004-099

Date: 
Wednesday, June 9, 1971 - 4:04pm - 4:17pm
Participants: 
Richard Nixon, George Shultz
Location: 
White House Telephone
Listen: 


President Nixon: Hello?
George P. Shultz: Yes, sir.
President Nixon: Hi, George. I wondered if our friend [University of Chicago economist Milton] Friedman--”did he give you any report after his dinner with [Federal Reserve Chairman] Arthur [F. Burns]?
Shultz: No, I hadn't--”I saw him, but in a meeting. I went over to the Federal Reserve's--”
President Nixon: Oh, yeah.
Shultz: --”consultants' meeting, and it lasted all morning long--”
President Nixon: Oh, yeah.
Shultz: --”and I didn't get a chance to talk with him individually.
President Nixon: I see.
Shultz: But I will check with him later on in the day. I imagine he's on his way back to Chicago now--”
President Nixon: Fine.
Shultz: --”and I'll try to get him on the phone there.
President Nixon: Fine . . . fine. Well, it was good to see him. I think it . . . my reaction was that--”certainly the same as yours, that he might just give Arthur exactly the wrong push at this moment, and I think he might [laughing] have too much of an effect. What do you think?
Shultz: Well, as you pointed out, he was basically saying things that Arthur agreed with--”
President Nixon: Yes.
Shultz: --”which is always--”
President Nixon: Yeah.
Shultz: --”makes it extra persuasive. In the meeting this morning, Milton's advice to the Fed was that they should follow something on the order of about a 4 percent policy for a while.
President Nixon: Oh, that's good.
Shultz: That 2 percent was sort of what was called for theoretically, but it would cause too much of a wrench, and they shouldn't go that far.
President Nixon: Mm-hmm.
Shultz: Now, all of the other . . . there were a lot of other consultants around, [MIT economist] Paul Samuelson and the group that--”
President Nixon: Yeah.
Shultz: --”basically follows that, and they were all complementing the Fed on being so expansive and suggesting that they stay with it and just let it rip.
President Nixon: Yeah. Yeah. Yeah.
Shultz: And, so--”
President Nixon: What is your feeling--”your feelings--”
Shultz: --”there's a debate about it.
President Nixon: Your feeling is 4 [percent]? Or--”I don't know. I'm inclined to--”I'm inclined not to get Arthur to ever think in terms of going this far--”
Shultz: My feeling is--”
President Nixon: I'm not quite as disturbed about the interest-rate situation. I mean, that six months up and then it--”take a bang next time. I'd just as soon have the--”that luxury for a while.
Shultz: Of what? Of keeping it down?
President Nixon: Yeah.
Shultz: Yeah.
President Nixon: Yeah.
Shultz: The--”my own feeling is that this roughly 6 percent path is what they said was the right policy, and they ought to go to that and stay on it if they can.
President Nixon: Yeah.
Shultz: And just not try to correct . . . not try to be too precise about correcting this--”
President Nixon: Yeah.
Shultz: --”bulge that has been there for about three months.
President Nixon: Yeah.
Shultz: And the worst thing in the world would be another three or four weeks of downward movement, actual downward movement in the money supply, which they gave us--”
President Nixon: Yeah.
Shultz: --”in April, and which I think--”
President Nixon: Affected the economy.
Shultz: You know, we had things going pretty well, and then it--”
President Nixon: Seemed to nip it a bit.
Shultz: --”slowed a bit--”
President Nixon: Something slowed it. I know.
Shultz: --”and I think probably that was--”had to be something to do with it. So that's my--”
President Nixon: Yeah.
Shultz: --”my own personal view. The--”
President Nixon: Yeah. Oh, yeah.
Shultz: As among administration people--”that is, [Treasury Secretary John B.] Connally, [Council of Economic Advisers Chairman Paul W.] McCracken--”
President Nixon: Uh-huh.
Shultz: --”and company. At this point, I tend to be on the more moderate side. They're all--”
President Nixon: A little more--”
Shultz: --”would like to see things expand more.
President Nixon: Yeah.
Shultz: So--”
President Nixon: Yeah. Well, actually, George, let me--”first point, when do you think we ought to do a Quadriad?
Shultz: Well, I think that anytime now, that would be useful to do.
President Nixon: They're about ready.
Shultz: Maybe early next week, or . . .
President Nixon: Early next week. All right, that's fine.
Shultz: . . . or early--”later this week, or anytime at all. I think that the--”
President Nixon: I've got--”
Shultz: Burns has a note into you, wanting to come and meet with you alone--”
President Nixon: Yeah.
Shultz: --”and report on the international monetary developments.
President Nixon: Yeah. Well, I'll see him. I'll see him.
Shultz: My suggestion, when I was asked about it, was that we have a Quadriad meeting sometime very soon and try and substitute that.
President Nixon: Yeah.
Shultz: So that you get the benefit of John's views--”
President Nixon: Yeah.
Shultz: --”and Paul's and the others--”
President Nixon: Yeah.
Shultz: --”who have been over at that meeting.
President Nixon: All right. Fine. I'll--”I've got [White House Chief of Staff H.R. "Bob"] Haldeman here now and I'll tell him to set up a Quadriad--”
Shultz: OK.
President Nixon: --”at a time that's convenient.
Shultz: Yeah.
President Nixon: You think anytime you'll be ready then, huh?
Shultz: Well, sure, I think that we could do it tomorrow or--”
President Nixon: Let me ask you this. With regard to your--”with regard to the situation generally, Friedman, I must say, is still--”he thinks there's an awful lot of steam in the boiler, doesn't he?
Shultz: Yes, he does.
President Nixon: I hope [Unclear.]--”
Shultz: And--”of course, I think that . . . that he is not as ambitious about what should happen to the economy this year--”
President Nixon: Yeah.
Shultz: --”as--”
President Nixon: We are.
Shultz: --”as we are, and we've--”
President Nixon: Well, he doesn't have the political--”doesn't have that political fire burning on his tail. He also is not taking into account what the Congress may do that will be very, very foolish unless we do a little bit more. That's the other problem, George.
Shultz: Mm-hmm.
President Nixon: You see, our real thing is if we were God and--”I mean--”or a dictator, without having to go to the Congress, then maybe we ought to just keep it at a certain level and let her go up next year.
Shultz: Mm-hmm.
President Nixon: But we're not acting in any vacuum. Boy, we're [Unclear.]--”
Shultz: No, that's certainly true. The Congress, as far as our budget is concerned--”and that's another thing they--”
President Nixon: Mm-hmm.
Shultz: Samuelson and company were all saying we need a more expansive budget, and I just can't believe that they understand how expansive it is--”
President Nixon: Thank God.
Shultz: --”and the Congress is adding to it daily. We had this action on the military package today.
President Nixon: Oh, unbelievable.
Shultz: And--”
President Nixon: That'll trim down a lot, of course, when they get to the House, but God--”
Shultz: Well, I'm not so sure, Mr. President.
President Nixon: You don't think so?
Shultz: The House, of course, voted roughly a similar amount. The--”there are differences in the composition of the amount--”
President Nixon: I see. I see.
Shultz: So that it may be that it'll come down some, but my guess is it'll--”
President Nixon: Yeah.
Shultz: --”it'll be up there pretty well. And I was suggesting to [White House Press Secretary] Ron Ziegler this morning--”he was asking about how at least I would suggest he comment on that--”that, that--”
President Nixon: Might veto.
Shultz: --”one thing we have to be careful about is that your having supported and promoted the volunteer idea, that we don't get maneuvered into being against that somehow or other by virtue of our position on this money, and that we talk about what we wanted. And our approach was to increase it . . . 50 percent raise this year and another big one next year, but let's see what the 50 percent raise does to us as far as recruiting patterns are concerned and then--”
President Nixon: Yeah.
Shultz: --”move on the rest.
President Nixon: Well, the thing about this pay raise, isn't it basically too much in the higher brackets?
Shultz: Well, the House part was.
President Nixon: Yeah.
Shultz: And the Senate--”the [Senator Gordon L.] Allot [R-Colorado] action--”
President Nixon: Yeah.
Shultz: --”was more in line with the Gates Commission report--”1
President Nixon: Yeah.
Shultz: --”so it's considerably better insofar as the distribution--”
President Nixon: I see.
Shultz: --”is concerned--”
President Nixon: I see.
Shultz: --”than the House. And so one of the things we're doing is getting up some material for [congressional liaison] Clark MacGregor to use--”
President Nixon: Yeah.
Shultz: --”with the conference committee to try to be sure that we get the Gates Commission--“type structure in it--”in the conference.
President Nixon: Right . . . right.
Shultz: But anyway, going back to the budget problem--”
President Nixon: Yeah.
Shultz: --”there's the military pay thing--”
President Nixon: Yeah.
Shultz: --”the education appropriation--”
President Nixon: Yeah.
Shultz: --”will be coming down probably 4[00] to 500 million [dollars] over your budget, and that's on the base of about a 4½ billion--”
President Nixon: Boy.
Shultz: --”appropriation. The Ag--”our intelligence out of the Ag Appropriation Committee is that they're talking about 700 over, and I think that there are going to be a whole series of these. And one of the reasons I was pressing Bob this morning that we ought to have a fairly thorough go-around on the budget and the economic situation very soon so that we can get the whole picture in front of us--”
President Nixon: Before we have to [Unclear.]--”
Shultz: --”for you to make your decisions on how we want to go on the accelerated public works, the public service employment--”
President Nixon: Yeah . . . yeah . . . yeah.
Shultz: --”and all these other things.
President Nixon: Yeah, yeah, yeah, yeah. Well, there's no question about the directions, it's a--”I mean, there's no question about the leaning to me. The main problem I see is these--”the in--”it's really a question of whether the increases affect jobs or whether they affect just--”and that, I know, is a gray area, but whether they just affect goosing up what we've already got--”
Shultz: Mm-hmm.
President Nixon: --”blowing it up. I must say it's a--”
Shultz: Yeah.
President Nixon: --”and we may just have to face up to it, George. I don't know. If we do . . .
Shultz: Well, there's tremendous pressure to just let 'er rip on the budget--”
President Nixon: Yeah.
Shultz: --”and . . . the . . . one of the things that I fear is that--”let's suppose that next year we have--”
President Nixon: High inflation.
Shultz: --”a real boom going on--”and I think we're almost certain to have that, myself--”
President Nixon: Yeah.
Shultz: --”that unemployment has come down--”that is clear in the campaign--”but that we also have, (a) two big deficits back-to-back--”
President Nixon: Yeah.
Shultz: --”on the order of 20 to 25 billion--”
President Nixon: Yeah . . . yeah.
Shultz: --”and a definitely renewed inflation. Now, I think that people--”
President Nixon: We've got [Unclear.]--”
Shultz: --”are going to tie the deficits--”
President Nixon: That's right.
Shultz: --”to the inflation.
President Nixon: Yeah. Well, we--”
Shultz: The real question is--”
President Nixon: --”but--”
Shultz: --”who's responsible for those deficits?
President Nixon: Well, as a matter of fact, it's--”it'll be fair game because when we were running in '68, we tied the inflation, the incipient inflation, to the deficits.
Shultz: Yeah, but we didn't produce that deficit.
President Nixon: I know, but we blamed them, so we've got to expect them to blame us.
Shultz: Right.
President Nixon: On the other hand, the deficit is going to be created--”a hell of a lot of it is going to be created by the Congress.
Shultz: Well, that's the--”
President Nixon: But we've got to make that case.
Shultz: That's--”that's right, and that's really my point here. That we have to--”now is the time to be laying the groundwork for making that case--”
President Nixon: Yeah.
Shultz: --”to the extent it can be made in recognizing that when all is said and done, the people, undoubtedly, they'll hold the President responsible for--”
President Nixon: Sure . . . sure.
Shultz: --”whatever it is that happens, so--”
President Nixon: What about this--”you mean, are you ready for this meeting yet, or--”this is earlier than the one you wanted to do at San Clemente then?
Shultz: Well, it would be a somewhat abbreviated version of--”like the one we had in San Clemente the last--”
President Nixon: Yeah.
Shultz: --”last July.
President Nixon: You wouldn't have the whole damn Cabinet in this though, would you?
Shultz: Oh no, no. We'd just have--”
President Nixon: A few people.
Shultz: --”[Chief Domestic Policy Adviser] John [D. Ehrlichman] and some others, and I should think--”
President Nixon: Fine.
Shultz: --”we also ought to add, perhaps, [Attorney General] John [N.] Mitchell and John Connally to this.
President Nixon: Yeah, I see.
Shultz: But then--”
President Nixon: All right.
Shultz: --”we would go on in San Clemente. I understand we'll have some time probably available in the July 8--”
President Nixon: Yeah.
Shultz: --”or so.
President Nixon: Oh yes, yes.
Shultz: And really--”
President Nixon: We're planning--”
Shultz: --”come down hard on the fiscal '73 budget--”
President Nixon: Yeah.
Shultz: --”the way we did last year.
President Nixon: Yeah. Yeah. We're planning that, of course. All right. Fine.
Shultz: Could I get you--”
President Nixon: Bob said that he--”
Shultz: --”one other--”
President Nixon: --”Bob said that he had this in mind.
Shultz: Yeah.
President Nixon: He's trying to work out some time.
Shultz: All right. Could I get you on one other thing while you're on the phone?
President Nixon: Yeah, sure.
Shultz: You remember a month or so ago I brought up with you [Commerce Secretary Maurice H.] Maury Stans' request for a mid-decennial census--”
President Nixon: Yep. No.
Shultz: --”and--”
President Nixon: I don't think we want it, but now are you thinking that maybe we should because it might provide jobs?
Shultz: No, sir. It wouldn't provide any immediate jobs at all. It wouldn't--”
President Nixon: Yeah.
Shultz: It would get them in some years from now--”
President Nixon: Yeah . . . yeah.
Shultz: --”as far as jobs are concerned.
President Nixon: What the hell is the purpose of it then?
Shultz: Well, it would give more--”I recommended against it, and that's what you decided.
President Nixon: I did.
Shultz: Maury is appealing that now, and he said he--”
President Nixon: Yeah.
Shultz: --”insists on getting a presidential statement about it--”
President Nixon: Yeah.
Shultz: --”or a review. We transmitted the decision to him.
President Nixon: Yeah. Yeah.
Shultz: And I believe that a certain amount can be accomplished by a much less expensive kind of sample survey approach.
President Nixon: Senator--”
Shultz: He rejects that and he wants it all or nothing, and he's--”
President Nixon: All right, fine. Then he gets nothing.
Shultz: He has to testify tomorrow--”
President Nixon: Yeah.
Shultz: --”and I'm due to call him and give him a reading.
President Nixon: Yeah. Well, he either has to do that or we're going--”we're not going to go--”didn't you say it cost--”how much?
Shultz: It would cost, altogether, around $200 million to do it.
President Nixon: No! The answer is hell, no!
Shultz: Way up in that neighborhood.
President Nixon: No! No! No! No! No, sir. I will under no circumstances--”it's not--”we just haven't got that kind of money.
Shultz: Mm-hmm.
President Nixon: And we've got to stop on something.
Shultz: Yeah. This would not be--”
President Nixon: And if he wants to come in with a smaller one, fine. But we just can't do it.
Shultz: Mm-hmm. All right. Well, I'll tell him that.
President Nixon: Just say that--”just say that I'm going to have to veto some--”education bill and a lot of others, and I just don't see doing this.
Shultz: Mm-hmm.
President Nixon: I don't think it's going to be--”tell him I just don't think it will be consistent with the pattern that we're going to have to do on some of the congressional overspending--”
Shultz: Mm-hmm.
President Nixon: --”for us to go down and ask for 200 million [dollars] more for the census.
Shultz: Yeah. All right.
President Nixon: I just feel that--”
Shultz: OK.
President Nixon: OK.
Shultz: I agree with that, and I'll tell him.
President Nixon: Stick to it.
Shultz: OK, sir.
President Nixon: Bye.
Shultz: Yeah, bye.

1Also known as the President's Commission on an All-Volunteer Armed Force, the Gates Commission was a commission appointed by President Nixon to study the feasibility of an all-volunteer military force. This commission recommended that President Nixon end conscription. ↑

Original tape courtesy of the Nixon Library. This transcript is a working draft. Please let us know if you find important errors.