unless they begin a tremendous building program, and I think the national Government should play its fair part. Educated young men and women are our most precious asset. It is the key to economic and social advance, and I think that this is a most important piece of legislation.
The real key is the Congress, and this Congress has done more in the last 18 months to combat the recession and strengthen the economy than any Congress since the end of the Second World War. It has provided benefits for nearly 3 million unemployed men and women who were paid under last year's temporary unemployment compensation bill.
Seven hundred hard-hit communities are receiving area redevelopment assistance, communities where 10, 15, even 20 percent of the people were out of work. Four hundred thousand unemployed men and women are now receiving retraining so that they can find new work in new industries, in new jobs. More than 350,000 of our fellow Americans, men, women, and children, can get a more decent diet with the help of our new food stamp program. And 200,000 children of our unemployed workers now get welfare assistance. In the old days they got assistance only if the husband deserted the wife, and we had the experience of some of our unemployed workers who would desert their families in order to make their children eligible. That is no longer necessary.
Aid has been stepped up to nearly 3 million aged, blind, disabled, and dependent people on welfare and federal help has been made available to reduce their dependency. One hundred thousand men are retiring every year under Social Security at 62 instead of 65, therefore providing jobs for younger men. More than a6,000--and this program, I think, can be most important in the coming years--aged couples and individuals are getting help for housing, especially designed for the elderly. Railroad and bus and excise taxes have been repealed and other measures have been taken which help our urban renewal programs, our housing programs, and our small business.
Now all these are not merely statistics and recitations of legislation's. In Eau Claire, Wis., a veteran of 14 years on the assembly line of the Presto plant found his job discontinued and no new jobs around. He was 63 years old and men were not being hired. Under our bill now, he is able to retire and they are drawing under Social Security, he and his wife, over $140 a month.
In nearby Hagerstown, Md., we have had cases of individuals who were unemployed for many months. One of them I know of, in an airplane company, is being retrained as a machine tool operator, and we hope that he is going to be back earning and supporting his family again.
In Davy, W. Va., a young couple with only $100 a month have to feed eight growing boys. They regard the food stamp program as the salvation of their family budget.
In Carbon County, Pa., 52-year-old George DeMart could no longer--and this is true of many Pennsylvanians and Southern Illinoisians, Kentuckians, West Virginians, and Ohioans--could no longer find a job in the coal mines to support his family. Last November his unemployment insurance ran out. Our federal supplemental benefits, however, paid him benefits for 3 additional months. Our retraining program then taught him new skills of a welder. A trailer company newly located in Pennsylvania, with the help of the Area Redevelopment Office, has him gainfully employed tonight on a night shift.
All these strands of administrative and legislative action have one common purpose, and that is a purpose of job and growth, strengthening the economy of our Nation, making the most of our machines and men, refusing to be satisfied with the status quo.
It is because in other years similar actions were taken under President Roosevelt and others that it was possible for us to move ahead in the period since the war. We also have to move ahead, and I know that there are those who oppose all these moves as they opposed moves in other days much as they opposed social security, much as they opposed minimum wage, much as they opposed a ban on child labor and, more recently in the Senate, medical care for the elderly.
This country would still be in the dark ages economically if we permitted these opponents of progress and defenders of special privileges and interests to veto every forward move. But the President of the United States, I believe, and the Congress and all of us must be committed to action in our time. Other Congresses and other Presidents were committed to other action in their time. And I do not believe that we should let the pressures from any special group or area stand in the way of fulfilling our promises in the 1960's.
I want to make it clear that we are not talking about federal spending getting out of control. On the contrary, we are attempting to provide a dollar of service for the dollars that we spend to close down those installations and activities that are not essential.
Secretary of Defense McNamara has estimated that he can save $3 billion a year in the Department of Defense by new economy moves and other departments are going to make similar efforts, and all requests for funds are going to be very sharply judged in this office.
I am urging the Congress, moreover, to end the postal deficit of $600 million a year--that bill has passed the House; it is now in the Senate--to save $1 billion a year on farm surpluses, of which we already have today $9 billion stored away while maintaining the farmers' income, and to close those tax loopholes enjoyed by a comparative few that will otherwise cost the taxpayers of the United States a billion dollars annually.
The true test is, are we spending the least amount that is consistent with our necessary national goals? I take some pride in the fact that we kept last year's deficit well below that incurred in the recession of 1958, and reduced the actual burden of the national debt in relation to the Nation's output.
This chart shows that because our wealth has increased, the percentage of our debt to our wealth has substantially gone down since the end of the Second World War and is being steadily reduced.
In 1945 our national debt was about 120 percent of our wealth. Now this country's economy has gone forward so fast that it is 60 percent and it will be steadily reduced in comparison to our gross national product.
The administration increases in expenditures have been primarily in the field of national security, defense and space and human welfare. No increases are planned beyond those we have submitted to the Congress, but those are important, and I want to make it clear that we will have no hesitancy in doing whatever must be done to meet our obligations to the Nation.
The single most important fiscal weapon available to strengthen the national economy is the federal tax policy. The right kind of tax cut at the right time is the most effective measure that this Government could take to spur our economy forward. For the facts of the matter are that our present tax system is a drag on economic recovery and economic growth, biting heavily into the purchasing power of every taxpayer and every consumer.
During the last 15 months, for example, of the current expansion in our economy, federal purchases have added $7 billion to the economy, but federal taxes have siphoned out $12 billion. It is estimated that at full of the Presidents employment our federal tax system, if all of our people were working and all of our factories were working full time, that our present budget tax system would bring in a $7-or $8-billion surplus, far too heavy for the purposes of curbing inflation and far too heavy to encourage investment and enterprise and risk-taking which make jobs and which make growth.
Our tax rates, in short, are so high as to weaken the very essence of the progress of a free society, the incentive for additional return for additional effort.
For these reasons, this administration intends to cut taxes in order to build the fundamental strength of our economy, to remove a serious barrier to long-term growth, to increase incentives by routing out inequities and complexities and to prevent the even greater budget deficit that a lagging economy would otherwise surely produce. The worst deficit comes from a recession, and if we can take the proper action in the proper time, this can be the most important step we could take to prevent another recession. That is the right kind of a tax cut both for your family budget and the national budget resulting from a permanent basic reform and reduction in our rate structure, a creative tax cut creating more jobs and income and eventually more revenue. And the right time for that kind of bill, it now appears in the absence of an economic crisis today-and if the job is to be done in a responsible way--is January 1963.
Such a bill will be presented to the Congress for action next year. It will include an across the board, top to bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand. And it will date that cut in taxes to take effect as of the start of next year, January 1963.
The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy.
Instead of being permanently saddled with excess plant capacity and the budgetary deficit that is created by this means, our goal must be fuller capacity and full employment and the budgetary surpluses that that kind of employment and capacity can produce.
By removing tax roadblocks to new jobs and new growth, the enactment of this measure next year will eventually more than make up in new revenue all that it will initially cost. By lightening tax burdens as the Common Market countries have done so successfully--and they have full employment and an economic growth rate twice ours-it will improve the competitive position of American business, encourage investment at home instead of abroad, and improve our balance of payments and will help make us all--individuals and as a nation--help us make the most of our economic resources.
The leaders of both houses and the Chairman of the House Ways and Means Committee, Congressman Mills, have assured me of their cooperation in steering such a bill through the legislative mills with sufficient speed to make the January 1 date effective and make it possible and meaningful. And I am certain that such a measure will be supported by the clear-cut economic evidence by Americans in all walks of life and by a majority of both Houses of the Congress.
Let me emphasize, however, that I have not been talking about a different kind of tax cut, a quick, temporary tax cut, to prevent a new recession. Under the right circumstances that is also a sound and effective weapon, but like many weapons it should be fired only at a period of maximum advantage.
Timing is of the essence, and in the absence of a clear and present danger to the American economy today I believe the American people are willing to bear the burdens of freedom and progress, to face the facts of fiscal responsibility and to share my view that proposing an emergency tax cut tonight, a cut which could not now be either justified or enacted, would needlessly undermine confidence both at home and abroad.
But let me make this clear: if more time should prove that this kind of a tax cut is necessary later this year, I will not hesitate to request it and to call Congress back into session if that should be necessary.
My fellow Americans, this administration is pledged to safeguard our Nation's economy. It is a vital matter to all of us. Upon it depends our individual well-being and the well-being of all the countries that so greatly depend upon us. I believe that it is necessary for those of us who occupy positions of responsibility in the National Government, in the Congress, and in the States and all of us to work together to build an economy which can sustain all of the great responsibilities which have been placed upon it; where men can work, where businessmen can invest with hope in the future; where housewives can purchase with due regard to the security of their dollars. I have confidence in that kind of an America, and I think--working together--we can bring it about.
We have made progress in the last 18 months, but much remains to be done. I believe it is important that this country sail and not lie still in the harbors. Great opportunities lie before us and great responsibilities have been placed upon us. I believe we can meet them. We have in the past, we are going to today, and I know we will in the future.
Thank you very much, and good night.