PR #14

20

should participate in this conference, and that there should
not be preferential membership -- we would be prepared
to carry out what I said in my Pilgrim speech, that it is
up to the European Community to decide the form and nature
of its participation.

Thirdly, after the conclusion of the meeting
of the consumers, we would be prepared to extend an
essentially open-ended initiation to other interested
parties, to participate in those fields of the work of
the consumers, and consumers and producers, that is
appropriate to them.

We have no intention here of producing a closed
club. But it is important to point out that the nations
that are invited between themselves represent seventy-five
to eighty percent of all the energy imports in the world
which is going to be one of the chief topics.

Let me turn over here.

Q Mr. Secretary --

SECRETARY KISSINGER: I'm so terrified of
Mr. O'Leary that I am ready to recognize him. Go ahead.

Q Mr. Secretary, you spoke earlier of, if need
be, using the strength of our economy and our political
strength. What forms of political strength do you have in
mind?

SECRETARY KISSINGER: First, when you talk about the strength of the economy, it is clear that if the balance of payments situation is as we described it, that we could withstand competitive bidding better than some other nations. Secondly, since we have long-established political relationships with many of the producing countries, we are not badly placed to deal with those countries in a bilateral context.

I repeat, however, that this is not our preferred solution. That the temporary benefits that one would gain by this approach would in the long term damage even the United States.

Q Mr. Secretary, Secretary of Defense Schlesinger the other day suggested that the energy crisis might produce pressures to use force to get oil. How serious do you consider the dangers of countries going to war over oil?

SECRETARY KISSINGER: Well, as I understood Secretary Schlesinger, he was explaining theoretical situations that might arise if the squeeze became excessive. If I understand him correctly, he also pointed out that this point had not yet been reached. So it is hard to answer your question.

But why don't we save the purely foreign policy

PR #14

questions for a little later?

Q Mr. Secretary, are you convinced that it will be necessary to roll back oil prices which have already been announced in order to prevent a world-wide depression?

SECRETARY KISSINGER: Well, all of the economic experts that have studied the problem believe that the bill, as it stands now, cannot be paid by most of the countries concerned. Now, what the remedy to this is, whether it is a reduction of prices or some other method, I think I would like to defer the answer on that until our own studies have been further advanced.

We hope to put forward some suggestions at the meeting in February. But we have not been able to come up with any conclusive answers ourselves -- unless Mr. Simon is hiding them from us.

Q Well, I would like to hear what Mr. Simon thinks about this.

MR. SIMON: I think that, as I said, the long-term interests of the world are best served in a world economy that is healthy. And one must gauge the impact of these prices on the world economy, and it must be done on a country-by-country basis. As the Secretary says, these

studies cannot be done overnight. Before we gauge the
impact to see whether or not we must roll back these prices,
we have to complete this work. And it will be completed
before the conference.

SECRETARY KISSINGER: Marvin.

Q Mr. Secretary, I was going to ask you,
at the last news conference you said that you were not
increasingly irritated by the continuing embargo. And yet
some people might draw that conclusion from your comment
today, from perhaps the indirect comment of the Defense
Secretary a few days ago, the Vice President a few days
ago. And I was wondering whether there is here an attempt
to orchestrate what might be interpreted as a national
threat, and if that is the case, what kind of threat?

SECRETARY KISSINGER: Well, all of you who know
the essential equanimity of my nature would find it
difficult to believe that I would be irritated.

Of course, our government is convinced, as
I have pointed out at every press conference that I have
held on this subject since November, that we understand the
reasons that led some producing nations to impose an
embargo at a time when they perceived us to be taking
sides in a military conflict in which they were engaged.

PR 114

(cc)

24

At the same time, since we were the country that played a principal role in ending that conflict, since we are the country that, after the end of that conflict, has made the major effort to promote a just and lasting settlement, and to produce whatever progress has been achieved in the negotiations, or contribute to producing it, we believe it is inappropriate to maintain the postures of confrontation that existed before. This reflects no irritation. It reflects a statement of our conviction. And since the various parts of our government are obviously in communication with each other, it should not surprise you that the various members say essentially the same thing.

Mr. O'Leary.

Q Mr. Secretary, you have spoken about the pitfalls of bilateral arrangements. Some nations have already taken care of their bilateral requirements, notably France. What makes you think France has any interest at all in whatever you might have to say to them on February 11 or beyond, and what kind of cards do the industrial nations of the world really have to play in the decade ahead against the countries that have the oil that we are not at this moment prepared to share with them as we will

25

(10)

later?

SECRETARY KISSINGER: Well, Mr. O'Leary, I don't believe that it is correct to say that France has taken care of its needs. France has made an arrangement for a small part of its needs on a bilateral basis. And other nations no doubt may make bilateral arrangements.

Our point is that an unrestricted bilateralism is going to be counter-productive for all the countries concerned, including those who may steal a march on some others on a temporary basis by making this or that deal. The conditions which I described of unrestricted competition cannot be avoided by unilateral efforts. And therefore the challenge to the statesmanship of all of the consuming nations is whether they are able to recognize this fact -- because if not reality will impose it on them.

It is not an American proposal for our own selfish benefit. Indeed, any country can probably gain in any six-months period some temporary benefits for itself. But over a five-year period, the result of such a course, if adopted by everybody else, would be extremely unfortunate, including for the countries that seem to be gaining a temporary advantage.

Now, as for the relationship between the consumers

and the producers -- I believe that a considerable number of the producers realize today that it cannot be in their interests to bring about a world-wide economic depression. That if they are to benefit from the resources which they control, it must be within the framework of a healthy world economy. And one interesting result of our initiative has been that no producing nation has yet expressed the slightest opposition to it. And several producing nations indicated that they support the concept of consumer-producer meetings in order to lay out the long-term goals of energy policy for both sides.

Under the present framework, the producing nations are forced to look only primarily at their short-term problems and they have to assess them in terms of the immediate supply and demand situation.

If there was some assured demand over a medium-term future and if the producing nations had some assurance and understanding of what is ahead for them, they could make their price decisions on a much more long-range basis. And therefore what we are producing is not intended as a confrontation, but it is intended to permit a rational consideration of issues in which the long-term interests of the consumers and producers are not necessarily divergent.

Q Mr. Secretary, you originally started
with the premise of beginning this process with a meeting
of producing and consuming nations. Could you tell us, sir,
what happened to that original concept? Are the Arab
nations now holding off from this process until there is
further advancement in resolving the Arab-Israeli conflict?
And thirdly, can you be any more precise about the sequence
of conferences that will take place after the initial meeting
of the consuming nations?

SECRETARY KISSINGER: First, Murrey, the original
proposal did not go into any detail as to the sequence
of moves. But I can assure you that it was always the
President's intention to follow the sequence that we are now
proposing. So there has been no change in the concept
between the Pilgrims speech and the formal letter that the
President sent yesterday to the consuming and producing
nations.

Secondly, no producing nation has linked
its response to a further evolution of the Arab-Israeli
negotiations. And we believe that this linkage
would be irrelevant to the basic problem. But there is
no sense commenting on it, since no nation has made this
linkage.

Q Dr. Kissinger, what will you do if the
Arabs refuse to come?

SECRETARY KISSINGER: What was the last part of the question?

Q The remaining part was how do you envision the process going --

SECRETARY KISSINGER: Oh -- how do we envision the process. We envision that the consumer-producer conference will meet within three months of the original consumer conference, and that the other consultations with developing consuming nations and other interested parties will take place between February 11 and the time that the consumer-producer conference takes place, which we will propose should be no later than three months after the original proposal.

What do we do if the producers don't come?

Q Yes.

SECRETARY KISSINGER: Well, then we can't
have a consumer-producers conference. (Laughter)

Clark.

Q In the light of the admitted disasters of the wheat deal, and also in the light of the talk of one-dollar bread, and the Agriculture Department posturing itself

PR #14

to become an importer of wheat, what confidence can the
American people have of the representatives of the United
States not being caught in another rip-off for the
consumers and taxpayers?

SECRETARY KISSINGER: Well, Mr. Mollenhoff,
in order to answer that question, we would have to have a
long discussion of the structure of the wheat deal, and what
produced it. But the short answer to your question would
be this. The wheat deal was the result of certain
assumptions about the nature of our surpluses--certain
lack of information about the nature of the purchases that
were being made. And it is precisely to avoid having to
make decisions on the basis of inadequate information
and inadequate understanding of the future that we are
proposing an approach which takes a comprehensive look at
all the factors involved, and which would reflect the
basic necessities of the American people as well as
of the rest of mankind.

Q In the initial wheat deals you were
relying to a large degree upon the wheat and the international
grain trade, as I understand it, plus the Agriculture
Department. Do you have any reason to believe that you
will get straight figures from the oil industry which

PR 44

30

provides most of the figures we have in this country at this
stage?

SECRETARY KISSINGER: Mr. Mollenhoff, it is difficult to compare a one-time negotiation, which was on a scale that was unprecedented, and therefore which the existing framework could not handle, with a long-term, generic problem that will be with us for decades. We have every confidence that for the sort of enterprise that we are now proposing with respect to energy, it will not fail for lack of correct information. It may fail for lack of wisdom and for the inability to develop a long-range view on the part of all the components that are involved internationally.

But with all respect, I would say there is no comparison between the long-term energy problem and a one-time wheat deal.

Q Are you concerned about the wheat importation situation --

Q Mr. Secretary, could I ask you to clarify something that was asked, I think, in the first question. Let me be more specific. To what extent are the major oil companies to blame for our current pricing problems?

SECRETARY KISSINGER: I have to let Mr. Simon answer this.

31

MR. SIMON: Basically their arrangement has been changed and changed quite often over the past few years. It is a feeling on the part of the nations of the Mid-East that they have sold their oil too cheaply, and indeed as we move into different arrangements -- we use the term "negotiations" in Vienna; I suggest that is a dignified term for the demands, if you will, for higher prices. They are just announcing higher prices, what they are going to demand. It is not the 25 percent equity any longer. But obviously they are going to demand a majority interest in the oil in the ground. They are also, because they own 67 percent of the world's proven reserves -- they believe that they can now make up for oil looking back. And anyone who looks back on a market can understand that maybe he would have done things differently. That they will indeed charge a price for it. And that is what is going on.

As far as the specifics of blaming the oil companies, that is a very popular game everyone is playing today. We are in the blame syndrome now -- let's find out who is to blame and let's hang him. And I will suggest that over the years -- and you can go back to the Paley Commission in the Truman Administration, who warned of

PR #14

(le)

32

this impending crisis -- you can go back for the past
five years, or just the fourteen months I have been in
government, as chairman of the President's Oil Policy
Committee, warning of this impending crisis -- forgetting
the embargo. That we are looking back on a period where we
had a low-cost abundant energy base. We are now in a
high-cost scarce energy base. And our alternatives right
now to the economic and political blackmail -- importing
today six-and-a-half to seven million barrels a day,
if indeed the embargo were over, to upwards of ten
or twelve million barrels per day, by the end of this
decade, and being subject to whatever price perhaps they
wish to put on it.

Q Mr. Simon --

MR. SIMON: We have the alternative to bring
on at a reasonable level alternate sources of energy
in this country to give us the ability for self-sufficiency,
thereby removing a demand from the rest of the world for
this oil, and removing a pressure from the marketplace.

PR #14

33

Q Mr. Simon, you described a "game" that everybody is playing. Could you be more specific about this game, whether we're trying to find who's at fault and trying to hang him?

MR. SIMON: Well, I can --

Q Are there any other examples in this game that you can give us?

MR. SIMON: No. As I say, we're all looking for the scapegoat right now. And I can go back, sure; and I'll go back and point to various Government actions and inactions over the past 20 years that have created the economic disincentives, if you will, for the oil industry to do exactly what's happened internationally, as far as drilling in the Middle East is concerned. You can go back to the Phillips Decision of 1954 on the regulation of natural gas. And how this discouraged necessary exploration and production in this country. On the environmental impacts, on the mandatory oil import policy that acted as a disincentive to building needed refinery capacity -- the Clean Air Act and need for implementation of the primary and secondary standards -- it is for many reasons.

I'm not saying that the oil industry should have

PR #14

34

had a little bit more responsibility. Fine, they
should have. And we're going to look at the specifics
of that. But let's not say that it's been just
one thing to blame; there are a whole series of events.

Q Mr. Secretary, at this stage, is it still
possible to enlarge the 11th February conference
beyond the eight invited countries, or would you rather
tell other interested consumer nations to join later on
in the working group level?

SECRETARY KISSINGER: Well, as I pointed out,
we are prepared, if the European Community would
prefer this, to have the nine members of the Community
participate, so that it would not appear as though we wanted
to make a distinction between the members of the European
Community.

Beyond that, we believe that it would be most
efficient if the future participation were at the
working group level and at other conferences that will
develop out of this, such as between the developed consumer
nations and the developing consumer nations -- and, of course,
the consumer-producer conference that will take place
later on.

35

Q Mr. Secretary, you mentioned some figures
in your answer a moment ago of restoring our delivery of
oil to 6 and 1/2 to 7 million barrels a day.

MR. SIMON: That's what our estimates
are, as to what the demand would be now.

Q In the future it's 10 million as compared
to 2, 2 and 1/2, that we're bringing in now.

Could you appraise for us quantitatively or
qualitatively how much of a difference it would make for
us to have the Arab oil embargo lifted on this nation's
economy?

MR. SIMON: Well, right now, as I've said many
times right from the first press conference -- which
was shortly after our figures were published, as far
as the extent of the shortfall -- and let's get a real
handle on that right at the outset, because there's a
great deal of problems with that favorite word of
"credibility" today on the extent of the shortfall --
in the job which we have of managing a shortage, rather
than just forecasting what the shortage may be, we can
gauge, and we can gauge with hard numbers, the exact
amount of oil, assuming an effective embargo, that we are not

PR #14

36

going to bring into this country. And that is the number
that we use if we are going to responsibly manage
this shortage -- manage it to the extent that industry
and jobs and employment in this country aren't going
to suffer unduly.

Fine -- it's going to have economic impact.
Then we take a look at the variables, and the variables
are obviously weather. And we've had a great break
in the fourth quarter of 1973 on the weather, and
that took care of reducing demand. Then our conservation
measures reduced, and that helped. There was leakage
in the embargo, which many people predicted -- although
the extent of the leakage is extremely difficult to
predict.

So all of these variables move into play
to reduce the shortfall; and this is where other people,
utilizing some of these assumptions -- they say, "The
shortfall won't be that bad; the Government's wrong."
Well, we're not wrong. We believe it won't be that
bad if the American people do their job. But I can't bet
on jobs in this country -- and the comfort and health of
the American people -- by betting these variables are going

PR 524

37

to work to this, that or another extent.

As I've said from the very first day, with
a nation -- 6 percent of the world's population ---
utilizing 35 percent, we waste almost as much as we use.
Some estimates show we waste between 30 and 40 percent
of our energy utilization. We can make up this
shortfall with simple changes in our lifestyles.

Now, these aren't going to be done overnight;
we understand that. Industry can do a great deal, and
they are doing a great deal overnight. We obviously
can't stop driving some of the gas-burners we all
drive around today; but we can drive them less, we can
drive them slower. There are many things we can
do. And I think the figures we put out every week show
that we are reducing our demand and we're moving toward
the elimination of this shortfall. Whether we make it
or not is uncertain, and for that reason we recommended
to the President that he put the rationing program
into effect [on a contingency basis].

SECRETARY KISSINGER: Since Mr. Simon is obviously
gaining on me and since this cannot be permitted in
this building --

(Laughter.)

TR #14

38

-- we'll have -- sit down for a minute, Marvin; I'm in the middle of a very important announcement!

(Laughter.)

MR. SIMON: Can I hold a separate conference outside? Did they shut my microphone off?

(Laughter.)

SECRETARY KISSINGER: Since, in fact, we're going to open the trap door under Mr. Simon!

(Laughter.)

Just a minute -- we'll take one more question on energy, and then we'll take a few questions on other aspects of foreign policy.

Q Mr. Secretary, I think you've already implied the answer to this question; but I wonder if the United States is prepared to set kind of a moral lead by foreswearing any kind of bilateral advantage in the immediate future.

SECRETARY KISSINGER: The United States will make proposals at the conference that will start on February 11th which will reflect the philosophy that I have described here, and I'm not aware of any bilateral

PR #14

39

United States deals that are in process between now
and February 11th.

And, now, should we switch to questions on --

Q John, do you have a question?

Q Mr. Secretary, you recently have just had
discussions with the Japanese Deputy Prime Minister.

SECRETARY KISSINGER: Yes.

Q Now, there's a little doubt in the minds
of some of us who talked with some officials later
as to whether or not they were going to go along
wholeheartedly with the U. S. initiative. Now, I'm
wondering what role you feel countries like Japan -- who
are so vulnerable to the need for oil in
Arab demands -- can play in the type of initiative
that you have in mind.

SECRETARY KISSINGER: Well, it is my understanding
that the Japanese Government is meeting today to decide its
answer to the President's letter. And I don't think
that I should prejudge what the answer of the Japanese
Government will be.

Our proposal is designed to enable the
Japanese Government, as well as all other invitees, to

PR #14

40

meet their energy needs over the indefinite future.

Each government concerned will have to decide for itself
whether by participating in an examination of its long-
term problems it is jeopardizing its short-term situation.

We do not believe that this is the case. We are making this
proposal precisely to reduce, and in time to eliminate,
the insecurity under which particularly those countries
suffer that import a much larger percentage of their energy
than we do. But I cannot predict what the Japanese
reaction will be.

Q If the non-members of the Community
want to attend? You didn't mean to single out certain
ones? And in your Pilgrim speech you said the Community
might decide to participate with one voice. Would that
still be welcome in the February 11th conference?

A We will leave it to the Community to
decide the form of its participation; yes.

Q Mr. Secretary --

PR #14

41

Q -- you are going to leave for Egypt
at midnight --

A So are you.

(Laughter.)

Q -- and then go to Israel and go back
to Egypt. And that schedule suggests that you expect to come
home with an agreement. Is that the case?

A No. What we expect to do on this
trip is to see whether we can transform the general ideas
that have up to now been advanced into a concrete proposal.
And we hope that when such a concrete proposal exists,
it will lead to a serious negotiation between Egypt and
Israel on the issue of the separation of forces. Therefore,
if the Israeli Cabinet decides after my first visit there
to make a proposal, we will be prepared to take it to
Egypt. But the more likely outcome of this would be not
that there would be an agreement but that there would be
a negotiation which would be conducted at Geneva.

Q Mr. Secretary, isn't there a danger
of an overplaying of your own role in this? If the
effort, as you've described it from the very beginning,
is to induce the parties to come up with their own
settlement, is there not the danger, by your going back time

PR #14

42

and again, that you become too fixed an element
in the negotiation and deprive the parties of the
chance to negotiate themselves?

A Well, this particular trip was
made at the request of the parties and not at our
initiative. And, therefore, while the basic
consideration is valid, in the crucial initial phase --
where confidence has to be built and where a process
has to be started -- we would think that it is
most important to get the progress made.

Once the initial phase is behind us, then
we believe that the negotiation should be conducted
at Geneva and that higher level participation should
occur only when there is an overwhelming deadlock.

Q Sir, it's become more or less enshrined
in the press in recent weeks that the Israelis have
proposed a withdrawal to a line about 20 miles east
of the Suez Canal in return for a thinning out of
Egyptian troops. Is this the kind of proposal you'd be
bringing to Aswan?

A Well, I'm not bringing, on my first trip,
any particular proposal to Aswan. What I intend to do is

PR #14

43

to discuss with President Sadat his ideas, to give
him my impression of some of the general Israeli
ideas; and any specific proposals would have to await
a decision by the Israeli Government, as the Israeli
Ambassador pointed out yesterday.

Q Mr. Secretary --

A Let me get questions over here (pointing).

Q Sir, if I could return for a moment to
your energy proposal, you said that the object of the
series of meetings would be to establish -- a "framework"
was the word you used -- for solving these problems
between the developed industrial nations which need
the fuel and the nations which have the fuel that are not
developed. Essentially, that's it.

Now, perhaps "framework" is a term of the art;
and I don't cover the diplomatic circuit. But what kind
of a framework are you talking about -- some sort
of series of actual agreements among nations on the
world economy? And, if so, is there any precedent in
past diplomacy for such a broad, all-encompassing
approach to the entire world economy?

PR #14

(cc)

4j

A There is no precedent in past diplomacy for this particular approach, but there is also no precedent in past diplomacy for this particular problem. What we are talking about is a series of agreements or understandings in a series of related areas, areas of sharing of technology, of determining the nature of the demand, of the concept of measures that can be taken with respect to the conservation of energy resources.

Other problems -- there are other problems to which we frankly haven't even the beginning of an answer -- such as, what happens to the consuming developing nations that we used to think were in need of substantial aid flows, where all of the aid flows have been outstripped in one afternoon's decision by the price increase that has been imposed on these countries by the producing nations. The balance of payments issues that I raised with you have now been understood in terms of numbers, but in terms of solutions we have frankly not come up with any answers that we are as yet prepared to put before other nations.

Moreover, we do not believe that we alone have the obligation to come up with all of the answers. We are inviting the other countries concerned to share with us their thinking on a problem that after all concerns them

PR #14

at least as much as us.

Q Mr. Secretary, the Egyptians expressed concern that a disengagement agreement would simply result in a freezing of another cease-fire line in the Middle East. Do you share that concern? And if so, are you seeking assurances from Israel that political talks will take place and will lead to further Israeli withdrawals?

A It has always been understood that disengagement would be the first phase in a process towards a final settlement and that negotiations towards that final settlement would continue. And that is the American position, and we believe that it is the position of the parties concerned.

Q Mr. Secretary, could you tell us what has been accomplished in talks between Panama and the United States in the last couple of days that didn't exist before? And whether this involved the Panamanians accepting -- agreeing to some principles that we proposed, or vice versa, or both?

A As in all negotiations, the progress reflected a modification by both sides of some of the positions they previously held. I think substantial progress has been

PR/M

46

made towards a statement of principles which now have to
be filled in by concrete negotiations. But since those
principles are still ad referendum, which means that they
still require the approval of the governments concerned,
I don't want to go into greater detail.

Q Mr. Secretary, you made very clear at the
beginning of the press conference the principles of world
interdependence. You also made very clear the basic necessity
of fuel, like food and water, which all nations need.

Now, aside from any theoretical propositions
to which you referred earlier, inasmuch as these are very
basic needs, would you foresee that failure to recognize
the principles that you outline here today, could eventually
lead to hostilities for the very basic things of life?

A Well, I don't want to predict exactly what will
happen if the shortsightedness of man should triumph over
his clear necessities, but obviously it will be a much
more tense, and extremely competitive world that would then
emerge, in which collaborative relationships in many fields
would severely suffer.

Q Mr. Secretary, yesterday the Cuban Ambassador
in Mexico said that talks with the United States would be
possible if the U.S. agrees to lift the economic embargo.

PR #14

47

Now some have interpreted his remarks as one
of the mildest yet coming out of Cuba, or from a Cuban
official. How do you see his statement?

A Well, I have not had an opportunity to analyze
all the subtleties of the statement. Our position is
that our objection to Cuban policy has concerned its
attempt to export its revolution to subvert existing
governments in the Western hemisphere. Our attitude would
be subject to change if Cuba pursued a more restrained
international course.

Q Thank you, Mr. Secretary and Mr. Simon.

[The briefing terminated at 3:36 p.m.]

NEWS
RELEASE

BUREAU OF PUBLIC AFFAIRS

Department of State
Office of Media Services

Press Conference
GLOBAL ASPECTS OF ENERGY CRISIS DISCUSSED
BY SECRETARY KISSINGER, WILLIAM SIMON

FOR IMMEDIATE RELEASE

Press conference by Secretary of State Henry A. Kissinger
and Federal Energy Administrator William Simon, in the
International Conference Room of the Department of
State, January 10, 1974.

SECRETARY KISSINGER: Well, I wanted to welcome His Majesty, the Energy Czar, to the State Department. We will do this press conference in two parts. I will talk about the foreign policy aspects of the President's letter to the consumer nations and also to the OPEC members, and Mr. Simon will discuss the relationship of this initiative to the domestic energy concerns, and we will both take questions on that subject. Then, at an appropriate point, we will switch to other foreign policy subjects which I alone will answer, Mr. Simon. (Laughter.)

MR. SIMON: I can understand that, because at the appropriate time, Mr. Secretary, you will press a button and I will disappear into the ground. (Laughter.)

SECRETARY KISSINGER: So, let me discuss the philosophy and intention behind the letters which the President has sent yesterday to the consuming nations, as well as to the members of OPEC.

It is the President's conviction that the energy crisis reflects a basic problem for the entire international community for the foreseeable future, that today concerns energy, but that in the future may concern other raw materials or foodstuffs where incentives for supply are out of proportion to the demand.

We face two major problems in connection with energy.

One is that demand has far outstripped incentives for supply. The second is that the rise in prices that has been decided upon by the OPEC countries recently, and the pattern that may be established as a result of this, may have a revolutionary impact on the world economy, affecting balance of payments of all of the advanced as well as the less developed consuming nations, and creating a situation in which the producing nations as well can become victims of their own actions, and in which there exists as of this moment no framework in which comprehensive long-range decisions can be taken.

If anything was needed to illustrate the interdependence of nations in this world, it is what has happened in the field of energy.

-2-

No single country is capable of solving the problem by itself. Indeed, no group of countries as between consumers and producers can solve the problem by themselves. And therefore we feel very strongly that what the President has proposed should not be seen as a confrontation between consumers and producers; rather it should be seen as creating a framework within which decisions can be taken by both consumers and producers that take into account the long-term necessities of both sides, and that can assure a constructive evolution of the world economy and of international relations, and can prevent certain very dangerous and potentially catastrophic consequences.

We are proposing to proceed in two or three stages.

The invitation to the Foreign Ministers Conference on February 11th was addressed to the nations comprising the high level oil committee of the OECD. They are the nations that import 75 to 80 percent of the world's energy imports. They are the nations that have worked together on that committee to take certain emergency measures.

The President has proposed that the meeting be moved to the Foreign Ministers level, because the issues that have been raised, both on the supply side as well as by the increase in prices, now far transcend the technical issues that are normally involved in simply allocating available energy sources.

However, we view this meeting as a prelude to a discussion with other consuming nations, especially consuming nations from the less developed parts of the world, who have been even more profoundly affected in terms of their capacities by the recent price rises than the developed nations. Our estimate is that their bill may approach $30 billion, which, of course, far exceeds any of the aid flows that anyone has ever projected, and indeed makes the whole international aid program a problematical and different exercise compared to the additional exactions that have been imposed on these countries.

And we will move from there, with the agreement, of course, of the countries concerned, to a meeting between consumer nations, both developed and less developed nations, and the producing nations, in order to assess and to develop a pattern of supply that is just to the concerns of all of the countries concerned, that will produce prices that are sustainable over an indefinite future, and that will discuss the impact on the world economy in which all of these nations will live, of the energy needs on a global scale.

At the meeting of the consumers, the first task will have to be to see whether we can come to an agreement about the nature of the problem that is facing us -- whether the consuming nations can agree between themselves about the impact of the supply situation on their economies, and the necessities that are produced for all of their economies by the prices that now exist.

We believe it is important that we will discuss together alternative sources of energy, efforts to pool the research and development efforts of the major consuming countries, and attempts to share between the major consuming countries the energy sources that become available as a result of these efforts.

Therefore we believe that it may be appropriate that working groups be formed to study these problems, as well as the international economic problems that are raised by the present patterns. And Secretary Shultz will raise some of these issues at the C-20 meetings that he is attending in Rome next week.

Now, we are aware of the fact that there are temptations towards bilateral arrangements. And we, of course, are in the best position of any consuming country to engage in bilateral efforts on our own. We have sub-

-3-

stantial sources of energy in our own country. We have large capabilities for research and development. And we are in possession of much of the advanced technology that is necessary in exploring the sea beds, for example.

Nevertheless, we believe that unrestricted bilateral competition will be ruinous for all of the countries concerned, and that the seeming victories that can be achieved will be at the cost of world stability and of the world economy. And therefore, even though we have the capability to withstand it better than any potential competitor, we believe that it is essential for all of the developed countries to understand that we are now truly interdependent, and that it is a problem that must be solved on a common basis if we are not going to suffer very severe consequences for international stability and for the international economy.

We also, in the developed nations, have a special obligation towards the consuming developing nations, so that as a result of the situation that has developed so suddenly, the hard-won gains of 20 years of effort are not dissipated, and the international efforts to bring about a greater equality between the developed and less developed nations are not destroyed as a result of decisions that certainly did not take all the consequences into account.

So, as far as the consuming nations are concerned, the energy situation, and what it portends for the future, will be a test of the whole approach towards the international system that we and other developing nations have pursued, and other developed nations have pursued towards each other, and towards developing nations for the last 25 years.

It is a test of the proposition that the world has become truly interdependent, and that isolation and selfish approaches must be destructive for all concerned.

As for the relations between the consuming and the producing nations -- the same is essentially true. In the framework that now exists, the producing nations have no alternative except to maximize their short-term benefits. There does not exist a framework in which they can assess the impact on them of the changes in the economies of the developed nations that are produced by the producing nations. And therefore, the evolution that the President is proposing, which seeks a greater understanding by the consuming nations of the whole range of their energy concerns, as well as of the impact on energy needs on their economies, provides also a framework within which the producing nations can guarantee to themselves the international stability within which alone the seeming benefits that they are gaining can be maintained.

The basic conviction of the President and of his associates is that it is a problem of truly global significance, in which selfish advantages cannot be attained, or if attained, cannot be sustained, either among consuming nations or between consuming and producing nations. It is in this spirit that the United States will make its proposals, first at the meeting on February 11th, and at the subsequent meetings that will, we hope, flow from that, and it will be in a spirit that we are constructing a solution for all of mankind, and not of particular benefit to any one segment of it, that the President has addressed both the consuming and the producing nations to start a process which we hope will provide long-term answers to the problem of supply, as well as to the problems of the economy.

Now, Bill, would you like to talk about the domestic side?

MR. SIMON: Basically, the energy policy of the United States, domestic as well as international, can be broken down into five parts.

From the domestic side, number one, we must establish a new energy ethic. We must reduce demand in this country, as you have all often heard me say.

-4-

With a nation that has six percent of the world's population and consumes 35 percent of the world's energy, we have been a nation of great energy wastrels. There is great waste in our consumption. This must be reduced. We must have this change in life-styles that I have spoken about so often.

A new government relationship must be forged with the domestic as well as international energy problem and energy industries. We must create this agency in government that brings together for the first time all components under one roof, so that we can more effectively deal with this problem.

Fourth, and most important, is what we like to call Project Independence. The energy problem, as far as the United States is concerned, is the most infinitely soluble problem in our country today. We have been blessed with a super-abundance of natural resources and technology. We have the ability to become self-sufficient. We are today domestically 85 percent self-sufficient in energy -- that other 15 percent is going to be achieved over the next decade-and-a-half.

And finally, this dovetails with what Secretary Kissinger has been explaining, international cooperation.

Our domestic goals are completely compatible with our international role of reducing demand, of the apportionment of critically short supplies, not only during short-term emergencies, such as this, but to deal with the long-term energy problem. And this problem is not going to go away, domestically or internationally, even after the embargo is lifted. This has been a problem that you have been warned about for years in the United States. The embargo is what brought it home. Demand continues to rise at 4 to 5 percent domestically. Our production peaked in 1970. Our exploration peaked in 1956. We have to get about the regeneration of our coal industry domestically, the utilization of oil shale-- a Manhattan-type project, or comparable to the synthetic rubber experience during World War II, to utilize the imagination, technology, and just great thrust of this free enterprise system.

Our technology -- we must work with other nations of the world in sharing our technology, the development with them of alternate sources of energy.

And, finally, world oil prices. Obviously, we must deal with these world oil prices, because the long-term interests of the world are best served by a world economy that is healthy.

I look forward to working with my colleagues in the State Department, in moving forward with the rest of the world, in solving this very difficult problem.

Thank you.

SECRETARY KISSINGER: If I can just add one point to what Mr. Simon said. As the United States achieves self-sufficiency in energy, and in time surplus, we are prepared, as part of these discussions with the other consuming nations, as well as with any other interested nation, to discuss sharing our energy sources, as they develop over the long-term future, and above all to share the research and development efforts.

Q Mr. Simon and Mr. Secretary, to deal with the present hard situation, the oil price squeeze, to what extent do you think the oil companies themselves have created a fanciful situation? Should they be implicated in our minds with the problems we are undergoing? I have heard no mention from either of you about the role of the oil companies in the future. How about the present, though? Is this oil squeeze some of their doing?

MR. SIMON: Actually, you did hear me allude in one of my five parts, as far as our energy policy is concerned, and that was the second part, the new government relationship that is going to be forged --that we are going to have to take a brand new look at what the government role is to be, internationally

-5-

as well as domestically, in our energy industry.

Q Are you including pricing, sir?

MR. SIMON: I would include pricing. I would include government nego-
tiation versus the way it is done now, in a company to government manner.
I would not preclude looking at absolutely everything, but would not give
you any final solution today until we forge this new role that government
is going to hold. Industry and government cooperation to bring on the al-
ternate sources of energy. There are many things that must be done.

Q Mr. Secretary --

SECRETARY KISSINGER: Peter.

Q How do both of you reconcile the statements of the President with what you have just said? The President said that we must become self-sufficient. And I think you, Mr. Simon, have said it often -- you have just said it -- so that we would not be subject to blackmail from foreign sources or dependent upon foreign sources. Secretary Kissinger says we are a world that is truly interdependent and we can't solve this problem alone. Now, how do you reconcile those two views?

MR. SIMON: Well, that basically -- Mr. Secretary, would you like to start? (Laughter)

SECRETARY KISSINGER: We can solve probably the immediate problem of energy by a unilateral effort, although it would still leave a gap of about five to ten years in which this fifteen percent shortage of which Mr. Simon spoke would exist. So when the President speaks of achieving independence, he is talking about the late seventies, early eighties. He is not talking of any short-term future.

Secondly, as I indicated in my presentation, we could probably achieve, even in the period between 1970 and 1980, a preferential position for ourselves by an exercise of bilateral diplomacy, using the strength of our economy and our political strength to achieve a preferred position with respect to energy. And it could be that we will be driven to this. But the intent to do so would heighten the difficulties of all other consuming nations in this interim period. And therefore we believe that as we achieve greater independence with respect to energy, we must let the other nations participate in this effort.

The problem of bringing in new sources of energy, expanding our re-
search and development, is not an effort which we should conduct, if we
have a choice, entirely by ourselves.

And therefore, while we can in time become independent, our preferred course would be to use our technological capability, to help solve the problems on a common basis, because if the economies of other nations -- if one looks at the statistics, for example, of the impact on the balance of payments of other developed countries of the price rises, they have a really revolutionary impact for the other countries; they have a relatively less decisive impact on us.

Nevertheless, if the economies of other countries are weakened, in
time the world economy will suffer. And therefore, we may bring about a
situation in which it will be demonstrated that no nation can prosper in
isolation.

Q Mr. Secretary, do you have any hope that by the time the con-

-6-

ference begins on February 11 there will be any resumption of Arab oil deliveries, and what effect, if that were to take place, would that have on the conference?

SECRETARY KISSINGER: You ladies and gentlemen know that we have a firm policy in this building, at least, not to put any deadlines on our expectation with respect to the embargo. Nevertheless, the problem that I have described here is essentially independent of the embargo. Even if there had been no embargo, the problem would have existed on both levels that I have indicated. It would have existed on the level of supply, because unless the producing nations increase their production, there would have been a shortfall in any event, and it would, of course, have existed on the level of price, independent of the embargo.

So what we are proposing here is not a device to get the embargo ended -- but of course it remains our strong conviction that the embargo is becoming increasingly inappropriate, and it is a matter that should be considered seriously by those countries imposing it. But this is not the purpose of these conferences.

Q Dr. Kissinger, there has been a situation described here today in which we are in the United States 85 percent self-sufficient, and we have other countries, our allies, that are 80 percent dependent on foreign sources of oil. Is the United States prepared to start sharing now, before this conference begins, in order to discourage efforts at bilateral deals?

SECRETARY KISSINGER: The conference is proposed for February 11 or any other convenient day in that week. We will put before those nations, the nations that have been invited, and before all other interested nations, our ideas as to the long-term evolution of the energy situation. The purpose of this conference is not to prevent nations between now and February 11 to make bilateral deals. The argument with respect to bilateral deals is a more fundamental one than the immediate situation. It has to do with the impact on everybody of unrestricted competition once it is unleashed.

Do you want to say something?

Q Mr. Secretary, could you elaborate, sir, on your statement at the outset of your presentation, that there may be shortages in other commodities? Was this a reference to food?

SECRETARY KISSINGER: One looks ahead over the next ten to fifteen years. It is conceivable, though not in such an acute form, that other raw materials may become scarce in relation to demand, and we saw temporarily some pressure on the food situation last year. I think it behooves all nations to take a look at their long-term problems, so that we can deal thoughtfully with them before they become acute.

Now, as you know, we have proposed a world food conference which will address itself to these issues. And we have started, within our government, a study of what may happen with respect to other commodities over the next ten years. And if our conclusions should lead us to the view that a repetition of some of these difficulties could arise, we hope to make proposals at an early time.

Q Mr. Secretary, since the Eastern Europeans have not been invited --

SECRETARY KISSINGER: I have to understand the system by which this works, where one points to one person and --

Q Oh, were you looking at somebody else:

SECRETARY KISSINGER: Well, it's my glasses. (Laughter)

-7-

Q Since the Eastern European countries have not been invited, how will this conference have an impact -- what will be the impact of this conference on detente with the Soviet Union? Two, aren't we getting into the position of 1947-1948 when the Marshall Plan was launched that precipitated in some form the Cold War? And three, perhaps you can say what will be the impact of the Conference on countries which are not invited at present but have hopes for entry? I mean how will they get in?

SECRETARY KISSINGER: With respect to the East European countries, it is our understanding that the socialist countries of Eastern Europe are substantially self-sufficient as of this moment through their cooperative arrangements. We see no reason why this should produce in any sense the Cold War, or a resumption of the Cold War, because there is no stretch of the imagination by which this could be construed as directed against the Soviet Union or against any other group of nations. It is an attempt to produce a common solution.

Secondly, with respect to the participation of other countries -- we are prepared, for example, if the European Community should feel that all its members should participate in this conference, and that there should not be preferential membership -- we would be prepared to carry out what I said in my Pilgrim speech, that it is up to the European Community to decide the form and nature of its participation.

Thirdly, after the conclusion of the meeting of the consumers, we would be prepared to extend an essentially open-ended invitation to other interested parties, to participate in those fields of the work of the consumers, and consumers and producers, that is appropriate to them.

Let me turn over here.

Q Mr. Secretary --

But why don't we save the purely foreign policy questions for a little later?

-3-

SECRETARY KISSINGER: Well, all of the economic experts that have studied the problem believe that the bill, as it stands now, cannot be paid by most of the countries concerned. Now, what the remedy to this is, whether is a reduction of prices or some other method, I think I would like to defer the answer on that until our own studies have been further advanced.

SECRETARY KISSINGER: Marvin.

Mr. O'Leary.

Q Mr. Secretary, you have spoken about the pitfalls of bilateral arrangements. Some nations have already taken care of their bilateral requirements, notably France. What makes you think France has any interest at all in whatever you might have to say to them on February 11 or beyond, and what kind of cards do the industrial nations of the world really have to play in the decade ahead against the countries that have the oil that we are not at this moment prepared to share with them as we will later?

-9-

It is not an American proposal for our own selfish benefit. Indeed, any country can probably gain in any six-months period some temporary benefits for itself. But over a five-year period, the result of such a course, if adopted by everybody else, would be extremely unfortunate, including for the countries that seem to be gaining a temporary advance.

Now, as for the relationship between the consumers and the producers -- I believe that a considerable number of the producers realize today that it cannot be in their interests to bring about a world-wide economic depression. That if they are to benefit from the resources which they control, it must be within the framework of a healthy world economy. And one interesting result of our initiative has been that no producing nation has yet expressed the slightest opposition to it. And several producing nations indicated that they support the concept of consumer-producer meetings in order to lay out the longterm goals of energy policy for both sides.

Under the present framework, the producing nations are forced to look only primarily at their shortterm problems and they have to assess them in terms of the immediate supply and demand situation.

If there was some assured demand over a mediumterm future and if the producing nations had some assurance and understanding of what is ahead for them, they could make their price decisions on a much more long-range basis. And therefore what we are producing is not intended as a confrontation, but it is intended to permit a rational consideration of issues in which the long-term interests of the consumers and producers are not necessarily divergent.

Q Mr. Secretary, you originally started with the premise of beginning this process with a meeting of producing and consuming nations. Could you tell us, sir, what happened to that original concept? Are the Arab nations now holding off from the process until there is further advancement in resolving the Arab-Israeli conflict? And thirdly, can you be any more precise about the sequence of conferences that will take place after the initial meeting of the consuming nations?

SECRETARY KISSINGER: First, Murrey, the original proposal did not go into any detail as to the sequence that we are now proposing. So there has been no change in the concept between the Pilgrims speech and the formal letter that the President sent yesterday to the consuming and producing nations.

10

Q Yes.

Clark.

Q In the light of the admitted disasters of the wheat deal, and also in the light of the talk of one-dollar bread, and the Agriculture Department posturing itself to become an importer of wheat, what confidence can the American people have of the representatives of the United States not being caught in another rip-off for the consumers and taxpayers?

SECRETARY KISSINGER: Well, Mr. Mollenhoff, in order to answer that question, we would have to have a long discussion of the structure of the wheat deal, and what produced it. But the short answer to your question would be this. The wheat deal was the result of certain assumptions about the nature of our surpluses -- certain lack of information about the nature of the purchases that were being made. And it is precisely to avoid having to make decisions on the basis of inadequate information and inadequate understanding of the future that we are proposing an approach which takes a comprehensive look at all the factors involved, and which would reflect the basic necessities of the American people as well as of the rest of mankind.

Q In the initial wheat deals you were relying to a large degree upon the wheat and the international grain trade, as I understand it, plus the Agriculture Department. Do you have any reason to believe that you will get straight figures from the oil industry which provides most of the figures we have in this country at this stage?

Q Mr. Secretary, could I ask you to clarify something that was askeć, I think, in the first question. Let me be more specific. To what extent are the major oil companies to blame for our current pricing problems:

11

As far as the specifics of blaming the oil companies, that is a very popular game everyone is playing today. WE are in the blame sn syndrome now -- let's find out who is to blame and let's hang him. And I will suggest that over the years -- and you can go back to the Paley Commission in the Truman Administration, who warned of this impending crisis -- you can go back for the past five years, or just the fourteen months I have been in government, as chairman of the President't Oil Policy Committee, warning of this impending crisis -- forgetting the embargo. That we are looking back on a period where we had a low-cost abundant energy base. We are now in a high-cost scarce energy base. And our alternatives right now to the economic and political blackmail -- importing today six-and-a-half to seven million barrels a day, if indeed the embargo were over, to upwards of ten or twelve million barrels per day, by the end of this decade, and being subject to whatever price perhaps they wish to put on it.

Q Mr. Simon --

MR. SIMON: Well, I can --

MR. SIMON: No, As I say, we're all looking for the scapegoat right now. And I can go back, sure; and I'll go back and point to various Government actions and inactions over the past 20 years that have created the economic disincentives, if you will, for the oil industry to do exactly what's happened internationally, as far as drilling in the Middle East is concerned. You can go back to the Phillips Decision of 1954 on the regulation of natural gas. And how this discouraged necessary exploration and production in this country. On the environmental impacts, on the mandatory oil import policy that acted as a disincentive to building needed refinery capacity -- the Clean Air Act and need for implementation of the primary and secondary standards -- it is for many reasons.

I'm not saying that the oil industry should have had a little bit more responsibility. Fine, they should have. And we're going to look at the specifics of that. But let's not say that it's been just one thing to blame; there are a whole series of events.

12

MR. SIMON: That's what our estimates are as to what the demand would be now.

MR. SIMON: Well, right now, as I've said many times right from the first press conference -- which was shortly after our figures were published, as far as the extent of the shortfall -- and let's get a real handle on that right at the outset, because there's a great deal of problems with that favorite word of "credibility" today on the extent of the shortfall -- in the job which we have of managing a shortage, rather than just forecasting what the shortage may be, we can gauge, and we can guage with hard numbers, the exact amount of oil, assuming an effective embargo, that we are not going to bring into this country. And that is the number that we use if we are going to responsibly manage this shortage -- manage it to the extent that industry and jobs and employment in this country aren't going to suffer unduly.

13

As I've said from the very first day, with a nation -- 6 percent of the world's population -- utilizing 35 percent, we waste almost as much as we use. Some estimates show we waste between 30 and 40 percent of our energy utilization. We can make up this shortfall with simple changes in our lifestyles.

Now, these aren't going to be done overnight; we understand that. Industry can do a great deal, and they are doing a great deal overnight. We obviously can't stop driving some of the gas-burners we all drive around today; but we can drive them less, we can drive them slower. There are many things we can do. And I think the figures we put out every week show that we are reducing our demand and we're moving toward the elimination of this shortfall. Whether we make it or not is uncertain, and for that reason we recommended to the President that he put the rationing program into effect (on a contingency basis).

SECRETARY KISSINGER: The United States will make proposals at the conference that will start on February 11th which will reflect the philosophy that I have described here, and I'm not aware of any bilateral United States deals that are in process between now and February 11th.

SECRETARY KISSINGER: Yes.

Q Now, there's a little doubt in the minds of some of us who talked with some officials later as to whether or not they were going to go along wholeheartedly with the U.S. initiative. Now, I'm wondering what role you feel countries like Japan -- who are so vulnerable to the need for oil in Arab demands -- can play in the type of initiative that you have in mind.

-14-

Our proposal is designed to enable the Japanese Government, as well
as all other invitees, to meet their energy needs over the indefinite
future. Each government concerned will have to decide for itself whether
by participating in an examination of its long-term problems it is jeopard-
dizing its short-term situation. We do not believe that this is the case.
We are making this proposal precisely to reduce, and in time to eliminate,
the insecurity under which particularly those countries suffer that import
a much larger percentage of their energy than we do. But I cannot predict
what the Japanese reaction will be.

Q If the non-members of the Community want to attend? You didn't mean
to single out certain ones? And in your Pilgrim speech you said the Com-
munity might decide to participate with one voice. Would that still be
welcome in the February 11th conference?

Q Mr. Secretary --

A So are you. (Laughter.)

A No. What we expect to do on this trip is to see whether we can
transform the general ideas that have up to now been advanced into a con-
crete proposal. And we hope that when such a concrete proposal exists,
it will lead to a serious negotiation between Egypt and Israel on the
issue of the separation of forces. Therefore, if the Israeli Cabinet
decides after my first visit there to make a proposal, we will be prepared
to take it to Egypt. But the more likely outcome of this would be not
that there would be an agreement but that there would be a negotiation
which would be conducted at Geneva.

Q Mr. Secretary, isn't there a danger of an overplaying of your own
role in this? If the effort, as you've described it from the very begin-
ning, is to induce the parties to come up with their own settlement, is
there not the danger, by your going back time and again, that you become
too fixed an element in the negotiation and deprive the parties of the
chance to negotiate themselves?

Once the initial phase is behind us, then we believe that the negoti-
ation should be conducted at Geneva and that higher level participation
should occur only when there is an overwhelming deadlock.

-15-

A Well, I'm not bringing, on my first trip, any particular proposal to Aswan. What I intend to do is to discuss with President Sadat his ideas, to give him my impression of some of the general Israeli Ideas; and any specific proposals would have to await a decision by the Israeli Government, as the Israeli Ambassador pointed out yesterday.

Q Mr. Secretary --

Moreover, we do not believe that we alone have the obligation to come up with all of the answers. We are inviting the other countries concerned to share with us their thinking on a problem that after all concerns them at least as much as us.

-16-

A As in all negotiations, the progress reflected a modification by both sides of some of the positions they previously held. I think substantial progress has been made towards a statement of principles which now have to be filled in by concrete negotiations. But since those principles are still ad referendum, which means that they still require the approval of the governments concerned, I don't want to go into greater detail.

(The briefing terminated at 3:36 p.m.)

NEWS BUREAU OF PUBLIC AFFAIRS
RELEASE

Press Conference
SECRETARY KISSINGER DISCUSSES
ISRAELI-EGYPTIAN AGREEMENT

FOR IMMEDIATE RELEASE

Press conference by Secretary of State Henry A. Kissinger
in the International Conference Room of the Department
of State, January 22, 1974.

SECRETARY KISSINGER: I will go right to the questions.

Q Mr. Secretary, we had a number of second and third hand reports from senior American officials and Congressmen and so forth, about the question of whether you, on your trip, in concluding this [Egyptian-Israeli] agreement or getting it concluded, made any commitments on behalf of the United States. Or beyond that, whether there are any unpublished under standings which put the United States in the position of being a diplomatic guarantor. And I thought it would be helpful if you would tell us, yourself, about this.

A Let me sum up the documents that exist, and then explain our understanding of their significance:

First, there is an agreement between Egypt and Israel, signed by the Chiefs of Staff of Egypt and Israel at Kilometer 101 -- and which has been published in the newspapers.

Secondly, there exists an undertaking about the limitation of forces in the zones of limited armament, and elsewhere, between Egypt and Israel that came about as the result, technically, of a United States proposal made by the United States to both sides. The reason was that both sides found it easier to accept a United States proposal as to the limitation of their forces, than to accept limitations which seemed to be demanded by the other side about their deployment.

This proposal was transmitted in a letter by the President, to the Heads of Government of Egypt and Israel in which it was pointed out that acceptance of this identical document -- that signature of this document -- would constitute acceptance and that it would thereby become part of the basic agreement

It, therefore, does not constitute a United States guarantee, but it was a device by which the United States made it possible to convey to the other their acceptance of certain limitations on the armaments. This, at the request of both sides, has not been published, and since it is not a United States obligation, we felt we had to acquiesce in the views of the parties.

PR 28/10

1/22/74

-2-

Thirdly, in the process of negotiating the agreement, both of the parties asked us questions about the intentions of the other, that were not part of the formal agreement, but that nevertheless made it easier for them to plan their own course. And we, therefore, sometimes in writing, sometimes orally, would do one of two things:

> We would either ask one of the parties what its intention was, with respect to the problem at issue, and we would then communicate that statement of intentions to the other side -- in effect, saying: "We have been informed that the Egyptian Government --" or that the Israeli Government -- "plans to do the following."

Sometimes we were asked what our interpretation was of certain clauses, and in that case we did that -- sometimes in writing, sometimes orally. In the cases that now come to my mind, it turned out that our interpretations were identical with the interpretations of both of the parties, and therefore it was essentially irrelevant.

Now, are we guarantors of the agreement?

In the sense of having a formal obligation to take specific action in case of violation of the agreement, we are not guarantors.

In the sense that we will be in some way involved if the agreement breaks down, all of recent history in the Middle East indicates that if there is an outbreak in the Middle East, the United States is involved whether or not it has engaged in prior diplomatic activity. It is certain that if there is another conflict, one or both of the parties are going to ask us for diplomatic support -- and in that sense it is, of course, true that our judgment as to who violated the agreement will affect the course that we will pursue. But in the legal sense, there is no obligation that the United States has taken to enforce the agreement.

Q Mr. Secretary, if you will follow up this question -- having read the four or five whatever you call them, assurances -- it struck me that all of them were given to Israel. Didn't Egypt need any? Was Mr. Sadat so self-assured that he didn't ask for any --

A No, there were some assurances given to Egypt as well.

Q Would you tell us some more? We have read in the papers about those you gave to Israel, but nothing about Egypt.

A Well, the ones you read in the papers that were given to Israel, had previously been leaked by the Government of Israel.

The ones that were given to Egypt have not been released -- but they are of the same nature.

Q Mr. Secretary, you said at your previous, or last, news conference, that it was increasingly inappropriate for the Arab oil embargo to continue while the United States was engaged in a mediating effort.

Now that that effort has been successful in its first stage, at least, what is your feeling about the continuation of the oil embargo? And can you report any progress in that area?

A Well, we have had every reason to believe that success in the negotiations would mark a major step toward ending the oil embargo. We would

.3.

therefore think that failure to end the embargo in a reasonable time would
be highly inappropriate, and would raise serious questions of confidence in
our minds with respect to the Arab nations with whom we have dealt on this
issue.

Q Mr. Secretary, back on the question of the documents -- doesn't this
leave the public record of the Administration, and the United States, in a
rather strange position with these unpublished documents? And does this not
raise a question of where the Administration is heading in its relations with
Congress, where there have been very strong demands in recent years for full
documentation of international accords?

A The Congressional leaders were given a detailed account of all of
these assurances, as well as of the content of any unpublished document.

Secondly, it makes a great deal of difference whether we publish a document to which the United States is a party, and which, therefore, spells out an American obligation -- or whether we publish a document which, in effect, spells out the obligations of other parties, and in which we played a mediating role because of the confidence these other parties had in us. I would suggest that there is an enormous difference in these two situations.

Nevertheless, the Congressional leaders have been informed about these
matters.

Q Mr. Secretary, going back to your answer on oil:

You mentioned that -- you used the phrase something about a "reasonable"
period of time that this could be lifted.

Is it a proper assumption that when the disengagement has been completed,
when this 40-day cycle is over, that it is at that time you would think the
oil embargo ought to be lifted?

A I think in more ambitious terms.

Q Do you mean even before that?

A Yes.

Q Mr. Secretary, there is word from --

A Wait a minute --

Q Have you got some assurances from Mr. Sadat that he would use his
influence in the oil-producing countries in this embargo?

A I don't think it would be appropriate to go into all the details
of the conversation between President Sadat and myself, but I have made
clear the United States position on the oil embargo, and I believe that it
is clearly understood by all of the leaders with whom I have spoken.

Q Mr. Secretary, while you were away, it was disclosed here through
the White House and the Pentagon that the U.S. military had been receiving
certain unauthorized National Security Council documents by such devices
as going through your briefcase, because they were worried about your policy
on China and the Soviet Union, and further that when you heard about it you
were furious and demanded the transfer of the guilty parties.

.4.

This becomes a matter of curiosity to me because I found myself wondering and wanting to ask you how you knew that these things were happening, when I recall your sworn testimony before the Senate was that you didn't know about the existence of the Plumbers, had no contact with David Young, and thought he was doing something else.

A I missed you on the trip, Mr. O'Leary [Laughter.] Let me answer the question in terms of my knowledge of this particular episode.

This incident arose out of the leakage of highly classified documents containing minutes of meetings of the Washington Special Action Group on the India-Pakistan crisis to a columnist. As a result of this leak, Mr. Erlichman, who was in charge of all internal security investigations in the White House, started an investigation of this particular leak.

Sometime after this, Admiral Welander, who was in charge of the JCS Liaison Office at the NSC, came to General Haig and told him that the internal evidence of at least one of the documents suggested to him that the leak to the columnist had occurred from his office.

I was out of town at the time. When General Haig informed me of this, I told him to turn that matter over to Mr. Erlichman.

Sometime later, I don't have the exact dates, several weeks later, Mr. Erlichman let me see -- or rather listen -- to the interrogation of Admiral Welander with respect to this particular incident. And, in the course of this interrogation, there was developed an allegation not only with respect to the source of the leak but also about the unauthorized transfer of documents from my office to the office of the Chairman of the Joint Chiefs of Staff.

Beyond this one interrogation, I was told nothing about the investigation, either preceding or following this interrogation.

I was amazed by this allegation, since the Office of the Chairman, and my office, had worked closely together. I agree with what Admiral Moorer [Chairman, JCS] said on television last week, that there was a full flow of information between my office and his office, and I had no reason to suppose, on the basis of my experience, that there was any conflict between the Joint Chiefs of Staff and my office. And therefore I have no reason to question the argument that has been made by Admiral Moorer that this incident of the unauthorized transfer of papers from my office to his office reflected overzealousness on the part of subordinates, and, in any case, gave him no information that he did not already possess.

I must add that I was not aware of the fact that a report was being prepared by Mr. Erlichman, and I have never seen that report. Nor have I seen the report of the investigation that was conducted by Secretary Laird's office. And therefore what I am saying is based on my personal knowledge of the incident which is confined to this one interrogation of one individual who volunteered his information first to my office. These reports must have come to conclusions similar to the ones I have outlined here, because no disciplinary action was taken by the addressees of this report.

After these allegations became known to me, it was decided in consultation between Admiral Moorer and myself to close the Liaison Office attached to my staff.

- 5 -

With respect to my statements before the Senate Foreign Relations Com-
mittee made under oath, I reaffirm here every word that I have said to the
Senate Foreign Relations Committee, and I assert that they were fully con-
sistent with the allegations of the unnamed sources that have been made
while I was on my trip last week.

To be specific, I did not know that David Young was conducting an in-
vestigation into the matter of the Anderson leaks. He never talked to me
about this, or any other subject, while he was conducting what I now know
was his investigation. I did not instruct him, nor did I request it. I
never saw the report, nor did I know that the report existed until I read
it in a newspaper early last week.*

I have called both Senator Fulbright and Senator Stennis and told them
that I would be prepared to meet with their committees to answer any ques-
tions that they might have on this subject.

Q. One quick follow up: who interrogated Admiral Welander?

A. I believe he was interrogated by David Young, but from this one could not suppose that David Young was conducting an investigation.

Q. Did you know David Young had performed the interrogation?

A. I knew that David Young had performed the interrogation, but I had
assumed that since we had sent Admiral Welander to Mr. Erlichman's office,
Mr. Erlichman had designated one of his staff members to take whatever
report Admiral Welander had to give.

I repeat again, we were not told about either the investigation preced-
ing it or the investigation following it, and I had no contact whatever
with David Young during that period.

Q. Mr. Secretary, to clarify, you said you participated in the interro-
gation.

A. I did not participate in the interrogation.

* General Haig has himself assured me that he had no contact with David Young on the report or related matters. [EDS: Added to the record subsequent to the press conference.]

-6-

Q Could you clarify that you read or listened to a tape of the
interrogation?

A I listened to a portion of the tape of the interrogation.

Q Mr. Secretary, why didn't you find out the total results of the
investigation and the interrogation of Admiral Welander?

A Because I was told that I was not to be informed of it.

Q By whom were you told?

A I have said all that I will say on this subject. All internal security matters in the White House after May 1970 were handled by Mr. Erlichman's office, and therefore it was not unusual for this to be conducted in the established framework.

Q Mr. Secretary, perhaps your lack of precision on the oil question is deliberate, but I wonder if I could try to pin you down once more. Can you tell us what you would define to be a reasonable period of time? And you said if nothing did happen, that it would raise a question of confidence. What is the implication of that question?

A It would not be useful for me to go beyond this. But we have carried out in good faith what we have told both sides we would do.

Q Mr. Secretary, the United States has stated its opposition to any one country dominating affairs in Asia or in other parts of the world. How do you look upon (a) the Paracel Islands question; and (b) the island question that is dividing North and South Korea. There seem to be disputes over both sets of islands?

A I don't think either of those issues raises the question of dominating the area, or dominating the world. With respect to the Paracel Islands, there has been a dispute between various countries as to the ownership of these islands.

The United States regrets the use of military force in settling this dispute, but it does not raise an issue of world domination.

With respect to the Korean islands, those were assigned to South Korea as the result of the armistice agreement, and the United States supports that position.

Q Mr. Secretary, what are the prospects now for agreements between Israel and Syria and Israel and Jordan? And in that connection, has your own personal diplomacy superseded the Geneva Conference?

A With respect to Syria and Israel, on the occasion of my visit to Syria, the Syrian Government put forward some ideas with respect to the disengagement of forces on the Syrian front. It's the first time that the Syrian Government put forward concrete suggestions on any phase of the negotiations.

We have transmitted those ideas to the Government of Israel, which is now studying them, and which has promised us an answer sometime after their cabinet meets next Sunday.

.7.

We hope that a process can be generated by which the disengagement
of forces on the Syrian side can be negotiated with the same seriousness as
on the Egyptian side, and we have indicated that we would be prepared, if
the two parties request it, to offer our good offices.

I might say also that the visit to Syria led to an improvement in the
bilateral relations between the United States and Syria; one example of
which is the fact that an American citizen, who has been held in Syria on
the charge of espionage since July of 1972, is being released tomorrow.
His name is John Bates, and Mr. Vest can give any of you, who want to
pursue it, further particulars.

With respect to Jordan, the United States believes that all parties
that have frontiers with Israel should participate in the process of
negotiation, and we favor negotiations, as well, between Israel and Jordan.

The framework for the negotiations that have taken place was established
by the Geneva Conference. The co-chairmanship between us and the Soviet
Union is taken very seriously by us, and we are keeping, and have kept,
the Soviet Union informed of all of the actions which we have taken, which
we believe are consistent with the consensus resolution which ended the
last meeting of the Geneva Conference, and which carried out the spirit
of this.

My personal role has been produced by the fact that both parties
found it easier to convey certain ideas through an intermediary, and
because given the hostility in the area, it was useful to have a more
impartial third party convey certain considerations and particular assur-
ances. It is to be hoped that as these negotiations develop, and as the
parties gain confidence in each other, that the role of a mediator will
become less crucial. But given the importance to the peace of the whole
world, of making progress towards a settlement in the Middle East, I don't
want to take a dogmatic position on that issue.

Q Mr. Secretary.

A Marilyn.

Q Mr. Secretary, in mentioning the documents that do exist you said
the second document is an undertaking of limited forces in zones of
limited armaments and elsewhere. Can you spell that out a little bit,
and does this involve limitation on weapons that could reach the other side?

A It concerns primarily the limitation of weapons within the zones
of limited armaments and some understandings with respect to offensive
capabilities.

Q Does each side then take on the responsibility not to acquire
offensive capability?

A No, it is strictly a deployment question.

Q Mr. Secretary, President Sadat is quoted today in Algeria as
saying that there has been a significant change since three months ago in
U.S. policy towards the Middle East. I wonder if you could tell us what
it was that you either said or did while you were in Egypt that would cause
President Sadat to reach that conclusion.

-8.

A I think -- of course I am not a spokesman for President Sadat -- but it is obvious that the United States has played a much more active role in the Middle East in pursuing a settlement than has been the case previously, and the United States has attempted to take into account the legitiante concerns of both sides in urging a settlement. So I would think that the change to which President Sadat referred concerns the degree of our activity and our general participation in producing a settlement.

Q Mr. Secretary, do you expect now that there will be a swift resumption of diplomatic relations with Egypt?

A I think the conditions for that have been improved.

Q Mr. Secretary, some of the Arab states or oil-producing states are said to be mining their oil fields in a direct response to Secretary Schlesinger's speech of January 6 in which he said that public opinion might force a show of force by the West. What is your opinion about the likelihood of such a show of force by the West if the embargo goes too far?

A Well, I don't think the embargo will go too far, so that this is essentially an academic question.

Q Mr. Secretary, following your last round of conversations with the Chinese leadership, you expressed the hope that the process of normalization could be accelerated. Could you tell us as to what precisely you mean by normalization? Is it establishment of full diplomatic relations? And if so, how would you go about it?

A Well, in our relations with the Chinese we have always stressed that the practical improvement of our relations is more important than the legal form in which it is expressed. Therefore, we have always stressed particular concrete steps. We are at the moment negotiating a number of issues with the Chinese Government on blocked assets and claims of both sides, which are progressing, and we are proceeding along the lines which we have previously outlined. But by normalization of relations we mean at this stage closer contact, improved communications, and a greater inter-connection of various activities.

Q Mr. Secretary, Mr. Ehrlichman is gone, but have you been assured since then that you never again will be denied information which properly falls within your sphere of operations?

A I had no reason to complain about the matter because I thought it was a reasonable division of labor that I would not participate in internal security matters.

Q Mr. Secretary, you've talked --

Q Mr. Secretary, what's the status of the preparations for the energy conference? And have you yet dispatched the special emissary to the European countries for the preparations?

A The question is what is the status of preparations for the energy conference, and have we dispatched the emissary?

Very active work went on in the preparations for the energy conference as a result of a task force composed of Mr. Donaldson, Mr. Sonnenfeldt, Mr.

- 9 -

Lord, and Mr. Cooper from the National Security Council, together with representatives from other departments: Mr. Bennett from the Treasury; a representative of the Energy Office.

Now, we are having daily meetings on the subject this week, and when our preparations have progressed to a certain point, no later than the end of this week, we will be prepared to talk to our allies and to other invitees.

I will have to talk to Mr. Donaldson on what the best use of his time is, whether the best use of his time between now and the beginning of the conference is by taking a trip or whether we can brief the other participants here. And that decision will be made in the next few days.

Q Mr. Secretary, there has been a debate within the Government over many years as to whether it is good or bad for the United States that the Suez Canal be open. What is your view now, since one by-product of this negotiation may be the opening of the Canal?

A I would say that obviously the United States has no overwhelming reason of its own to get the Suez Canal opened. So the arguments pro and con have to be seen within the context of the general contribution that opening of the Suez Canal would make to peace in the Middle East. In that context, the United States would feel that it would be a positive step towards peace in the Middle East, and the greater ease by which the Soviet Union can transfer its fleet from the Mediterranean to the Indian Ocean can be compensated both by the greater ease with which we can transfer some of our ships into the Indian Ocean and other measures that can be taken of a different nature.

Q Mr. Secretary, last fall when Foreign Minister Jobert was here you spoke of the constructive role that France was playing in the dialogue between the United State and Europe. I was wondering if you would still use that description for French policy in view of the initial steps that France has taken with regard to the franc and the negative attitude the French have taken until now towards your projected energy conference.

A Well, of course, the steps that France has taken with respect to the franc is similar to the steps that we have taken with respect to the dollar. And we can't blame France for pursuing a fiscal policy similar to our own.

With respect to the negotiations on the various declarations, they are now in process, I am quite optimistic that the NATO declaration can be settled fairly quickly. The declaration with the European Community is in the process of being redrafted. And there will be another meeting of our representatives with those of the Nine early in February, and it will be easier to form a judgment then.

With respect to energy, our views and those of France are quite opposed. And to the extent that we, of course, believe that we are correct, I could not characterize the French attitude as constructive.

Q To follow up, at your San Clemente press conference, the last time you talked about Europe, you mentioned only two declarations. What happened to the third one, was it dropped -- the idea?

- 10 -

A With respect to Europe, we are working on two declarations: a declaration defining the relationship between the European community and the United States, and a declaration defining the basic principles on which NATO should proceed.

There is a project that we strongly support for a third declaration, including Europe, the United States and Japan -- and encompassing the basic principles of both of the declarations we are drafting with Europe, plus certain objectives we share together with Japan.

The United States position is that we strongly favor such a trilateral declaration, and we have not changed our policy.

Q Mr. Secretary, if France does not come to the oil conference, then would you go ahead with it anyway?

A We would proceed in any event. Yes.

Q Mr. Secretary, would you say that the removal of the oil embargo is not really enough, is not the real problem but that the production cutbacks must be restored as well, otherwise, everybody would be competing for the same amount of scarce oil.

Do you have reason to believe that that will happen, as well as the lifting of the embargo?

A I maintain the position that I advanced at previous press conferences.

Q Mr. Secretary, one of the Senators who was at a meeting with you yesterday, said that the Russian cooperation was mainly, not objecting to what you were achieving in the Middle East. Could you give us an example of the more positive Soviet cooperation?

A The Soviet Union played a very useful role and a very crucial role, in helping to get the Geneva Conference organized. It played a very constructive role at the Geneva Conference itself.

Neither of those events could have occurred without active and constructive Soviet participation.

With respect to disengagement, it was always understood by the Soviet Union and ourselves, that we were in a tactically better position to promote progress on that issue.

And therefore, at the Military Committee that was meeting in Geneva, it was agreed from the beginning, that the Israeli and Egyptians discussions should take place under the auspices of a United Nations representative, rather than under the auspices of the Co-Chairman.

Now in the last phase of the negotiations, the tactical details were handled primarily by the United States, but the Soviet Union was informed, and indicated its strong support for the effort -- and we consider this a constructive step.

Q Mr. Secretary, you mentioned opening a new dialogue -- your desire to open a new dialogue with the countries in South America, and there has been some talk about a trip, perhaps to Panama, and your trip to Mexico City

at the end of the month -- and possibly a larger trip to the Continent in
April.

I would like to ask you if you could be more specific at this time
about your plans, and whether you would rule out a meeting in Mexico with
an emissary of the Cuban Government.

A: I have indicated at a previous press conference that there has been
an agreement ad referendum, which means for current examination by the
United States and Panamanian Governments about the basic principles on which
a negotiation leading to a new treaty for the Panama Canal should be based.

These principles are now being studied in our Government, and when they
are approved, it is possible that I may take a trip to Panama to mark the
Agreement on these principles.

The Meeting in Mexico City grew out of a speech I made to the Latin American Foreign Ministers during the United Nations General Assembly, in which I pointed out that the United States was eager to start a new dialogue with Latin America on the basis of equality and geared to the realities of the current situation.

At this lunch, the Foreign Minister of Colombia responded to my speech and invited the Foreign Ministers of all Latin American countries to a meeting in Bogotá to formulate a preliminary response to this American initiative.

That meeting took place in November, and came up with what we consider
a very constructive document that outlines an agenda for a proposed meeting
between the other nations of the Western Hemisphere and the United States.

This meeting is now scheduled for the period of February 21st to the
23rd, in Mexico City. The Latin American Foreign Ministers will meet
several days before then, to formulate their ideas even more precisely
than was possible in Bogotá.

I have been in close touch with various foreign ministers who are
active in Latin America and who are actively engaged in this, and I am
quite optimistic that we can take a significant step in Mexico City, and we
are hard at work in preparing an American position in response to this
Latin American initiative.

With respect to a possible meeting with a Cuban Representative, there
is no such plan.

Q: Mr. Secretary, I don't know if you had a chance to be fully briefed on certain changes in strategic nuclear weapons policies that Secretary Schlesinger has publicly talked about, involving retargeting of nuclear warheads and also the improvements in the accuracy of our nuclear warheads -- and if so, what effect do you think these decisions might have on our relations with the Soviets, and what effect, if any, on the SALT II discussions?

A: All decisions of this nature are taken within the framework of the National Security Council system and, therefore, in my capacity as Assistant to the President, as well as in my capacity as Secretary of State, I'm of course familiar with these various matters.

- 12 -

I would say that they underline the inexorable nature of the arms race and the essential necessity of making progress on the limitations of arms.

If the strategic arms race continues unchecked, it is inevitable that both sides will refine the number of their weapons, multiply their warheads, increase their accuracies and develop strategies which will sooner or later, create the threat of a gap between the first strike and the second strike capability -- which was considered to be a principle element of insecurity in the 1950s and early 1960s -- which would put a premium on striking first and therefore, contribute to the danger of the outbreak of nuclear war.

Q Thank you, very much --

A This is why we believe that this is a year in which major progress should be made on the strategic arms limitation.

Q Thank you very much, Mr. Secretary.

PRESS
DEPARTMENT OF STATE

[LC]

January 23, 1974

No. 31

JOINT STATEMENT BY
THE HONORABLE HENRY A. KISSINGER,
SECRETARY OF STATE,
AND THE HONORABLE GEORGE P. SHULTZ,
SECRETARY OF THE TREASURY
REGARDING THE HOUSE OF REPRESENTATIVES' VOTE
ON THE INTERNATIONAL DEVELOPMENT ASSOCIATION

The Administration deeply regrets the action of the House of Representatives today in voting down the Administration bill for a four-year replenishment of the International Development Association totalling $1.5 billion. This money formed part of an equitably shared effort among all industrialized nations to provide the capital and know-how to help the poorest and developing countries. In this most critical of times for international amity and harmony, this action represents a major setback to all efforts of cooperation and to the ability of the US to provide leadership in the world where there is an increasingly serious tendency for nations to believe their best interest lies in going it alone.

We intend to confer immediately with members of both parties of the Congress in an effort to find a way in which the US can continue to play a role of leadership fully consistent with our own economic situation.

* * * * *

For further information contact:

FOR IMMEDIATE RELEASE

JANUARY 30, 1974

OFFICE OF THE WHITE HOUSE PRESS SECRETARY

THE WHITE HOUSE
STATE OF THE UNION ADDRESS
OF
PRESIDENT RICHARD NIXON
TO A JOINT SESSION OF THE CONGRESS

THE HOUSE CHAMBER

AT 9:05 P.M. EDT

Mr. Speaker, Mr. President, my colleagues
in the Congress, our distinguished guests, my fellow
Americans:

We meet here tonight at a time of great challenge
and great opportunities for America. We meet at a time
when we face great problems at home and abroad that will
test the strength of our fiber as a Nation. But we also
meet at a time when that fiber has been tested, and it
has proved strong.

America is a great and good land and we are a great
and good land because we are a strong, free, creative
people and because America is the single greatest force
for peace anywhere in the world. Today, as always
in our history, we can base our confidence in what the
American people will achieve in the future on the record
of what the American people have achieved in the past.

Tonight, for the first time in 12 years, a President
of the United States can report to the Congress on the
state of a Union at peace with every nation of the world.
Because of this, in the 22,000-word message on the State
of the Union that I have just handed to the Speaker of
the House and the President of the Senate, I have been
able to deal primarily with the problems of peace -- with
what we can do here at home in America for the American
people -- rather than with the problems of war.

The measures I have outlined in this message set
an agenda for truly significant progress for this Nation
and the world in 1974. Before we chart where we are going,
let us see how far we have come.

It was five years ago on the steps of this Capitol
that I took the oath of office as your President. In those
five years, because of the initiatives undertaken by this
Administration, the world has changed. America has
changed. As a result of those changes, America is safer
today, more prosperous today, with greater opportunity
for more of its people than ever before in our history.

Five years ago America was at war in Southeast
Asia. We were locked in confrontation with the Soviet
Union. We were in hostile isolation from a quarter of
the world's people who lived in Mainland China.

MORE

Page 2

Five years ago our cities were burning and besieged.

Five years ago our college campuses were a battleground.

Five years ago crime was increasing at a rate that struck fear across the Nation.

Five years ago the spiraling rise in drug addiction was threatening human and social tragedy of massive proportion and there was no program to deal with it.

Five years ago -- as young Americans had done for a generation before that -- America's youth still lived under the shadow of the military draft.

Five years ago there was no national program to preserve our environment. Day by day our air was getting dirtier, our water was getting more foul.

And five years ago American agriculture was practically a depressed industry with 100,000 farm families abandoning the farm every year.

MORE

Page 3

As we look at America today we find ourselves challenged by new problems. But we also find a record of progress to confound the professional criers of doom and prophets of despair. We met the challenges we faced five years ago and we will be equally confident of meeting those that we face today.

Let us see for a moment how we have met them. After more than ten years of military involvement, all of our troops have returned from Southeast Asia and they have returned with honor. And we can be proud of the fact that our courageous prisoners of war, for whom a dinner was held in Washington tonight, that they came home with their heads high, on their feet and no on their knees.

In our relations with the Soviet Union, we have turned away from a policy of confrontation to one of negotiation. For the first time since World War II. the world's two strongest powers are working together toward peace in the world. With the People's Republic of China after a generation of hostile isolation, we have begun a period of peaceful exchange and expanding trade.

Peace has returned to our cities, to our campuses. The 17-year rise in crime has been stopped. We can confidently say today that we are finally beginning to win the war against crime. Right here in this Nation's capital -- which a few years ago was threatening to become the crime capital of the world -- the rate in crime has been cut in half. A massive campaign against drug abuse has been organized. And the rate of new heroin addiction, the most vicious threat of all, is decreasing rather than increasing.

For the first time in a generation no young Americans are being drafted into the Armed Services of the United States. And for the first time ever we have organized a massive national effort to protect the environment. Our air is getting cleaner. Our water is getting purer, and our agriculture, which was depressed, is prospering. Farm income is up 70 percent, farm production is setting all-time records, and the billions of dollars the taxpayers were paying in subsidies has been cut to nearly zero.

Overall, Americans are living more abundantly than ever before today. More than two and a half million new jobs were created in the past year alone. That is the biggest percentage increase in nearly 20 years. People are earning more. What they earn buys more, more than ever before in history. In the past five years the average American's real spendable income -- that is what you really can buy with your income even after allowing for taxes and inflation -- has increased by 16 percent.

MORE

Page 5

Let me speak to that issue head on. There will be no recession in the United States of America. Primarily due to our energy crisis, our economy is passing through a difficult period. But I pledge to you tonight that the full powers of this Government will be used to keep America's economy producing and to protect the jobs of America's workers.

We are engaged in a long and hard fight against inflation. There have been, and there will be in the future, ups and downs in that fight. But if this Congress cooperates in our efforts to hold down the cost of government, we shall win our fight to hold down the cost of living for the American people.

As we look back over our history, the years that stand out as the ones of signal achievement are those in which the Administration and the Congress, whether one party or the other, working together, had the wisdom and the foresight to select those particular initiatives for which the Nation was ready and the moment was right -- and in which they siezed the moment and acted.

Looking at the year 1974 which lies before us, there are ten key areas in which landmark accomplishments are possible this year in America. If we make these our national agenda, this is what we will achieve in 1974:

We will break the back of the energy crisis, we will lay the foundation for our future capacity to meet America's energy needs from America's own resources.

And we will take another giant stride toward lasting peace in the world -- not only by continuing our policy of negotiation rather than confrontation where the great powers are concerned, but also by helping toward the achievement of a just and lasting settlement in the Middle East.

We will check the rise in prices, without administering the harsh medicine of recession and we will move the economy into a steady period of growth at a sustainable level.

We will establish a new system that makes high-quality health care available to every American in a dignified manner and at a price he can afford.

We will make our States and localities more responsive to the needs of their own citizens.

We will make a crucial breakthrough toward better transportation in our towns and in our cities across America.

We will reform our system of Federal aid to education, to provide it when it is needed, where it is needed, so that it will do the most for those who need it the most.

MORE

Page 6

We will make an historic beginning on the task of
defining and protecting the right of personal privacy
for every American.

And we will start on a new road toward reform of
a welfare system that bleeds the taxpayer, corrodes the
community and demeans those it is intended to assist.

And together with the other nations of the
world, we will establish the economic framework within
which Americans will share more fully in an expanding
worldwide trade and prosperity in the years ahead, with
more open access to both markets and supplies.

In all of the 186 State of the Union messages
delivered from this place in our history, this is the
first in which the one priority, the first priority,
is energy. Let me begin by reporting a new development
which I know will be welcome news to every American. As
you know, we have committed ourselves to an active role
in helping to achieve a just and durable peace in the
Middle East, on the basis of full implementation of
Security Council Resolutions 242 and 338. The first
step in the process is the disengagement of Egyptian
and Israeli forces which is now taking place.

MORE

Because of this hopeful development I can
announce tonight that I have been assured, through my
personal contacts with friendly leaders in the Middle
Eastern area, that an urgent meeting will be called in
the immediate future to discuss the lifting of the oil
embargo.

This is an encouraging sign. However, it should
be clearly understood by our friends in the Middle East
that the United States will not be coerced on this issue.

Regardless of the outcome of this meeting,
the cooperation of the American people in our energy
conservation program has already gone a long way: towards
achieving a goal to which I am deeply dedicated. Let
us do everything we can to avoid gasoline rationing in
the United States of America.

Last week I sent to the Congress a comprehensive
special message setting forth our energy situation,
recommending the legislative measures which are necessary
to a program for meeting our needs. If the embargo
is lifted, this will ease the crisis, but it will not
mean an end to the energy shortage in America. Voluntary
conservation will continue to be necessary. And let
me take this occasion to pay tribute once again to the
splendid spirit of cooperation the American people have
shown which has made possible our success in meeting
this emergency up to this time.

The new legislation I have requested will also
remain necessary. Therefore, I urge again that the energy mea-
sures that I have proposed be made the first priority of
this session of the Congress. These measures will require
the oil companies and other energy producers to provide
the public with the necessary information on their supplies.
They will prevent the injustice of windfall profits for
a few as a result of the sacrifices of the millions of Americans.
And they will give us the organization, the incentives,
the authorities needed to deal with the short-term
emergency and to move toward meeting our long-term needs.

Just as 1970 was the year in which we began a
full-scale effort to protect the environment, 1974 must
be the year in which we organize a full-scale effort to
provide for our energy needs not only in this decade,
but through the 21st century.

As we move toward the celebration two years
from now of the 200th anniversary of this Nation's
independence, let us press vigorously on toward the goal
I announced last November for Project Independence. Let
this be our national goal. At the end of this decade in
1980, the United States will not be dependent on any
other country for the energy we need to provide our jobs,
to heat our homes and to keep our transportation moving.

MORE

To indicate the size of the Government commitment, to spur energy research and development, we plan to spend $10 billion in Federal funds over the next five years. That is an enormous amount. But during the same five years, private enterprise will be investing as much as $200 billion -- and in 10 years, $500 billion -- to develop the new resources, the new technology, the new capacity America will require for its energy needs in the 1980's. That is just a measure of the magnitude of the project we are undertaking.

But America performs best when called to its biggest tasks. It can truly be said that only in America could a task so tremendous be achieved so quickly, and achieved not by regimentation, but through the effort and ingenuity of a free people, working in a free system.

MORE

Turning now to the rest of the agenda for 1974, the time is at hand, this year to bring comprehensive high quality health care within the reach of every American. I shall propose a sweeping new program that will assure comprehensive health insurance protection to millions of Americans who cannot now obtain it or afford it, with vastly improved protection against catastrophic illness. This will be a plan that maintains the high standards of quality in America's health care. And it will not require additional taxes.

Now I recognize that other plans have been put forward that would cost $80 billion or even $100 billion and that would put our whole health care system under the heavy hand of the Federal Government. This is the wrong approach. This has been tried abroad and it has failed, it is not the way we do things here in America. This kind of plan would threaten the quality of care provided by our whole health care system. The right way is one that builds on the strengths of the present system and one that does not destroy those strengths; one based on partnership not paternalism. Most important of all, let us keep this as the guiding principle of our health programs. Government has a great role to play, but we must always make sure that our doctors will be working for their patients and not for the Federal Government.

Many of you will recall that in my State of the Union address three years ago I commented that "Most Americans today are simply fed up with government -- at all levels," and I recommended a sweeping set of proposals to revitalize State and local governments, to make them more responsive to the people they serve. I can report to you today that as a result of revenue sharing passed by the Congress and other measures, we have made progress towards that goal. After 40 years of moving power from the States and the communities to Washington, D. C., we have begun moving power back from Washington to the States and communities and most important, to the people of America.

In this session of the Congress, I believe we are near the breakthrough point on efforts which I have suggested, proposals to let people themselves make their own decisions for their own communities, and in particular on those to provide broad new flexibility in Federal aid for community development, for economic development, and for education. And I look forward to working with the Congress, with members of both parties in resolving whatever remaining differences we have in this legislation so that we can make available nearly $5-1/2 billion to our States and localities to use not for what a Federal bureaucrat may want, but for what their own people in those communities want. The decision should be theirs.

MORE

I think all of us recognize that the energy crisis has given new urgency for the need to improve public transportation, not only in our cities but in rural areas as well. The program I have proposed this year will give communities not only more money, but also more freedom to balance their own transportation needs. It will mark the strongest Federal commitment ever to the improvement of mass transit as an essential element of the improvement of life in our towns and cities.

One goal on which all Americans agree is that our children should have the very best education this great Nation can provide.

In a special message last week, I recommended a number of important new measures that can make 1974 a year of truly significant advances for our schools, and for the children they serve. If the Congress will act on these proposals, more flexible funding will enable each Federal dollar to meet better the particular needs of each particular school district. Advance funding will give school authorities a chance to make each year's plans knowing ahead of time what Federal funds they are going to receive. Special targeting will give special help to the truly disadvantaged among our people. College students faced with rising costs for their education will be able to draw on an expanded program of loans and grants. These advances are a needed investment in America's most precious resource, our next generation. And I urge the Congress to act on this legislation in 1974.

Page 11

One measure of a truly free society is the vigor with which it protects the liberties of its individual citizens. As technology has advanced in America, it has increasingly encroached on one of those liberties, what I term the right of *personal* privacy. Modern information systems, data banks, credit records, mailing list abuses, electronic snooping, the collection of personal data for one purpose that may be used for another, all these have left millions of Americans deeply concerned by the privacy they cherish.

And the time has come, therefore, for a major initiative to define the nature and extent of the basic rights of privacy and to erect new safeguards to ensure that those rights are respected.

I shall launch such an effort this year at the highest levels of the Administration and I look forward again to working with this Congress in establishing a new set of standards that respect the legitimate needs of society, but that also recognize personal privacy as a cardinal principle of American liberty.

Many of those in this Chamber tonight will recall that it was three years ago that I termed the Nation's welfare system "a monstrous, consuming outrage -- an outrage against the community, against the taxpayer, and particularly against the children that it is supposed to help."

That system is still an outrage. By improving its administration, we have been able to reduce some of the abuses. As a result, last year, for the first time in 18 years, there has been a halt in the growth of the welfare case load, but as a system, our welfare program still needs reform as urgently today as it did when I first proposed in 1969 that we completely replace it with a different system.

In these final three years of my Administration, I urge the Congress to join me in mounting a major new effort to replace the discredited present welfare system with one that works, one that is fair to those who need help or cannot help themselves, fair to the community, and fair to the taxpayer. And let us have as our goal that there will be no Government program which makes it more profitable to go on welfare than to go to work.

MORE

I recognize that from the debates that are taking place within the Congress over the past three years on this program that we cannot expect enactment overnight of a new reform, but I do propose that the Congress and the Administration together make this the year in which we discuss, debate and shape such a reform so that it can be enacted as quickly as possible.

America's own prosperity in the years ahead depends on our sharing fully and equitably in an expanding world prosperity. Historic negotiations will take place this year that will enable us to ensure fair treatment in international markets for American workers, American farmers, American investors and American consumers.

It is vital that the authorities contained in the trade bill I submitted to the Congress be enacted so that the United States can negotiate flexibly and vigorously on behalf of American interests. These negotiations can usher in a new era of international trade that not only increases the prosperity of all nations, but also strengthens the peace among all nations.

In the past five years, we have made more progress toward a lasting structure of peace in the world than in any comparable time in the Nation's history. We could not have made that progress if we had not maintained the military strength of America. Thomas Jefferson once observed that *the* price of liberty is eternal vigilance. By the same token, and for the same reason, in today's world, the price of peace is a strong defense as far as the United States is concerned.

MORE

Page 13

In the past five years, we have steadily reduced the burden of national defense as a share of the budget, bringing it down from 44 percent in 1969 to 29 percent in the current year. We have cut our military manpower over the past five years by more than a third, from 3-1/2 million to 2-2/10ths million.

In the coming year however, increased expenditures will be needed. They will be needed to assure the continued readiness of our military forces, to preserve the present force levels in the face of rising costs and to give us the military strength we must have if our security is to be maintained and if our initiatives for peace are to succeed.

The question is not whether we can afford to maintain the necessary strengths of our defense, the question is whether we can afford not to maintain it, and the answer to that question is no. We must never allow America to become the second strongest nation in the world.

I do not say this with any sense of belligerence, because I recognize the fact that is recognized around the world. America's military strength has always been maintained to keep the peace, never to break it. It has always been used to defend freedom, never to destroy it. The world's peace as well as our own depends on our remaining as strong as we need to be as long as we need to be.

In this year 1974 we will be negotiating with the Soviet Union to place further limits on strategic nuclear arms. Together with our allies, we will be negotiating with the nations of the Warsaw Pact on mutual and balanced reduction of forces in Europe. We will continue our efforts to promote peaceful economic development in Latin America, in Africa, in Asia. And we will press for full compliance with the peace accords that brought an end to American fighting in Indochina, including particularly a provision that promised the fullest possible accounting for those Americans who are missing in action.

Page 14

And having in mind the energy crisis to which I have referred to earlier, we will be working with the other nations of the world toward agreement on means by which oil supplies can be assured at reasonable prices on a stable basis in a fair way to the consuming and producing nations alike.

All of these are steps toward a future in which the world's peace and prosperity and ours as well as a result, are made more secure.

Throughout the five years that I have served as your President, I have had one overriding aim and that was to establish a new structure of peace in the world that can free future generations of the scourge of war. I can understand that others may have different priorities. This has been and this will remain my first priority, and the chief legacy I hope to leave from the eight years of my Presidency.

This does not mean that we shall not have other priorities, because as we strengthen the peace we must also continue each year a steady strengthening of our society here at home. Our conscience requires it, our interests require it and we must insist upon it.

As we create more jobs, as we build a better health care system, as we improve our education, as we develop new sources of energy, as we provide more abundantly for the elderly and the poor, as we strengthen the system of private enterprise that produces our prosperity, as we do all of this and even more, we solidify those essential bonds that hold us together as a Nation.

Even more importantly, we advance what in the final analysis Government in America is all about.

What it is all about is more freedom, more security, a better life for each one of the 211 million people that live in this land.

We cannot afford to neglect progress at home while pursuing peace abroad. But neither can we afford to neglect peace abroad while pursuing progress at home. With a stable peace, all is possible, but without peace, nothing is possible.

In the written message that I have just delivered to the Speaker and to the President of the Senate, I commented that one of the continuing challenges facing us in the legislative process is that of the timing and pacing of our initiatives, selecting each year among many worthy projects those that are ripe for action at that time.

MORE

Page 15

What is true in terms of our domestic initiatives
is true also in the world. This period we now are in in
the world -- and I say this as one who has seen so much
of the world, not only in these past five years, but
going back over many years -- we are in a period which
presents a juncture of historic forces unique in this
century. They provide an opportunity we may never have
again to create a structure of peace solid enough to last
a lifetime and more, not just peace in our time, but peace
in our children's time as well. It is on the way we
respond to this opportunity more than anything else that
history will judge whether we in America have met our
responsibility and I am confident we will meet that great
historic responsibility which is ours today.

It was 27 years ago that John F. Kennedy and I sat
in this Chamber, as freshmen Congressmen, hearing our first
State of the Union Address delivered by Harry Truman. I know
from my talks with him as members of the Labor Committee, on
which we both served, that neither of us then even dreamed
that either one or both might eventually be standing in this
place that I now stand in now and that he once stood in
before me. It may well be that one of the freshman Members
of the 93rd Congress, one of you out there, will deliver
his own State of the Union message 27 years from now, in
the year 2001.

Well, whichever one it is, I want you to be able
to look back with pride and to say that your first years
here were great years and recall that you were here in this
93rd Congress when America ended its longest war and began
its longest peace.

Mr. Speaker, and Mr. President and my distinguished
colleagues and our guests:

I would like to add a personal word with regard
to an issue that has been of great concern to all Americans
over the past year. I refer, of course, to the investi-
gations of the so-called Watergate affair.

As you know, I have provided to the Special
Prosecutor voluntarily a great deal of material. I believe
that I have provided all the material that he needs to
conclude his investigations and to proceed to prosecute
the guilty and to clear the innocent.

MORE

FOR RELEASE AT 9:00 P.M. EDT WEDNESDAY

JANUARY 30, 1974

Office of the White House Press Secretary

January 30, 1974

THE WHITE HOUSE
STATE OF THE UNION MESSAGE
OF

PRESIDENT RICHARD NIXON
TO BE PRESENTED TO THE MEMBERS
OF THE SECOND SESSION
OF THE 93rd CONGRESS

January 30, 1974

TO THE CONGRESS OF THE UNITED STATES:

We enter 1974 not at the beginning of an historical cycle, but in the middle of one. Beginnings have been made in many vital areas, beginnings which we now must build upon. New needs have arisen which we are in the process of addressing. Opportunities are coalescing which give us a chance to make historic progress toward a stable peace and expanding prosperity.

In looking at the agenda for 1974, we cannot consider the work of this or of any one year in isolation. What we select as our tasks in 1974 must build on the work of the years before, and anticipate needs of those ahead. Indeed, one of the continuing challenges facing us in the legislative process is that of the timing and pacing of our initiatives.

It would be as false to pretend that we could do --- or afford to do --- everything at once, as it would be to maintain that we can do nothing. Therefore, we must strive to maintain steady progress, selecting each year among many worthy projects those that are ripe for action at that time, and that can be accommodated within the constraints of our budget --- but pressing to ensure that the most that can be done is done.

In discussing my legislative recommendations for this Congressional session, therefore, I shall do so in the context of the advances that have already been made, the problems that remain, and the special opportunities we have in 1974 to make further progress.

I have started with certain basic premises:

— The basic tax burden on the American taxpayer should not be increased.

more

2

-- Our new initiatives, therefore, should be scaled to what can prudently be spent given the level of revenues that would be generated by the existing tax structure at full utilization of our resources.

-- Increases in Federal spending should be kept to a minimum, but the budget should be flexible enough to be used, if necessary, to maintain jobs and prosperity.

-- It is essential that we break the old habit of regarding any Federal program, once established, as permanent; we must learn to scrap old programs that are no longer effective or needed in favor of new ones that are. This is the only way we can afford to do what must be done.

Within these guidelines, there are a number of major new initiatives which are ripe for action in 1974 -- several of which can be milestones on our march to a life of greater freedom, greater opportunity and greater prosperity for all.

In particular, 1974 can be the year in which:

-- First, we not only break the back of the energy crisis, but also, through Project Independence, lay the foundation for our future capacity to meet America's energy needs from America's own resources -- at reasonable prices and with adequate environmental protection.

-- Second, we take another giant stride toward lasting peace in the world -- not only by continuing our policy of negotiation rather than confrontation where the great powers are concerned, but also by helping toward the achievement of a just and lasting settlement in the Middle East.

-- Third, we will check the rise in prices, without administering the harsh medicine of recession, and move the economy into a period of steady growth at a sustainable level.

-- Fourth, we establish a new system of comprehensive health insurance that makes high quality health care available to every American in a dignified manner and at a price he or she can afford.

-- Fifth, we continue to build a new era of achievement and responsiveness in State and local government, by cutting the strings of too tight Federal control that have bound the hands of State and local officials in community and economic development programs.

-- Sixth, we make a crucial breakthrough toward better transportation by strengthening the ability of local communities to deal with their transportation problems.

-- Seventh, we reform our system of Federal aid to education to provide it when it is needed, where it is needed, and so that it will do the most for those who need it most.

-- Eighth, we make an historic beginning on the task of defining and protecting the right of personal privacy.

more

3

Ninth, we start on a new road toward reform of a welfare system that bleeds the taxpayer, corrodes the community and demeans those it is meant to assist.

And tenth, together with the other nations of the world, we establish the economic framework within which Americans will share more fully in an expanding world trade and prosperity in the years ahead, with more open access to both markets and supplies.

## MEETING OUR ENERGY NEEDS

At the start of this Congressional session, the number one legislative concern must be the energy crisis.

The cooperative efforts of the American people, together with measures already taken by the Administration, have significantly reduced the immediate impact of the energy crisis. There has been some economic dislocation and some individual hardships, but these have been minimized by our policy of encouraging broad conservation measures and allocating scarce energy resources so as to do the least possible harm to jobs and the economy. The object has been to keep our farms and factories producing, to keep our workers on the job, and to keep our goods and services flowing, even if this means that we must live and work in somewhat less comfortable surroundings and drive fewer miles at slower speeds.

Even with the full cooperation of most Americans, however, we will still face real challenges -- and genuine shortages -- in the months and years immediately ahead. To meet these challenges, we must change our patterns of energy consumption and production, we must press forward with the development of reliable new energy sources, and we must adjust to the fact that the age of unlimited supplies of cheap energy is ended.

The immediate energy crisis began with the oil embargo imposed in the Middle East last fall. But the embargo only hastened a shortage that was already anticipated. For a number of years our fuel consumption had been climbing while our production of domestic energy supplies declined. We became more and more heavily dependent on oil imports and, consequently, more vulnerable to any interruption or reduction in those imports, as well as to sudden increases in foreign prices. Today, we have an interruption in supplies and we face sharply increased prices for those supplies when they are restored.

Irrespective of the possibility of restoring the flow of Middle East oil, we must act now to ensure that we are never again dependent on foreign sources of supply for our energy needs. We must continue to slow the rise in our rate of consumption, and we must sharply increase our domestic production.

The effects of energy conservation can be felt at once. Already the responsiveness of the American people to the recent crisis has proved to be the major factor in helping to avoid the serious consequences that the winter might have brought. That conservation must continue.

The required increase in domestic supplies cannot be achieved so rapidly. It will involve the development of entirely new sources of energy as well as the expanded development of oil and coal resources; it will require a significant expansion of our research and development efforts; it will require a shift from the use of scarce fuels to those which are more plentiful but also more

more

(OVER)

expensive than the cheap energy to which we have been accustomed;
it will require that we encourage both exploration-
and production; it will mean that as we act to prevent the energy
industry from making unconscionable windfall profits, we must
also avoid crippling that industry with punitive legislation;
and finally, it will require that we make some difficult decisions
as we sort out our economic and environmental priorities.

As we seek to act domestically to increase fuel supplies, we
will act internationally in an effort to obtain oil at reasonable
prices. Unreasonable increases in the cost of so vital a com-
modity as oil poses a threat to the entire structure of inter-
national economic relations. Not only U.S. jobs, prices and
incomes are at stake, but the general pattern of international
cooperation is at stake as well. It is our hope that we can
work out cooperative efforts with our friends abroad so that we
can all meet our energy needs without disrupting our economies
and without disrupting our economic relationships.

Last week I sent to the Congress a comprehensive special
message setting forth our energy situation, our energy prospects,
our energy needs, and the legislative measures I consider
necessary for meeting those needs. I shall not repeat that
analysis nor the full list of those recommendations today.

I do want to urge, however, that the critical energy
measures which I have proposed be made the first order of
legislative business in this session of the Congress, and
that work go forward expeditiously on the others. Those
measures which I request be given the highest priority are
the following:

-- A special energy act which would permit additional
restrictions on energy consumption and would postpone temporarily
certain Clean Air Act requirements for power plants and automotive
emissions;

-- A windfall profits tax which would prevent private
profiteering at the expense of public sacrifice;

-- Unemployment insurance for people in areas impacted by
serious economic dislocation; and

-- Mandatory reporting by major energy companies on their
inventories, their production and their reserves.

I am also asking that the Congress quickly establish the
Federal Energy Administration and the Energy Research and
Development Administration to provide the appropriate
organizational structure for administering the national energy
policy, as we work toward the establishment of a Department
of Energy and Natural Resources.

The 13 other energy measures I requested last week deal
with longer-term needs, extending beyond the present emergency.
But these also require expeditious action if we are to achieve
the goal of Project Independence -- a capacity for energy
self-sufficiency by 1980. The success of Project Independence
is essential to the continued strength of our position in
world trade, and also to our independence of action as a great
power.

I hope that our joint efforts now to resolve the energy
crisis and to move toward a capacity for self-sufficiency in
energy will enable the President who addresses the 98th Congress

more

5

a decade from now to look back and say we made it possible for
America to enjoy continued peace and prosperity in the 1980s.

# THE NATION'S ECONOMY

## The World Economy

During the past three years the United States has
reached an unprecedented level of material prosperity.
Industrial output has set new records. Trade has
flourished. Consumption has risen to the highest levels
in history. Even our inflation rate -- the most serious
economic problem we now face -- has been one of the lowest
in the industrialized free world.

The major policy decisions we took in 1971 contributed
significantly to this prosperity -- both here and in other
countries. It was clear, for example, as we moved into the
1970s that the international monetary system adopted after
World War II needed major adjustments. Unsustainable
imbalances had developed, threatening a resurgence of protec-
tionism and a disruption of world trade. This is why I
decided to take some very strong measures in August of 1971,
measures that have resulted in a major realignment of world
currency values, progress toward new and more flexible inter-
national monetary management, and negotiations toward a more
open and equitable trading system.

These adjustments, while essential, were not easy. But
now we have finally entered into a more flexible and realistic
international financial system. Much remains to be done to
complete the transition, but its beneficial results are already
clear.

The realignment of currency values helped produce an
increase of 80 percent -- or more than $50 billion -- in the rate of
U.S. exports during the past two years, along with a major improvement
in our trade balance. This improvement was good not only
for us, but also for the rest of the world. In addition,
the shocks to the world economy arising from reduced food
supplies in 1972 and 1973, and in recent months from the
oil embargo and the arbitrary increases in the price of
oil, all were managed without panic under the new arrangements.
Indeed, world trade has continued to expand, despite these
temporary difficulties.

## International Trade Barriers

A vigorous international trade is vital to the American
economy. Jobs for American workers depend on our ability to
develop foreign markets. Moreover, American consumers deserve
access to foreign-made products that might be less expensive,
or more interesting, or unavailable in the United States.
But if trade is to be advantageous over the long run, it must
be conducted on a basis which is fair to all participants.

There are still many unnecessary barriers to trade which
need to be lowered or removed. While improvements have been
made in this situation during the last 10 years, we need now
to build on this progress and to negotiate for more open
access both to markets and supplies. This is why I call
upon the Congress with special urgency to complete action
on my proposed Trade Reform Act, in order to provide the
authority we will need to negotiate effectively for reductions

more

6

in barriers to trade, to improve the trading system, and to manage trade problems at home more effectively.

As the Senate considers this legislation, I would draw its attention particularly to provisions added in the House which would seriously impede our efforts to achieve more harmonious international relationships. These provisions would effectively prevent both the extension of non-discriminatory tariff treatment and of credits to certain Communist countries unless they followed a policy which allowed unrestricted emigration. I am convinced that such a prohibition would only make more difficult the kind of cooperative effort between the United States and other governments which is necessary if we are to work together for peace in the Middle East and throughout the world. I am confident that by working with the Congress we can find a solution to this problem that will avoid a major setback in our peacemaking efforts.

At the same time, we must move forward with current negotiations to reform the international payments system under the auspices of the International Monetary Fund. These negotiations are designed to increase the opportunities for all nations to trade and invest profitably. The U.S. has already presented proposals for deterring the growth of significant imbalances in international monetary affairs while preserving for each nation a wide freedom in choosing how necessary adjustments can best be accomplished. In addition, the system will also have to accommodate the increased payments flow and prospective reserve accumulations occasioned by higher oil prices. If, however, other nations share with us the will to preserve a healthy and growing world economy, I am confident that a mutually acceptable solution to this problem will be achieved.

In practice, this means that our markets must increasingly be open to imports from developing countries -- a condition that would be significantly facilitated by enactment of the Trade Reform Act. It also means that the Congress must continue to authorize and appropriate our fair share of both bilateral and multilateral economic assistance, including a substantial contribution to the International Development Association which helps the poorest countries. In 1973 we successfully negotiated a reduction of the United States share from 40 percent to one-third of IDA funds. We cannot let the action of the House in voting against IDA stand as our final answer. We will work hard with the Congress to ensure that this country continues to play a leadership role, consistent with our own economic situation, so that long-term economic development can continue to be planned in an orderly manner.

Along with trade and monetary problems, new international agreements on investment policies and new mechanisms for dispute settlement are high on our negotiating agenda for the coming year. We must continue to work for economic arrangements which permit the beneficial flow of international investment so that all may derive the maximum benefit from their own resources. To that end, I am glad to be able to note that this week the United States completed the phaseout of controls on flows of capital from this country.

The recent oil embargo and especially arbitrary increases in the price of oil have created major economic problems for many countries, including the United States. If continued, these policies would require enormous transfers of goods and assets from oil importing nations, transfers which would

more

represent a serious burden for even the wealthiest countries
and which would be virtually unbearable for the less developed
countries.

Our objectives are clear -- we must get world oil prices
down from levels that are arbitrary and exploitative. We
must also cooperate to ensure that the international and
domestic economic policies of the advanced countries do not
compound the economic disturbances created by the current
emergency but rather that we do all that can be done to
contain and limit those disturbances.

## The Domestic Economy

Despite our general prosperity, inflation remains a most
serious economic problem, not only in the United States but
also for the rest of the world. We see clear evidence of
this problem at every hand. World oil prices have gone up
recently at dramatic rates. World food, metals and other
commodities prices are also up sharply. Because domestic
prices cannot be isolated from international prices, world-
wide inflationary pressures have helped to drive up prices
here at home.

Inflation has been a continuous problem for nearly a
decade, and it got worse in 1973. The result has been that
people have come to expect continuing price increases --
and to behave accordingly in their own economic life. Their
behavior, in turn, adds further to inflationary pressures,
contributing to a vicious inflationary spiral which is
difficult to break.

Some people have said that the best way to wring these
inflationary expectations out of our economy is by taking
the economy into a recession. I disagree. It is true that
a lower level of economic activity would reduce demand and
thus lower the pressure for higher prices. However, the
cost of such a policy in terms of increased unemployment
would simply be unacceptable.

By the same token, I also reject the notion that we should
totally ignore inflation and concentrate solely on stimulating
higher levels of employment. This policy would also involve
too high a cost since it would unleash a further acceleration
of the inflation rate.

In developing my economic policy for 1974, I have chosen
what I believe is a sound middle road: to cushion the economic
slowdown we expect during 1974 without providing additional
stimulus for inflation. We expect this policy to reduce the
rate of inflation by the end of the year. Should there appear
to be a serious threat of a severe slowdown, then we will act
promptly and vigorously to support the economy.

As we cope with the challenge of inflation, we must
recognize the clear lesson of recent years: While direct
controls over prices and wages can help fight inflation in
the short-run, they have a very limited useful life.
Inevitably, their eventual effect is to create or aggravate
significant distortions in production and distribution.
Accordingly, I will continue to watch the wage-price situation
closely and to pursue a policy of gradual, selective decontrol
except in particularly troublesome areas.

more

(OVER)

8

At the same time, those Federal programs that will help reduce inflation by increasing the supply of scarce resources will be strengthened. One key area where we can look forward to expanded supplies is that of food. With a new national farm policy that encourages rather than discourages output, we achieved a record harvest in 1973 and another record harvest now appears likely in 1974. Increased agricultural output is the only sure way to bring food prices down -- and increased output is what our new policies are producing.

Rapid inflation is not inevitable and it must not be tolerated. To regain control of inflation, however, will require patience and persistence over the long course. My Administration is dedicated to achieving this objective and we are confident that with the help of the American people we will succeed.

Another most pressing economic problem -- and a major contributor to inflation -- is the energy crisis. As the cost of using our own fuel resources came to exceed the cost of imports in the 1960's, it became increasingly attractive for us to import oil and petroleum products. Unfortunately, our growing dependence on imports made our entire economy more vulnerable to outside forces. That vulnerability has been tested in recent months -- as has the even greater vulnerability of the developed countries of Western Europe and Japan and the less developed countries which have no oil. Every American has learned the consequences of this vulnerability: short fuel supplies and higher fuel prices.

To a large extent, our flexible, adaptable economy will solve the longer run energy problem through the normal workings of the marketplace. As energy prices reach somewhat higher levels than the bargain rates of the past, conservation will be encouraged while domestic energy production will be expanded. One example of normal market forces at work has been the recent shift to smaller cars with better gas mileage. Over the next few years we can also expect to see an expansion of coal production and new output of oil and natural gas.

Nevertheless, we will still have to import some of the oil we will need in the immediate future. It is essential, therefore, that we seek a more reasonable price for oil in the world market.

It is also imperative that we review our current and prospective supplies of other basic commodities. I have therefore directed that a comprehensive report and policy analysis be made concerning this crucial matter so that governmental actions can properly anticipate and help avoid other damaging shortages.

Even with the inflation and energy problems, 1973 was a year of many important economic gains for American people.

First, employment in 1973 increased by 2.7 million persons; this 3.3 percent rise in employment was the largest since 1955. New job opportunities greatly benefitted all categories of workers, including women, non-whites, teenagers, and Vietnam veterans. Unemployment reached low levels, especially for skilled workers.

more

9

Second, the purchasing power of the American people reached new highs last year. Even after allowing for price increases, people are now consuming more goods and services than they did a year ago, or in any other year in the entire history of the United States.

Not everyone's purchasing power went up, of course. Inflation took its toll on many families whose income did not rise as fast as that of the average American. It is for this reason that we continue to regard inflation as a very serious enemy. At the same time, however, we should not ignore the substantial economic gains that have been made.

## Perspective on 1974

We have known for some time that a slowdown in economic growth is inevitable in 1974. It has been clear that our economy has simply been growing at an unsustainable rate. Shortages of skilled workers, full utilization of plant and equipment in key industries, and short supplies of a number of essential raw materials have all provided clear indications that our rate of growth would have to taper off. Unfortunately, the very mild slowdown which we anticipated for 1974 now threatens to be somewhat more pronounced because of the oil embargo, the resulting shortages, and the oil price increase.

We expect, therefore, that during the early part of this year output will rise little if at all, unemployment will rise somewhat and inflation will be high. Our objective, however, is to turn this situation around so that later in the year output will be rising more rapidly, while unemployment will stop rising and will then decline, and the rate of inflation will slow.

## Role of the Federal Budget

The budget that I will recommend to the Congress next week will help us achieve our goals for this period. It will support the economy, resisting a major slowdown, but it will not provide a degree of stimulation that could accelerate inflation. If future events suggest that a change in fiscal policy is desirable, I will promptly recommend the appropriate changes. In particular, I will not hesitate to use the stimulus of fiscal policy if it becomes necessary to preserve jobs in the face of an unexpected slackening in economic activity.

For fiscal year 1975, my budget recommends total spending of $304.4 billion, an increase of $29.7 billion over the current year. The increase is being held to the minimum level necessary -- nearly 90 percent of the increase is unavoidable under existing law. The budgeted increase in relatively controllable outlays is only 4.2 percent.

Federal receipts should reach $295 billion during fiscal year 1975, an increase of $25 billion. The projected budget deficit is $9.4 billion. Under conditions of full employment, however, Federal receipts would be substantially higher and there would instead be a moderate budget surplus.

The Federal budget remains an essential tool in the fight against inflation. With the energy supply limitations we are experiencing and the price pressures they create, budget discipline is still required.

more

(OVER)

10

I have noted with satisfaction that most Members of the Congress have also recognized the need for budgetary discipline, and that work is going forward to establish a more systematic budgeting procedure. The Congress devoted considerable effort in 1973 to developing a mechanism for coordinating its individual spending decisions with the budget as a whole. I continue to support this effort, although I have been troubled by some of the extraneous amendments which have been added to some of the measures for achieving this goal. I urge the Congress to enact workable budget reform in this legislative session.

## Tax Reform

Our entire economy is affected by the incentives for job-creating investments that are embodied in our tax laws. Major steps have been taken to reform our tax laws in the past five years, but much remains to be done.

Since 1969 -- primarily through the Tax Reform Act of 1969 and the Revenue Act of 1971 -- major changes have been introduced to make the personal income tax system conform more nearly to contemporary standards of fairness. Both the higher level of personal exemptions and the low income allowance have worked to free more than eight million low income families from their entire Federal income tax burden. The difference in the tax liability for single and married taxpayers has also been reduced. As a result of these and other tax changes, individual income taxes will be about $25 billion less in 1974 than they would have been under the old tax laws. The saving in the tax burden for a typical family will be more than $270, or the equivalent of two weekly take-home paychecks for the average worker.

I look forward to working with the Congress during the next few months not only to simplify our tax laws themselves, but also to simplify the tax forms that individuals fill out and to distribute the income tax burden more equitably.

Last April, the Secretary of the Treasury presented to the Congress a set of Administration proposals for major and fundamental tax reform. Included in these proposals were the establishment of a minimum taxable income so that no one could avoid paying a fair share of the tax burden, the establishment of new rules for taxing income from foreign sources, and also a limitation on artificial accounting losses to eliminate so-called "tax shelters." I urge the Congress to consider the Administration's tax reform proposals early in the year.

I have also been concerned about the excessive burdens imposed on our low income elderly families by State and local property taxes. To deal with his problem, I have proposed a refundable tax credit for those low income elderly persons whose property taxes exceed five percent of their income. The proposal would also provide equivalent relief for the low income elderly individual who pays rent. I again urge the Congress to enact this very important proposal.

## Financial Reform

The health of our economy depends upon an efficient and flexible private financial system -- commercial banks, thrift institutions, credit unions, and a host of other institutions and individuals that comprise the financial sector of our economy. The average family depends on these institutions,

more

11

both to provide a fair and reliable return on its savings and to provide credit on reasonable terms when needed to buy homes, automobiles and other purchases. There have been occasions recently when this financial system has not worked as well as it should -- occasions, for example, when mortgage lending has been very difficult to obtain. In large part these problems have been the result of legislation, regulations and institutional arrangements which were suited to an earlier time but which are now obsolete.

To remedy this problem I submitted draft legislation last year which reflected the results of careful study by a Presidential commission and Government experts. I again urge the Congress to act promptly on this matter so that American families, businessmen, and local governments can be served by a financial system suited to the economic conditions of the 1970s.

The Administration is also studying the competitive position of foreign banks within this country and of American banks abroad to make sure that discriminatory regulations do not prevent American banks and other financial institutions from doing business they are entitled to do. I will be following the results of this study with considerable interest and will submit to the Congress any proposals resulting from the study which seem desirable.

## A HEALTHY AGRICULTURAL ECONOMY

Abundance is the primary goal of our farm policy -- abundance that can guarantee lower food prices for every American and higher incomes for all American farmers.

Five years ago, agriculture was a troubled industry:

- Government controls were reducing incentives for production and costing the taxpayers over $3 billion a year in farm subsidies designed to hold down production.

- Farm income was low ($14.7 billion) and the long hours worked by farmers earned them an average income that was 26 percent below the nonfarm average. Farm families had been leaving the farm at an average rate of over 100,000 a year.

Today, that picture has been dramatically altered:

- Farm markets have expanded dramatically. Farm exports have set new records in each of the last four years, becoming the largest single factor in the Nation's balance of payments and strengthening the dollar in international money markets.

- Farm production has reached new record levels in each of the last three years, and a new record harvest should be forthcoming in 1974.

- The billions of tax dollars which used to go for farm price support payments for basic commodities every year will be reduced to nearly zero.

- Farm income has reached record levels. By 1973, the gap between farm income and nonfarm income had closed from 26 to 7 percent. Net farm income was up from $14.7 billion to $26.1 billion.

more

12

We are making this progress not through more Government regulation but less. One of the proudest achievements of this Administration was the enactment of the Agriculture and Consumer Protection Act of 1973, which places production decisions where they belong -- with farmers, not with the Government.

A primary challenge for Federal agricultural policies now is to encourage greater production of agricultural goods -- which will mean more income for the farmer, greater international trading benefits for the Nation, and reasonable food prices for the consumer. I am therefore asking the Congress to revamp the programs which still require restrictive Federal control over the production of some remaining farm commodities -- especially rice, peanuts, tobacco, sugar, and extra long staple cotton.

To further enhance agricultural activity, the Administration will also:

- Promote longer-run soil and water conservation practices.

- Consolidate the locations of local offices of Federal agricultural agencies -- specifically, the Agricultural Stabilization and Conservation Service, the Soil Conservation Service, the Farmers Home Administration, and the Federal Crop Insurance Corporation -- creating one-stop agricultural service centers on the local level to make things easier for the farmer and less costly for the Government.

- Place high priority on directing agricultural research into those areas which will assure plentiful agricultural goods at reasonable prices, maintain our competitive advantage in world agricultural production, and protect the land.

At my direction, Secretary Kissinger recently proposed to the United Nations that it convene a World Food Conference, a concern made urgent by acute food shortages in many parts of the world. This conference, to be held in November of 1974, should prove of particular importance to the American farmer, whose extraordinary productivity has made this Nation the world's leading food exporter and whose own prosperity will continue to increase as we help to meet the needs of a hungry world.

Our farm policy must of course address not only the needs of the farmer but also those of the consumer. During 1973, we experienced a period of rapidly increasing food prices. Those prices leveled off in late 1973, but now we appear to be heading into a period of increasing food prices for at least the next few months. It is our intention to hold these increases to the smallest possible rate through executive actions such as lifting the quota on wheat imports, an action that I took last week. But the most significant force in the battle against higher food prices is higher production. This summer and fall, the large 1974 harvest should be coming on the market, serving as the best possible damper on higher prices.

more

13
ECONOMIC SECURITY

One of the most significant legislative achievements of 1973 was the enactment of the Comprehensive Employment and Training Act (CETA). A form of manpower revenue sharing, this bill transfers from the Federal Government to States and localities significant control over the design and operation of programs to improve the employability of the unemployed and the under-employed. CETA is a landmark of the New Federalism. It is also a landmark on the way to better manpower programs.

Under this legislation, State and local governments will be able to use Federal funds to meet locally-determined needs and to devote special attention to employment problems with particular local impact -- as, for example, those that might arise in certain areas as a result of the present energy shortage. In my new budget, I am including an additional $250 million for CETA in the current fiscal year, and $350 million in the year beginning July 1, for distribution to areas with high unemployment. Overall, I am requesting more than $2 billion to fund our training and employment programs in the coming year.

Other proposals related to economic security that I made to the Congress last year, and on which I again urge action, include:

-- The establishment of minimum vesting, funding and fiduciary standards for private pension programs, so that workers could have greater assurance of receiving the pensions they expect and deserve when they retire. I urge that we work together to resolve speedily the remaining disagreements and to enact responsible legislation which increases employee protection without burdening employers to such an extent that existing plans are jeopardized or new ones discouraged.

-- Extension to State and local governments of the law forbidding employment discrimination against older workers.

-- Improvement of the Federal-State unemployment insurance program in several ways: by increasing the State limits that keep some unemployed workers from receiving a reasonable proportion of their normal wage, by extending coverage to farmworkers, and by prohibiting payment of benefits to strikers while assuring benefits to non-participants unemployed as a result of a strike.

These general improvements in unemployment insurance should be augmented by a special extension of present benefits for those specific areas of the country which experience particularly high levels of unemployment over the next 12 months. In addition, basic coverage should be provided for those in these areas who do not at present have any unemployment insurance. I will submit special legislation to achieve this purpose.

I also continue to support legislation to raise the minimum wage. Higher prices have eroded the purchasing power of workers receiving the current minimum wage. But we must be careful to guard against enacting a bill which includes sharp increases or coverage extensions that would keep low income workers from being employed or a bill with a minimum wage for youths so high that we unwittingly deny them jobs.

Finally, we must attack one of the most troublesome problems faced by both rural and urban areas; the existence of persistent and often severe unemployment or low incomes in areas whose character has been altered by changes in our economy and technology. Within the next several weeks, I will propose an Economic Adjustment Assistance program to help States and communities in overcoming problems caused by structural changes in their economies. This program would replace the present Economic Development Administration and the Regional Action Planning Commissions after a period of orderly transition.

more

(OVER)

INCOME SECURITY

One measure of a nation's character is the respect it accords to its elderly. Another is the way it helps those in need. We can be proud of the efforts we have made, but it is time to reassess where we are and what direction we should take in the future.

We can take pride in the fact that:

- Cash benefits under social security have risen from $26 billion in fiscal year 1969 to $63 billion in fiscal year 1975, primarily as the result of five benefit increases totaling almost 70 percent and reaching 29 million persons.

- A program of Supplemental Security Income has been initiated and will soon be providing benefits to more than 5 million of the low-income aged, blind, and disabled, on a uniform, nationwide basis in a way that respects their dignity.

But our income security programs need more than improved benefits.

Over the past thirty-five years, a multitude of federally funded programs has grown up whose primary purpose is income security for those in need. Each of these efforts reflects a humane attempt to respond to a worthy goal. However, as cash, in-kind and service programs have rapidly expanded in the past few years, two things have become painfully clear:

- First, the result is an extremely costly set of generally unrelated, uncoordinated programs with many unintended and undesirable consequences; and

- Second, these efforts neither efficiently nor equitably accomplish the overall objective of assisting lower income families and individuals to achieve greater economic independence.

The fact that a third of the new Federal budget -- $100 billion -- will be spent on income security programs in fiscal year 1975, compared to the $38 billion, or one-fifth of the budget, which they received just five years ago, highlights the need to rationalize and integrate our income assistance programs.

As long ago as 1969, I called for a complete overhaul of our discredited welfare programs. I said then that "whether measured by the anguish of the poor themselves, or by the drastically mounting burden on the taxpayer, the present welfare system has to be judged a colossal failure."

At that time, I proposed the Family Assistance Plan. Neither the Congress nor the country accepted that proposal. I do not intend to resubmit a new version of the Family Assistance Plan.

Since then, we have made a concerted effort to improve the administration of the existing programs. In 1973, for the first time in recent years, because of vigorous new Federal and State initiatives to enforce the rules more strictly, growth in the Aid to Families With Dependent Children case load was halted.

But in their overall impact, the welfare programs remain a failure and an outrage.

As an example of the failure, recent studies have shown that fully 40 percent of the AFDC benefits being paid are either going to ineligible persons or are incorrect in amount. This performance

more

15

is not just the result of fraud, although there is some of that.
It is primarily and overwhelmingly the result of a system which
is so complex and so riddled with obscure, obsolete and incom-
prehensible regulations that it defies fair and efficient
administration.

I plan to make a major new effort to replace the current
maze of welfare programs with a system that works. This task
will be difficult, but we have no other alternative, save
further waste -- both of lives and dollars. I welcome the
evidence that thoughtful Members of the Congress, after careful
study, have reached the same conclusion.

While this effort goes forward, I will make every possible
effort to improve the operation of the existing programs through
administrative reforms, recognizing that a replacement system
cannot be developed, enacted, and put into operation overnight.
But, unless we move urgently to the development of a new system,
efforts to improve the administration of the present programs
will eventually be undermined by their basic structural flaws.

In the development of my proposal, I will be guided by
five principles:

(1) All Americans who are able to work should find it more rewarding to work than to go on welfare. Americans would strongly prefer to have good jobs rather than a Federal handout. While we should provide cash assistance to those in need, we must always encourage complete self-support for those who are capable of it.

(2) Cash assistance is what low-income people need most from the Federal Government. The people themselves, not the Federal Government, know their own needs best.

(3) We need to focus Federal help on those who need it most. People in need should receive equal treatment from the Federal Government regardless of their place of residence.

(4) The new system should be as simple as possible to administer with rules that are clear and understandable. It should be based on objective criteria rather than the personal judgment of administering officials. And it should be efficient.

(5) This new approach should not require an increased tax burden for any of us. Too much of the income of all of us now goes to support Government. We help no one -- certainly not those in poverty -- by weakening our free enterprise system by even higher taxation.

Starting from these basic principles, I believe we can
develop a new system which would ensure that those who can
help themselves do help themselves, and which would allow
those who cannot help themselves to live with dignity and
self-respect.

IMPROVING OUR PEOPLE'S HEALTH

In February of 1971, I outlined to the Congress a new
national health strategy to assure that no American would
be denied access to high quality medical care because of
an inability to pay. Much has already been accomplished
toward meeting that objective.

more

(OVER)

16

A little over two years ago, I took special satisfaction in signing into law the National Cancer Act, which enabled us to launch an accelerated effort to conquer this dread disease. Considerable progress has been made in our attack on cancer and there is much hope that additional knowledge can be developed in the future. In the budget that I will submit to the Congress next Monday I plan to ask for an additional $100 million above last year's request of $500 million for the expanded attack on cancer. In addition, biomedical research in other areas, including heart disease, has been intensified --- and the total 1975 budget for biomedical research will exceed $2 billion, more than double the total in fiscal year 1969.

We are also making headway toward increasing the Nation's supply of health manpower. During the last ten years, first year medical school enrollments have grown by more than 55 percent. The number of other health professionals also can be expected to grow dramatically. Just last month, I approved legislation along the lines I requested in 1971 to permit the Federal Government to support the demonstration of health maintenance organizations across the Nation. During both 1974 and 1975, $125 million will be provided through health maintenance organizations to demonstrate the benefits of prepaid health care to our citizens.

Federal programs to finance health services for the aged, for the disabled, and for low income persons have been greatly expanded. Since 1969, Medicare and Medicaid coverage has been extended to an additional 21 million aged, disabled, and low-income Americans. The range of services covered under Medicare and Medicaid has also increased.

Consumer safety programs -- to assure safe foods, drugs, cosmetics, and other consumer products -- have received almost a fourfold increase in Federal funding since 1969.

Despite all these advances, however, too many Americans still fail to receive needed health care because of its costs. And too often the costs of health care threaten our citizens with bankruptcy while the services that can prevent or cure disease are not fully utilized.

As one of my major new initiatives for 1974, I shall soon submit to the Congress a comprehensive health insurance proposal which would:

- Make available health insurance protection to millions of Americans who currently cannot obtain or afford the private health insurance coverage they need.

- Provide all Americans with vastly improved protection against catastrophic illness.

- Place a new emphasis on preventive health care.

- Provide State and Federal subsidies for low-income families, and for those whose special health risks would otherwise make them uninsurable or insurable only at exorbitant expense.

My comprehensive health insurance proposal will build upon the strengths of the existing health system, rather than destroying it. It will maintain the high quality of medical care without requiring higher taxes. It will be based on partnership, not on paternalism. And most importantly, it will require doctors to work for their patients, not for the Federal Government.

more

17

This plan would require that employers offer a comprehensive health insurance plan to all their full-time employees, with the employer paying a share of its costs. The role of private health insurance in financing health care would be expanded and the consumer's opportunity to choose between competing health insurance plans would be enhanced.

In addition to this plan, there are a number of other health-related measures that I urge the Congress to enact this year. These include:

- A Health Resources Planning Act, to help States and localities improve their planning and use of health resources;

- New and expanded national health service scholarship legislation, to increase the number of Federal scholarships available to students in health professions, and also to help ensure that the Federal Government can meet its needs for physicians; and,

- A general expansion of the guaranteed student loan program, to provide adequate financial assistance to all professional and graduate students, including health professionals.

## IMPROVING EDUCATION

The Federal Government should provide strong leadership in assuring equal access to a high quality education for all Americans and in bringing about renewal and reform of all of our education programs.

Since 1969, we have raised Federal spending for education from $4.3 billion to $7.6 billion -- an increase of 76 percent.

In special messages to the Congress on education in the past, I set forth five major proposals to improve American education. They were:

- A new program of student assistance to help to ensure -- for the first time in the Nation's history -- that no qualified person is barred from attending college by lack of money.

- A National Institute of Education, to be the focal point for educational research and development aimed at increasing our knowledge of how to help students learn.

- A National Foundation for Higher Education, to encourage innovation in learning beyond high school.

- An Emergency School Aid program to assist desegregating school districts.

- A thorough reform of the programs for Federal support of elementary and secondary education, consolidating the myriad separate categorical grant programs in order to transfer educational decisions back to the State and local levels where they belong.

The first four of these basic proposals have been enacted, in whole or in part, and a great deal has already been accomplished through them. As for the fifth, reform

more

(OVER)

18

of Federal funding for elementary and secondary education, I believe that 1974 should be the year of its enactment.

## College Student Assistance

The Basic Educational Opportunity Grant Program is the primary vehicle in my effort to ensure that no qualified student be denied a college education because of lack of funds. In my new budget, I am asking Congressional approval to strengthen this program by providing grants of up to $1,400 a year for needy students. Altogether, when combined with other student funding efforts, the Federal Government in the coming fiscal year would provide an estimated $2.2 billion of financial aid to post-secondary students, an increase of over $900 million from the level of five years ago.

Since the present student assistance programs are targeted to help the neediest, and because the costs of higher education have risen dramatically, many middle income students are now finding it increasingly difficult to make ends meet. I therefore also recommend that the limit on total borrowing be increased so that professional and other graduate students will be able to find adequate student loans.

## Educational Research and Development

When I originally proposed the creation of a National Institute of Education, I suggested that providing equal opportunity for quality education means, in part, increasing our knowledge about the ways that students learn and then changing the way we teach them. For too long we have followed the belief that bigger educational programs are necessarily better educational programs and that money alone can solve our educational problems. But now we are beginning to see that the quality of our thinking about education can be as important as the size of our educational budget.

The National Institute of Education can help us to marshal our educational resources in ways which will produce the best results. It has already begun to provide the kind of leadership in educational research and development which I have long believed was needed.

## Educational Innovation Beyond High School

While the National Foundation for Higher Education which I proposed in 1970 has not been established, the Fund for the Improvement of Post-secondary Education was set up by the Congress. The fund is now providing support for the development and demonstration of more effective approaches to college level education. Our initial assessment leads me to believe that the fund will, in the years to come, become the primary focal point for innovation in higher education.

## Assisting School Desegregation

Under the Emergency School Aid Act of 1972, an estimated $467 million in Federal funds will have been provided to local school districts by the end of 1975 to assist in the process of elementary and secondary school desegregation, to encourage voluntary programs

more

19

to overcome minority group isolation, and to assist in
meeting the educational needs of children who, because
of racial isolation, have not had an equal educational
opportunity.

By the 1975-1976 school year, the bulk of the
problems incident to "de jure" segregation should have
passed. However, to provide assistance to those other
school districts which may still be required to take
special desegregation measures as the result of court
rulings, I have budgeted an additional $75 million for
fiscal year 1975. In addition, the Federal Government
will continue to provide civil rights education advisory
activities to local districts to assist them in meeting
any remaining problems.

Busing

I have often expressed my opposition to the use of
forced busing for purposes of achieving racial balance.
I have also proposed legislation which would dictate
reasonable limits on the use of forced busing, and I
have opposed the consolidation of school districts in
an effort to achieve racial balance in the larger district.
Such consolidation plans have only led to more busing and
the eventual disappearance of the neighborhood school.
The end result of an excessive reliance on forced busing
and the imposition of arbitrary ratios has frequently
been an increasing concentration of the poor and minorities
in our central cities and the serious weakening of the
very school systems which must serve them. In some cases,
the education of minority children has actually suffered,
not benefitted, from such plans.

I shall continue to support the passage of legislation
which makes busing only a last resort --- tightly circum-
scribed even then. I will also continue to work with the
Congress to revise my proposals in light of unfolding
events in this area.

Funding Elementary and Secondary Education

I am encouraged by the interest the Congress has
continued to show in legislation which follows the concepts
put forward in my proposed Better Schools Act. I believe
that meaningful compromise is now possible, and that we can
at last reform and consolidate Federal grants for elemen-
tary and secondary education, vocational programs and
adult education.

I hope that the Congress will include four basic
elements in this reform:

- Consolidation of existing categorical grant programs.

- Granting greater decision-making authority to State and local educational agencies.

more

(OVER)

20

-- Greater equity in the distribution of Federal funds to the States for the education of disadvantaged children.

-- Reform of the impact aid program to concentrate support in those districts where the Federal presence has substantially decreased the tax base, rather than those in which it has increased the tax base.

Upon enactment of legislative authorities that accomplish these goals for elementary and secondary education, vocational programs and adult education, I will propose special supplemental appropriations to provide funding for the 1974-1975 school year. This funding would place most elementary and secondary education grant programs on a "forward funded" basis, letting State and local agencies know how much they will receive while plans for the next school year are being made. "Forward funding" is an important concept in the financing of education, and it merits the full support of the Federal Government.

As I noted in my message sent to the Congress on education policy last week, I also recommend additional support for several other educational programs -- some old and some new. These include:

-- An additional increase in aid to black colleges and other developing institutions during fiscal year 1975, thus quadrupling Federal funds for these important educational institutions since I took office.

-- Continuation and extension of the Head Start program, our single largest child development program. In 1975, Head Start will reach 282,000 disadvantaged youths year-round, as well as some 78,000 pre-schoolers during the summer -- and it will extend its activities to include handicapped youth.

-- The consolidation of eight separate authorities for education of the handicapped into four broader and more flexible programs.

## Non-Public Schools

I remain firmly committed to the principle of educational diversity. The continued health of the Nation's non-public schools is essential to this concept. Although governmental efforts aimed at supporting these schools have encountered difficulty in the courts, I believe we must continue our efforts to find ways to keep these schools open.

For that reason, I continue to support legislation which permits tax credits for parents who pay to send their children to non-public schools.

## HELPING OUR VETERANS

Twenty-nine million Americans living today have given military service to their country. As a group, veterans are among our most productive citizens. Studies show that they generally have higher incomes, more education, and better health than non-veterans of the same age.

more

21

We can be proud of the veterans' contributions, but we must also be concerned for those veterans and veterans' families who remain in need.

The assistance provided to veterans and their families in recent years has been substantial:

- Total compensation payments for veterans disabled or killed in military service have been increased from $2.7 billion in 1969 to $3.9 billion in the coming fiscal year.

- Medical care in VA hospitals and clinics has been greatly improved and expanded, with ten new or replacement hospitals now in service and five more in preparation.

- Educational benefits per trainee have more than doubled since 1969.

- Last year two key measures -- one expanding health care and the other improving the national cemetery system for veterans -- were passed and signed into law.

- Of vital importance, the unemployment rate for Vietnam era veterans has been sliced from 11 percent in early 1971 to 4 percent by late 1973. As a result, Vietnam era veterans have a higher employment rate than others of their same age, a significant achievement that is well deserved.

Earlier this week, in a special message to the Congress, I proposed additional legislation to help veterans in two crucial areas in 1974 -- pensions and education.

My pension proposals would benefit some 1 million veterans and 1.3 million veterans' survivors who are in economic need because of disability, age, or the loss of a breadwinner. VA pensions already go a long way toward meeting such needs, but the pension structure itself is fraught with inequities and anomalies that are technical in nature but tragic in consequence. My proposals would correct these deficiencies.

Veterans now in training require additional help if their GI bill allowances are to keep pace with rising costs. I shall therefore propose that GI bill benefits be raised by an average of 8 percent.

I have also set a 1974 goal for the Government of placing an additional 1.2 million veterans in jobs or job training. There remain sizable numbers of educationally disadvantaged veterans and service-disabled veterans who have never taken advantage of Federal training opportunities and are now unemployed. I have directed that, as a matter of high priority, the Federal Government's efforts to reach these veterans be intensified and that they be counselled and encouraged to use the available services.

## EQUAL OPPORTUNITY FOR ALL AMERICANS

This Administration has made a determined effort to secure equal opportunity for those who have been previously denied such opportunity. I am personally very proud of the success those efforts have already achieved, and I am committed to building on that success in the future.

more

(OVER)

22

Progress for Minority Groups

Members of racial minority groups have made considerable strides toward equal opportunity in recent years. The following are among the more notable benchmarks of this progress:

- Setting an example as an Equal Opportunity Employer in the past five years, the Federal Government has added more than 35,000 minority group members to its civilian employee roles.

- In the Armed Forces, more than 850 minority-group cadets are now enrolled in the military academies; and whereas prior to 1971 only four minority group members had ever achieved general or flag rank in the armed forces, now sixteen serve on active duty as generals and admirals.

- Federal aid to minority business enterprises — one of the cornerstones of the Administration's effort to open new economic horizons for minority group members — has nearly tripled since 1970.

- Civil rights enforcement activities have continued at a vigorous level, with their funding substantially increased.

- Since 1969, combined Federal expenditures on civil rights activities and minority economic development programs have grown from less than $1 billion to $3.5 billion.

- Five years ago 68 percent of all black children in the South were still attending all-black schools. Now that figure has been reduced to 8 percent, and the dual school system has been virtually eliminated.

- The Government has also sought to expand job opportunities through legal actions of its own against those who may be engaged in discriminatory practices. During 1972 and 1973 the Department of Justice initiated 34 pattern and practice lawsuits against approximately 207 defendants. These suits directly covered more than 248,803 employees. During the same period of time, approximately 37 cases were fully resolved by entry of decrees and an additional six were partially resolved by the entry of decrees. The decrees entered in those two years alone covered more than 217,000 employees and provide specific goals for the hiring of more than 21,800 minorities and women in traditionally white and male jobs. In addition, those decrees provide new transfer of seniority rights for approximately 12,700 minorities and women and provide for back pay awards which are estimated to amount to well over $6,000,000.

The real story lies not in these figures themselves, but in the facts and the attitudes they represent. They do not represent a flamboyant promise, but rather a quiet determination to work not only toward the symbols but also toward the substance of equal opportunity. They represent an effort to build foundations that will last — in particular, the foundation of economic independence, and of a basic faith in the equal dignity of mankind.

more

23

Justice for American Indians

For too many years the American Indians -- the first Americans -- have been the last Americans to receive the rights and opportunities to which they are entitled. This Administration has taken the initiative to change this picture.

For its part, the Federal Government must put behind it the role of autocratic manager of Indian reservations. We shall continue to encourage Indians and their tribal governments to play an increasing role in determining their own future. We are also particularly determined to defend the natural resources rights of Indian people.

The last five years have been historic steps in Federal Indian policy. In 1971, we worked closely with Indian leaders to achieve a settlement of Alaska Native claims, a settlement consistent with America's sense of fairness and also indispensable to the growth and development of all of Alaska.

We also returned lands taken away long ago from the Taos Pueblo at Blue Lake. We returned lands wrongfully taken from the Yakima people. Because the Menominee people have seen their tribal states involuntarily terminated but had nevertheless kept their land and their tribal structure together, the Congress enacted and I signed the bill which restored the Menominee tribe to trust status. In the courts, we are forcefully asserting Indian natural resources rights, as we have done in protecting Indian rights in Pyramid Lake.

One measure of our attempt to foster a better, more humane policy is the level of Federal funding benefitting American Indians -- over twice what it was five years ago or about $1.6 billion.

I am especially encouraged by the fact that the rate of infant deaths, pneumonia, influenza, and tuberculosis is significantly lower among Indians than ever before. Although we have not yet achieved our full goals of health and educational services for the Indian people that are fully compatible with those of the general population, this progress demonstrates our continuing commitment.

The Congress has shared in these accomplishments in a spirit of bipartisan cooperation. I hope that I will soon have on my desk two more enactments on which Congressional action is progressing: measures to speed Indian economic development and to upgrade the position of the Commissioner of Indian Affairs to the Assistant Secretary level. Also still awaiting Congressional action are four other proposals I have submitted previously: to permit turning over to Indian tribal governments the management and control of Indian programs; to create an Indian Trust Counsel with authority to safeguard Indian natural resources rights; to help ensure that funds for Indian education actually reach Indian children; and to provide greater local control over federally assisted reservation programs through a program of tribal grants.

more

(OVER)

24

Looking forward, I shall ask that the Bureau of
Indian Affairs make specific plans to accelerate the
transfer of significant portions of its programs to
Indian tribal management, although I repeat my assurances
that, while accelerated, these transfers will not be
forced on Indian tribes not willing to accept them.

## The Spanish-Speaking

The Spanish-speaking citizens of our Nation face
special problems in obtaining equal opportunities because
of language and cultural barriers. For that reason, my
Administration has made a special effort to expand those
opportunities.

Our progress on this front is reflected in many ways.
Nearly 3,800 Spanish surnamed Americans have been employed
by the Federal Government, despite an overall reduction in
Federal jobs. The Small Business Administration has also
increased its loans to Hispanic businessmen, reaching a
total of $109 million in fiscal year 1973.

In 1969, the Cabinet Committee on Opportunities for
the Spanish-speaking people was created. The Cabinet
Committee has both made the Government more aware of the
needs and the talents of Spanish-speaking citizens and
helped to expand Federal employment of the Spanish-speaking.
Since the authorization for this organization expires this
year, I am asking the Congress to extend its life through
June 30, 1975. The Cabinet Committee on Opportunities for
the Spanish-speaking serves to focus the Administration's
continuing efforts in this important area of concern.

## The Rights of Women

Both men and women have become increasingly aware of
the pattern of sometimes blatant but often subtle discrimi-
nation to which women are subjected. Some of this discrimi-
nation can be erased by existing law; some requires new
law: some would be rectified by the Equal Rights Amendment,
now nearing ratification by the required three-fourths of
the States. It is my hope that the Equal Rights Amendment
will be ratified speedily so that equal justice under our
laws will become a reality for every American.

One of the primary goals of this Administration is to
ensure full equal employment opportunity for women by striving
to open to women jobs that previously were reserved for men,
often simply by habit or custom. Specifically, we have moved
vigorously both to enforce the law and to lead by example --
by insisting on equal employment and promotion opportunities
within the Federal service, by promoting more women into
the professionally critical areas of middle management and
by continuing our special recruiting drive to bring more
women into the highest levels of Government.

To help advance these goals I have appointed the first
woman Counsellor to the President, and she, in turn, has
set up a new Office of Women's Programs within my executive

more

office. We are particularly proud that this Administration
is the first to have women as heads of three independent
Federal agencies -- the Atomic Energy Commission, the Federal
Maritime Commission, and the United States Tariff Commission.

The effort to improve the economic status of women
outside the Government is also continuing. The Equal
Employment Opportunity Commission, which has been given
enforcement power in the Federal Courts, has reported a
marked increase in its activities to end sex discrimination
in employment.

We will continue to pursue all these efforts with vigor.
This emphasis is especially appropriate as we approach 1975,
which has been declared International Women's Year by the
United Nations.

One especially invidious form of sex discrimination in
particular is ripe for correction now through new legislation:
the discrimination that often denies women equal access to
credit. In an economy that increasingly operates on credit,
this is a particularly grievous practice.

The Congress already has before it a proposal to ensure
that credit is extended to all persons on an equitable basis,
without regard to their sex or marital status. This Adminis-
tration strongly supports this proposal and is sending to
the Congress amendments which we believe will strengthen
it even further. I urge prompt consideration and passage
of this vital legislation.

PROTECTION AGAINST CRIME AND INVASIONS OF PRIVACY

Over the past five years I have had no higher domestic
priority than rolling back the tide of crime and violence
which rose in the 1960s. I am therefore especially pleased
with the progress we are making on this front:

-- After 17 years of continuous and often dramatic increases, crime in 1972 registered its first overall decline. Although in 1973 it again registered a slight increase, it still held below the level of 1971. Now that the momentum of increase has been broken, I am confident that we can look forward to further reductions in crime rates in the years ahead.

-- Serious crime in our largest cities was actually reduced
by 13 percent between 1971 and 1973.

-- In Washington, D.C., where the Federal Government has
special law enforcement responsibilities, crime has been cut in
half since 1969.

Indictments and convictions of organized crime racketeers
have more than tripled since 1969, thanks in large measure to
the 1970 Organized Crime Control Act and to expanded Federal
interagency strike forces. In addition, of course, the riots,
urban terrorism and burnings of the 1960s have now become a
thing of the past.

These indications of success do not mean that we should
slacken our anti-crime effort, but that we should intensify
it. Key elements of our strategy to do so -- most of which
will require the assistance of the Congress -- include:

more

(OVER)

26

-- Comprehensive reform of the Federal Criminal Code. Last year I submitted a proposal which was based upon the work of the Justice Department and a five-year study completed by the National Commission on Reform of Federal Criminal Laws. The Federal criminal code has not been completely revised in a quarter century and the need for reform is urgent. I call upon the Congress to act expeditiously in reforming our criminal code, to make it both more workable and more responsive to the demands of our complex society.

-- Restoration of the death penalty under the Federal Criminal Code for several especially heinous specific crimes which result in the death of innocent victims. Examples of such crimes are hijacking, kidnapping, or bombing.

-- Increased Federal assistance to State and local law enforcement agencies. For the next fiscal year, I propose funding through the Law Enforcement Assistance Administration of $886 million -- up from only $60 million in 1969.

-- Increasing the resources available to the U.S. Attorneys' offices throughout the Nation -- offices which have, in the last three years, increased the number of criminal convictions by 28 percent.

-- Creation of additional Federal judgeships to assure speedier disposition of criminal cases. Legislation to accomplish this goal is now before the Congress.

-- Comprehensive improvement of Federal correctional programs. Already 15 additional correctional institutions have been built, acquired or begun. My 1975 budget request would represent a tripling of 1969's budget levels.

-- A new effort to deal more effectively with employment problems caused by the increase in the number of illegal aliens entering this country. Legislation to achieve this objective is also before the Congress.

## Protecting the Right of Privacy

One of the basic rights we cherish most in America is the right of privacy. With the advance of technology, that right has been increasingly threatened. The problem is not simply one of setting effective curbs on invasions of privacy, but even more fundamentally one of limiting the uses to which essentially private information is put, and of recognizing the basic proprietary rights each individual has in information concerning himself.

Privacy, of course, is not absolute; it may conflict, for example, with the need to pursue justice. But where conflicts occur, an intelligent balance must be struck.

One part of the current problem is that as technology has increased the ability of government and private organizations to gather and disseminate information about individuals, the safeguards needed to protect the privacy of individuals and communications have not kept pace. Another part of the problem is that clear definitions and standards concerning the right of privacy have not been developed and agreed upon.

I have therefore ordered an extensive Cabinet-level review -- which will be undertaken this year -- of both government and industry practices as they relate to the right of privacy, of

more

27

the conflicts that arise and the balances that must be struck between legitimate needs for information and the right of privacy, and of those measures -- including appropriate legislation -- that can be taken to ensure that these balances are properly struck.

ENDING DRUG ABUSE

During the decade of the '60s, increasing numbers of Americans -- including a high percentage of young people -- each year turned to heroin and other drugs in search of "new highs" and "synthetic solutions" to the problems of life. In this retreat from reality, the Nation's drug problem grew dramatically. Residents of our proudest cities were gripped by fear as addicts turned to crime to support their habits, and thousands of families suffered devastating personal tragedies.

I am pleased to be able to report that since then, Federal spending on drug treatment and enforcement have increased tenfold, and progress has been made. We have indeed turned the corner on hard drugs:

- Better drug law enforcement, at home and abroad, has caused an acute heroin shortage throughout much of the country.

- Enough treatment capacity has now been created so that virtually all addicts who want medical help and counselling can get it.

- Our drug abuse indicators all suggest that we have at last succeeded in reducing both the total number of heroin addicts and the number of new addicts.

Nevertheless, the drug battle is far from over.

For the sake of the next generation, I am determined to keep the pressure on -- to ensure that the heartening progress made to date is translated into a lasting victory over heroin and other drugs.

As enforcement efforts meet with success in one area of the world, pressure increases on other trafficking routes. To meet these new threats, we will step up our support of joint drug enforcement programs. I have also directed that plans for increased vigilance at our own borders be put into effect.

In the treatment area, we are intensifying our efforts to encourage hard-core addicts to undergo treatment.

To provide added incentive for those not motivated to seek help on their own, I have directed Federal agencies to expand their support for local programs which direct addicts charged with crimes into treatment pending trial and sentencing.

Continued progress will also require help from the Congress:

- I will shortly recommend severe new penalties for both heroin traffickers and those engaged in illegal distribution of other illicit drugs. This legislation will supplement my proposals currently pending before the Congress.

- The Psychotropic Convention, a key international treaty regulating manufactured drugs worldwide, has -- after 2-1/2 years -- still to be ratified. Affirmative action in this session is of the utmost importance.

more

(OVER)

28

I will continue to pursue a balanced approach to the drug problem in the next year by emphasizing both vigorous law enforcement, and treatment and rehabilitation programs to help speed the return of ex-addicts to productive lives in society.

## ENHANCING THE ENVIRONMENT

Both our Nation and the world have made imposing strides during recent years in coping with the problems of our natural environment. Building upon well-justified concerns, we have created institutions, developed policies and strategies, and deepened public understanding of the problems that face us.

Now we are entering the second phase of environmental action. It may prove to be a more difficult period.

In this second phase, we will be looking at our environmental problems in new ways which are more complex and far-reaching than those to which we have been accustomed. We must be concerned not only with clean air, clean water and wise land use but also with the interaction of these environmental efforts with our need to expand our energy supplies and to maintain general prosperity.

In facing up to these tough, new problems, we can draw strength from the progress we have already made and from the knowledge that there can be no turning back from our general commitment to preserve and enhance the environment in which we live.

Our record over these past five years includes the vigorous enforcement of air quality legislation and of strengthened water quality and pesticide control legislation, the enactment of new authorities to control noise and ocean dumping, regulations to prevent oil and other spills in our ports and waterways, and legislation establishing major new parks, recreation and wilderness areas.

We have also tried to reorganize the Federal structure in ways that are more responsive to environmental needs. The National Environmental Policy Act, passed in 1969, has provided a basis for reform in our Federal agencies and has given citizens a greater opportunity to contribute to environmental decisions. In 1970, I established the Environmental Protection Agency and National Oceanic and Atmospheric Administration to provide more coordinated and vigorous environmental management. Also in that year, I appointed the first Council on Environmental Quality.

## Producing Results

The results of our vigorous anti-pollution efforts are now being seen and felt.

In our major cities, levels of dangerous sulfur oxides and particulates have declined, and pollutants from automobiles have been reduced. Water pollution is being conquered, assisted by a massive Federal commitment of over $14 billion in municipal treatment plants during this Administration. Major misuses of pesticides are now under control, and major sources of noise are being regulated for the first time.

more