But recession is only one enemy of a free economy--inflation is another.
Last year, 1961, despite rising production and demand, consumer prices held
almost steady--and wholesale prices declined. This is the best record of
overall price stability of any comparable period of recovery since the end
of World War II.
Inflation too often follows in the shadow of growth--while price stability
is made easy by stagnation or controls. But we mean to maintain both
stability and growth in a climate of freedom.
Our first line of defense against inflation is the good sense and public
spirit of business and labor--keeping their total increases in wages and
profits in step with productivity. There is no single statistical test to
guide each company and each union. But I strongly urge them--for their
country's interest, and for their own--to apply the test of the public
interest to these transactions.
Within this same framework of growth and wage-price stability:
--This administration has helped keep our economy competitive by widening
the access of small business to credit and Government contracts, and by
stepping up the drive against monopoly, price-fixing, and racketeering;
--We will submit a Federal Pay Reform bill aimed at giving our classified,
postal, and other employees new pay scales more comparable to those of
private industry;
--We are holding the fiscal 1962 budget deficit far below the level
incurred after the last recession in 1958; and, finally,
--I am submitting for fiscal 1963 a balanced Federal Budget.
This is a joint responsibility, requiring Congressional cooperation on
appropriations, and on three sources of income in particular:
(1) First, an increase in postal rates, to end the postal deficit;
(2) Second, passage of the tax reforms previously urged, to remove
unwarranted tax preferences, and to apply to dividends and to interest the
same withholding requirements we have long applied to wages; and
(3) Third, extension of the present excise and corporation tax rates,
except for those changes--which will be recommended in a message--affecting
transportation.