Gov. Luther H. Hodges of North Carolina, honorary chairman of the National Committee of Business and Professional Men and Women for Kennedy-Johnson, has reviewed with Senator John F. Kennedy, Democratic presidential candidate, questions of particular concern to the business community of the United States.
     Our honorary chairman, Gov. Hodges, is eminently qualified to speak on behalf of business in view of his successful career in business before entering public life.
     Gov. Hodges, after spending over 30 years in the textile business, left Marshall Field & Co. in 1950 as vice president in charge of mill operations and sales.  He became Lieutenant Governor of North Carolina in 1952 and subsequently, Governor of that State.
     The following is a report of the discussion between Gov. Hodges and Senator Kennedy:

     Q. Senator Kennedy, why should American businessmen support the Democratic Party?
     A. I believe that the businessman's first concern is that of every other citizen of the United States - the security, progress, and well-being of our country. Indeed, it seems to me that as the principal innovator and organizer of economic activity in our free enterprise economy, the businessman has the responsibility to make the United States the most productive country in the world. The Democratic Party's program is dedicated to the achievement of a prosperous and progressive economy. A prosperous business community is the measure of our performance.
     Q. Nevertheless, the Republican Party has the reputation among businessmen in particular of being the party of business. Do you think this is justified?
     A. No. Certainly it is not good for business to have two recessions within these past 7 years, as has been the case under the Republicans, or to have economic conditions so uncertain for a third time that many forecasters anticipate still another recession. Idle plant capacity is not good for business. The steel mills are now operating at less than 55 percent of capacity. Automobile production has not been much higher. Homebuilding is down drastically. Our textile industry is facing serious trouble. Corporate profits are declining. During the last 8 years the number of business failures has been the highest in our history.
     It is a matter of record that business has prospered more under the Democrats. What is good for the country as a whole is also good for business. The expansion of production and demand is the best cure for what ails business. Expansion permits greater sales and higher profits. I am on record for such a policy of expansion.
     Q. To get down to some specific problems which concern businessmen, what do you propose to do about the problem of inflation?
     A. In the long run, the most effective antidote for inflation is increased productivity and greater production. However, there are other specific measures which can be adopted with discretion according to precise needs of the moment.
     (a) A balanced budget - except during times of emergency affecting the national security or a high rate of unemployment.
     (b) An insistence that collective bargaining takes public interest as well as private advantage into account.
     (c) Federal monetary and credit policies, applied equitably and with reasonable foresight as to timing.
     Q. On the question of inflation and monetary policy, will you follow a tight money policy, like the Republicans?
     A. I will not. The ostensible purpose of the misconceived and mismanaged Republican tight money policy was to stop inflation. The policy failed, probably because inflation was not caused by excessive demand. Cost of living rose almost 12 percent under the Republicans.
     The Republicans appear to have pursued a tight money policy because they thought the policy sound despite the condition of our economy. In the 1957 recession, for example, they tightened money when they should have made it easier to obtain.
     Unnecessarily tight money has discouraged new housing and consumer purchases. Businesses which cannot finance expansion from their own accumulated profits have been discouraged from making growth-producing investments because they could not obtain capital at reasonable interest rates. Thus, this policy has restricted economic growth. To forge ahead in the critical international competition which we face, we require increased production, increased credit, and an improvement of the financial climate.
     Q. Senator, can you give us your thinking with respect to taxes? Do you have any thoughts on the possibility of increasing or decreasing tax rates? Businessmen are particularly interested in the possible liberalization of depreciation allowances, which many feel would stimulate new investment in plant and equipment. Can you give us your views on this matter?
     A. Certainly this is not the time for an increase in tax rates. Now that our economy shows signs of stagnating, it would be extremely bad judgment to raise taxes. With an improvement in general business conditions and with greater production, we will get additional tax revenue at existing tax rates. This will, of course, help defray costs of increased defense and other needs. Our tax system requires reform. The last general tax revision took place in 1954. It left much to be desired. By tax reform we can eliminate inequities and loop-holes and improve the simplicity and administrative convenience of raising revenue. We must be sure, however, that we do not mistake historical and beneficial economic stimulants as loopholes. Through successful tax reform we can broaden the tax base and lower the extremely high tax rates that cut down business and personal incentives.
     Business investment in plant and equipment must be encouraged as a generator of increased productivity and economic growth. The high cost of capital plant replacement has acted as a barrier to investment, particularly when business firms are not able to obtain adequate financing at reasonable cost. Improvement in the laws relating to depreciation allowances will permit business firms to finance modernization of plant capital through internal resources. For this reason proposals that move in this direction seem to me to deserve a place in any program of tax reform. Above all, we must encourage the production of earnings and channeling them back into further productivity. Only thus can we create additional job opportunities.
     Q. Senator, the problems of small business have come increasingly to the fore. How do you propose to solve the special problems of small business in our economy?
     A. First, our monetary policy should be adapted to provide sufficient credit at reasonable interest rates.
     Second, efficient small business needs a competitive environment without favoritism or disadvantage in which to work. The enhancement of competition is also good for our economy as a whole because it inhibits inflation and induces greater productivity.
     Third, the Government can directly assist small business by channeling more defense contracts to efficient firms. Today, 86 percent of our defense contracts, amounting to $19.6 billion, is negotiated, and only 14 percent is let on a competitive bid basis. The small business share of the competitive contracts was 48 percent; that of the negotiated contracts was 12 percent. This demonstrates that, when given an opportunity to compete for business it is capable of handling, small business can hold its own.
     Fourth, the Government, through its widespread financing of research and development, becomes aware of many new techniques and ideas. A greater effort must be made to make these more easily available to small business.
     Fifth, a greater use of the Small Business Administration and a more positive approach to policies of management so lacking under the Republican administration will do much to relieve the current problems of small business in this country.
     Q. What are your views on the question of our foreign trade and foreign investments?
     A. Foreign trade and investment problems seriously affect domestic industry. We must bear in mind that foreign trade is a two-way street. If we wish to sell our goods abroad we must also buy from foreign countries. The world economy is becoming increasingly interdependent. We cannot change this. I therefore favor expansion of our foreign trade and private investments abroad. I do so with the qualification that we should avoid serious adverse effects on domestic industry that can arise from foreign competition. I have long supported programs of assistance to workers, industries, and communities that have been adversely affected by imports. Our national interest requires a liberal trade policy, but adverse domestic consequences of such a policy are necessarily the concern of the entire Nation. Economic displacements due to world trade become lessened as the opportunities resulting from world trade increase.
     Q. Senator Kennedy, it has been charged by many conservative Republicans that the policies of the Democratic Party tend toward welfare statism. Would you care to comment on how the social reforms of the Democratic Party apply themselves in terms of the average American businessman?
     A. The Democratic Party has brought social and economic progress to our country. One measure of its success in this respect is that all its reforms have since been adopted by the Republicans. The new programs that we now put forward will not alter our free enterprise system. They will simply help it work more effectively. The business community, like all America, is interested in the welfare of the American people -  their level of education, their health, the adequacy of their housing, the state of our natural resources, and our progress in scientific research. In addition, the business community will benefit from higher payrolls, an increased standard of living, a healthier and better educated citizenry. I wish to emphasize my conviction
that the American economic system has served us well. It has made us the strongest Nation in the world and provided our people with the highest standard of living. It has enabled us to enlarge and continue enlarging the area of personal liberties. No one who understands these achievements would wish to change its fundamental structure. Certainly I do not wish to do so. Nor does the Democratic Party. Only through evidencing the workability of the private enterprise system can we assure its acceptance and perpetuation.
     Q. Senator, this question is more personal, but it is one which is often asked in business circles and we would again appreciate getting your point of view on it. Frequently the press refers to economic advisers whose views are unpopular with businessmen. Would you care to comment on the extent of their influence upon your thinking?  Can you tell us whether other economists and businessmen enjoy your confidence?
     A. Anybody who aspires to the Presidency of the United States must have the objectivity and detachment to listen to and evaluate every responsible point of view. I have always endeavored to do this. I consult advisers of both liberal and conservative thought, just as any corporate executive seeks the advice of all of his associates. Then I make up my own mind.
     Q. The Democratic Party has enjoyed the support of organized labor and working people in the United States. Does this mean that the Democratic Party is the party of labor?
     A. The Democratic Party is no more the party of labor than it is the party of business. It is the party of both. It enjoys labor support because it has improved the lot of working people. It is equally interested in the welfare of business. Both business and labor are best served by a dynamic, growing economy based upon our free private enterprise system.