To the Congress of the United States:

     America has the human and material resources to meet the demands of national security and the obligations of world leadership while at the same time advancing well - being at home. But our nation has been falling further and further short of its economic capabilities. In the past seven years, our rate of growth has slowed down disturbingly. In the past 3½ years, the gap between what we can produce and what we do produce has threatened to become chronic. And in the past year, our economic problem has been aggravated by recession and by loss of gold. I shall shortly send to the Congress a separate message dealing with our international balance of payments and gold position.
     The nation cannot - and will not - be satisfied with economic decline and slack. The United States cannot afford, in this time of national need and world crisis, to dissipate its opportunities for economic growth. We cannot expect to make good in a day or even a year the accumulated deficiencies of several years. But realistic aims for 1961 are to reverse the downtrend in our economy, to narrow the gap of unused potential, to abate the waste and misery of unemployment, and at the same time to maintain reasonable stability of the price level. For 1962 and 1963 our programs must aim at expanding American productive capacity at a rate that shows the world the vigor and vitality of a free economy. These are not merely fond hopes, they are realistic goals. We pledge and ask maximum effort for their attainment.
     I am proposing today measures both to alleviate the distress arising from unsatisfactory performance of the economy and to stimulate economic recovery and growth. If economic developments in the first quarter of this year indicate that additional measures are needed, I will promptly propose such measures.

The Present Situation and Outlook.

     The potential of the American economy is constantly expanding. The labor force is rising by 1.5 percent per year. Output per man rises annually by 2 percent as a result of new and better plant and equipment, modern technology, and improved human skills. These increases in manpower and productivity provide the base for a potential annual growth of 3.5 percent in the nation's total output. This is not high enough. Our potential growth rate can and should be increased. To do so, we propose to expand the nation's investments in physical and human resources, and in science and technology.
     But in recent years the economy has not realized even its present possible growth. From the peak of the business cycle in the second quarter of 1953 to the top of the anemic recovery seven years later, gross national product grew only at an annual rate of 2.5 percent. The failure to use our full capacity is the urgent economic problem of the day.
     In 1960, the American economy produced $503 billion of output when it was capable of producing at least $535 billion. In the fourth quarter of 1960, actual output could have been 8 percent higher than it was. More than a million and a half unemployed - over one-third of all unemployed - could have had jobs. Twenty billion, dollars more personal income could have been earned in 1960. Corporate profits could have been $5 billion higher. All this could have been accomplished with readily available manpower, materials and machines - without straining productive capacity and without igniting inflation.
     The performance of the economy in 1960 was not only well below its full capacity; it also fell short of the modest levels expected by the previous Administration.
     Adjusting all figures to the same statistical basis, the Budget projections last January were based on a 1960 national output of $513 billion. In October, output for the year was still expected to exceed $508 billion, implying a rate of at least $521 billion in the fourth quarter. The actual figure turned out to be $503 billion both for the year as a whole and for the last quarter.
     Even when the recession ends and economic activity begins to expand again, the problem of unused potential will remain. Even if we were to achieve the $515 billion output projected for 1961 in connection with last month's Budget Message, the gap between potential and actual output would continue to grow and unemployment would hover between 6 and 7 percent of the labor force throughout the year. Under these circumstances, the expectation of minor improvements in business conditions during the next year provides no basis for complacency, no excuse for inaction. And - speaking out of realism, not pessimism - we cannot rule out the possibility of further deterioration if we fail to act.
     An unbalanced economy does not produce a balanced budget. The Treasury's pocketbook suffers when the economy performs poorly. Lower incomes earned by households and corporations are reflected in lower Federal tax receipts. Assistance to unemployed workers and the costs of other measures for alleviation of economic distress are certain to rise as business declines. That is why recession - as our $12.4 billion deficit in the fiscal year 1959 recently reminded us - forces the budget into imbalance. That is why the prospect of surpluses in the Federal budgets for fiscal 1961 and fiscal 1962 is fading away.

General Fiscal Policy and the Budget.

     The Federal Budget can and should be made an instrument of prosperity and stability, not a deterrent to recovery. This Administration is pledged to a Federal revenue system that balances the budget over the years of the economic cycle - yielding surpluses for debt retirement in times of high employment that more than offset the deficits which accompany - and indeed help overcome - low levels of economic activity in poor years.
     If this economy were operating at full potential, the existing Federal revenue system would yield more than $90 billion in fiscal year 1962, instead of the $82.3 billion now estimated, producing a large budget surplus, and permitting retirement of national debt as well as the further development of Federal programs to meet urgent national needs. Debt retirement at high employment contributes to economic growth by releasing savings for productive investment by private enterprise and State and local governments.
     The programs I am now proposing will not by themselves unbalance the budget which was earlier submitted, but are designed to fulfill our responsibility to alleviate distress and speed recovery - both through benefits directly available to needy persons and through desirable fiscal effects on the economy. They will sustain consumer spending and increase aggregate demand now when the economy is slack. Many of these expenditures will automatically cease when high employment and production are restored.
     Other measures contained in this message propose necessary uses of national economic capacity and tax revenue for our long-range growth, and are essential even in the absence of a recession. They are proposed because the country needs them, can afford them, and would indeed be poorer without them.

Agriculture.

     Recession in agriculture has been chronic since the early Fifties. Falling farm income has been a drag on the industrial economy, while economic slack has restricted the job openings which might have eased the adjustment process in agriculture. The marginal or displaced farmer is most painfully aware of the interdependence of agriculture and industry. Restoration of the economy as a whole to satisfactory and rising levels of performance is an important prerequisite to restoring farm prices and income to their rightful levels. The American farmer should receive for his managerial skills, his labor, and his capital investment returns that are similar to those received for comparable human talents and resources in other types of enterprise. To this end the Administration will recommend further specific measures in a separate message on agriculture to be submitted to the Congress at an early date.

1. Monetary Policy and Debt Management.

     Both full recovery and economic growth require expansion of expenditures for business plant and equipment, for State and local governmental facilities, and for residential construction. To increase the flow of credit for these purposes, long-term interest rates should decline. However, further declines in short-term interest rates, under present conditions, would lead to a further outflow of funds abroad, adding to the deficit in our balance of payments. That would be particularly unfortunate at the present time, just as falling rates abroad have been narrowing the gap between our rates and those of other leading countries.
     In these circumstances, monetary policy and debt management must serve two apparently contradictory objectives: checking declines in the short-term rates that directly affect the balance of payments, and increasing the flow of credit into the capital markets at declining long-term rates of interest to promote domestic recovery. These two objectives can be achieved concurrently, but only with close cooperation among all governmental agencies concerned. As a result of measures already under way, there will be an increasing flow of funds at declining long-term rates to finance productive investment. Measures to strengthen this country's ability to hold and to attract internationally mobile liquid funds will be outlined in my subsequent message on the balance of payments.
     The Treasury and the Federal Reserve System already are working together to further the complementary effectiveness of debt management and monetary policy. These tools will be strengthened not only for their present tasks but also for restricting inflationary demands on the economy whenever they recur.

2. Housing and Community Development.

     During the 1960's, we must have the energy and vision to lay sound foundations for meeting the problems which will result from the steady growth of our urban areas through the balance of this century. This task calls for new initiative and imagination in a great diversity of fields: in housing construction, in the maintenance and improvement of our vast existing stock of housing, in urban renewal, in the provision of essential community facilities, and many others. It calls for the revitalization of administrative machinery at the Federal, State and local levels. It calls for more comprehensive and more practical planning for urban and metropolitan areas. I shall shortly make specific recommendations to the Congress for action in this whole vital area.
     Meanwhile, to make sure that general expansion of long-term credit is effective in stimulating residential construction, we have surveyed the range of administrative actions which can be taken promptly to help lower the cost of housing credit.
     A reduction of mortgage interest rates is already overdue. Despite the easing of the general money market in the past year, the cost of mortgage credit still hangs just below its postwar peak. I have been assured that officers of many leading lending institutions share my view that present mortgage yields are unrealistic, and are prepared to cooperate in an effort to make mortgage money available at lower rates.
     Consistent with this appraisal of the present situation, I have directed the Federal Housing Administration to reduce the maximum permissible interest rate on FHA-insured loans from 5¾ to 5½ percent. The resources of the Federal National Mortgage Association in the secondary mortgage market will help to give effect to this change in the rate. The FNMA stock subscription requirement applicable to sales of mortgages in the FNMA secondary market will be temporarily cut in half. I shall request the Federal Home Loan Bank Board to cooperate in advancing this effort to reach a more realistic level of mortgage lending rates.
     What is good policy here for the private housing sector is also good policy for public construction activity. Under the program by which loans are made to local public bodies for the construction of public facilities, the Community Facilities Administration at my direction is reducing interest rates on new loans. This program will also be broadened to make eligible for loans many communities and certain types of public facility projects which are now excluded.
     I have instructed the Housing and Home Finance Agency to hasten the initiation or completion of those approved projects in which a speed-up can be effected without waste. In examining new applications for assistance, HHFA will give priority of attention to projects which are fully planned and ready for construction, and to projects located in areas of chronic unemployment. Under the college housing program, available funds will be committed more rapidly than hitherto planned, and efforts will be made to move forward the starting date for previously approved projects.
     The Federal Government will do everything in its ability at all administrative levels to quicken the pace of urban renewal work. Given this assurance, mayors and other local officials can by energetic leadership accelerate projects under way or about to begin. I have today telegraphed the mayors of 297 cities to urge that they review their urban renewal projects to find ways of hastening the completion of these vital civic improvements.

3. Temporary Unemployment Insurance Extension.

     The number of persons out of work and seeking employment has been rising since the early summer of 1960 and has reached serious proportions in these rigorous winter months. In January 5.4 million persons were unemployed, more than 1.3 million have been continuously out of work for fifteen weeks or longer, 600,000 for six months or more. In addition, workers involuntarily confined to part-time work numbered 1.7 million, a rise of 200,000 over December.
     We have long since decided as a nation that we will not turn our backs upon workers and their families undergoing the hardships of unemployment. Furthermore, we know all too well that the loss of income of the unemployed inevitably depresses consumer spending, threatening to deepen the recession and delay recovery. The flow of wage and salary payments, measured at an annual rate, has fallen by $4 billion from August to December.
     Our unemployment insurance system serves to mitigate, in some degree, the hardships of displaced employees and helps to strengthen the economy against the forces of contraction. The total number of persons drawing benefits under that system has risen sharply since the middle of 1960, and in mid-January stood at 3.4 million, 1 million higher than a year ago. Although average benefits amount to only $34 per week, total payments are estimated to have been $430 million in January, compared to $264 million in January a year ago. The number of persons exhausting unemployment benefits has also increased. About 500,000 persons who have exhausted their benefits are still unemployed. During the first six months of 1961, nearly 1½ million more persons will use up their unemployment benefits before finding jobs.
     In these urgent circumstances, I shall ask the Congress to enact a temporary program for extending the duration of benefits. Under agreements voluntarily entered into between the states and the Federal Government, additional weeks of benefits would be authorized from Federal funds, during the twelve months following enactment, to persons who have exhausted regular benefits since October 31, 1960, and are still unemployed. These extended benefits would equal one-half-up to a maximum of 13 weeks - of the duration provided by the State. The duration of the benefits would be subject to an over-all maximum, State and Federal, of 39 weeks. Where the State law already provides benefits for longer than 26 weeks, the Federal Government would pay, for the period of the emergency, for all weeks of benefits beyond 26, up to a maximum of 39, thus freeing state funds for much-needed increases in benefit amounts. The amount thus going into increased income and purchasing power will be advanced from general revenues and later repaid in full from increased insurance contributions obtained by raising the taxable payroll maximum per employee from $3,000 to $4,800 annually. This increase will maintain the self-supporting basis of the system and enhance its capacity to meet future emergencies.
     Our permanent Federal-State unemployment insurance system, which has become an institution essential to the efficient functioning of our labor markets as well as a strong defense against economic contraction, is in need of permanent reform. As I said in 1958, I believe it would be a tragic mistake to embark on a Federal supplementation program geared to the present emergency without also strengthening the underlying system. A mere stop-gap approach ignores the role our permanent unemployment insurance system was intended to play, and establishes instead a precedent for falling back on temporary remedies whenever the system is really needed. The standards of the system have proven inadequate to deal with the recession problem.
     This time, we must establish a permanent unemployment compensation system which can do the job it was intended to do. A program of federal legislation designed to revise and strengthen the benefit and financing provisions of the system will therefore be recommended to the Congress by the end of March.

4. Expansion of United States Employment Service.

     I am directing the Secretary of Labor to take necessary steps to provide better service for unemployment insurance claimants and other job applicants registered with the United States Employment Service. This will require expanded counseling and placement services for workers or job-seekers (a) in depressed areas; (b) in rural areas of chronic underemployment; (c) displaced by automation and technological change in factories and on farms; (d) in upper age brackets; and (e) recent graduates from college and high school.

5. Aid to Dependent Children o f the Unemployed.

     Under the Aid to Dependent Children program, needy children are eligible for assistance if their fathers are deceased, disabled, or family deserters. In logic and humanity, a child should also be eligible for assistance if his father is a needy unemployed worker - for example, a person who has exhausted unemployment benefits and is not receiving adequate local assistance. Too many fathers, unable to support their families, have resorted to real or pretended desertion to qualify their children for help. Many other fathers are prevented by conscience and love of family from taking this route, thereby disqualifying their children under present law.
     I recommend that the Congress enact an interim amendment to the Aid to Dependent Children program to include the children of the needy unemployed. Temporary action is recommended pending completion of a study of a permanent program to aid needy children and certain other groups now excluded from the Federal-State public assistance programs.

6. Distressed Area Redevelopment Program.

     The Congress is considering legislation designed to reinforce the efforts of areas of heavy chronic unemployment to improve their economic climate. Although State and local governments, as well as private agencies, have been helpful in many instances, the distressed areas constitute a national problem that is properly the concern of the Federal Government.
     The subject has been studied by standing and special committees of the Congress, by individual states, by groups of states, and by private study groups. There is general agreement that we should enact legislation providing the means for loans for private projects, technical assistance, loans and grants for public facilities, and programs for training and retraining workers. I urge that any area development program be flexible enough to benefit urban and rural areas alike and to apply to regions of economic distress which include parts of two or more states.
     The immediate subsistence needs of the people of these economically depressed areas must be met, but it is equally important that these areas be enabled to acquire the basic facilities, physical plant, and trained labor force necessary to secure their share of the nation's economic expansion.
     I have already advised the Congress of my interest in such legislation by letters sent to the Vice President and the Speaker of the House of Representatives last week. I urge that area redevelopment legislation be enacted without delay.

7. Distribution of Surplus Food.

     We are committed to expanding the variety and quantity of surplus foods distributed to persons who, in a nation of unparalleled agricultural bounty, lack adequate diets.
     (a) The first Executive Order issued in this Administration directed the Secretary of Agriculture to "take immediate steps to expand and improve the government program of distributing surplus food to needy families."
     (b) Further, I have instructed the Secretary of Agriculture, consistent with the bill enacted by the Congress last year authorizing establishment of pilot Food-Stamp programs, to proceed as rapidly as possible to establish pilot programs for needy families in localities in West Virginia, Pennsylvania, Eastern Kentucky, Northern Minnesota, Southern Illinois and the Detroit area. It is my hope that this pilot program, while providing additional nutrition to those now in need, will pave the way for substantial improvement in our present method of distributing surplus food.
     (c) I have also asked the Secretary of Agriculture to make recommendations to improve and strengthen our school lunch program, to make the best possible nutrition available to every school-child, regardless of the economic condition of his family or local school district.

8. Improvements in the Old-Age, Survivors, and Disability Insurance Program.

     The current softness of the economy underscores the inadequacy of social security benefits in relation to the needs of many present beneficiaries. The average retired worker's benefit is only $74 a month. A majority of these beneficiaries have no other significant income. The basic principle of our social insurance system is undermined when a substantial number of retired individuals must seek public assistance or else subsist below minimum standards of health and comfort. We must not permit the benefits of retired workers and their families to lag behind rises in living costs; we cannot decently exclude our older population from the general advances in standards of living enjoyed by employed workers.
     I recommend that Congress enact five improvements in benefits, to become effective April 1. All are clearly justified in equity and decency. They will increase benefit payments for between four and five million people in the next twelve months. Besides meeting pressing social needs, the additional flow of purchasing power will be a desirable economic stimulus at the present time. Early enactment will serve this end.
     The Old-Age, Survivors, and Disability Insurance program is financed on a sound actuarial basis, with insurance contributions adjusted to scheduled benefit payments. The benefit improvements I am proposing can be covered by additions of ¼ of 1 percent each to the employer's and employee's contributions, beginning at the next scheduled increase in contributions on January 1, 1963.
     The five proposals are:
     (1) Raise the minimum monthly benefit for the retired worker from $33 per month to $43 per month, increasing benefits for more than 2,200,000 people in the first 12 months. We wish it could be raised higher - but surely we cannot continue benefits at such an inconscionably low minimum.
     (2) Improve retirement protection by paying actuarially reduced benefits to men beginning at age 62.  Present law does not permit a man to become eligible for optional retirement benefits before age 65 although such benefits are available to women at age 62 on an actuarially reduced basis. Provision for paying reduced benefits to men beginning at age 62 would make benefits available to older unemployed workers at comparatively little additional program cost. The plight of the older unemployed man is particularly serious in areas of chronic unemployment. However, the difficulties older workers find in reentering the labor market after losing their jobs or after periods of illness exist in all parts of the country. Frequently, as persons approach age 65 they find it difficult to compete in their accustomed occupations because of physical incapacity which may not however have progressed to the point of total disability. Provision for actuarially reduced benefits at age 62 to men as well as women will provide income for 600,000 people, some of whom would otherwise have to turn to public assistance for support.
     (3) Provide Benefits for 170,000 Additional People by Liberalizing the Insured-Status Requirement. At present a person can receive benefits only if before retirement he was employed in jobs covered by the social security program for one out of every three quarters after 1950. The proposal is to reduce the required coverage to one quarter out of every four. This is only fair to our present generation of older people, as it brings their eligibility requirement into line with the one that present law contemplates for future generations, i.e., ten years of coverage out of a working life of about forty years.
     (4) Increase the Aged Widow's Benefit from 75% to 85% of her Husband's Benefit Amount, raising benefits for 1,550,000 widows. There is no justification either in equity or in the facts of family consumption for this size gap in the level of widows' benefits.
     (5) Broaden disability insurance protection. The social security program should provide disability insurance benefits for insured workers and their families after the workers have been totally disabled for 6 months. Under present law, disability benefits are available only if the disabled worker's condition is expected to result in death or to last for a long and indefinite period. The proposed change provides benefits in the first 12 months for 85,000 people (totally disabled workers and their dependents) many of whom otherwise have to resort to public assistance. Since it would no longer be necessary to determine that the disabled person is unlikely to recover, the change removes an important barrier to rehabilitation. It also speeds up determinations of disability. While the change has these desirable effects, it would in no sense be an innovation. Similar provisions are contained in many private insurance contracts and other disability programs.

9. Early Payment of Veterans Life Insurance Dividends.

     I have asked the Veterans Administration to advance the payment of the 1961 dividend of $258 million on National Service Life Insurance and U.S. Government Life Insurance policies. This payment would normally be distributed throughout the year. Substantial amounts should begin to reach veterans of World War I and II within the next thirty to sixty days - the period of slump - when they are most needed and will do the most good. If sound insurance practices justify it, as I hope further study will show, an additional dividend will be paid this year from the substantial funds that have been accumulated.

10. Minimum Wage Increase and Expanded Coverage.

     I urge the Congress to raise the minimum wage immediately to $1.15 and to $1.25 within two years. This will improve the incomes, level of living, morale, and efficiency of many of our lowest-paid workers, and provide incentives for their more productive utilization. This can actually increase productivity and hold down unit costs, with no adverse affects on our competition in world markets and our balance of payments. More than four-fifths of those commodities affected by either export or import trends are produced by industries which would not be significantly affected by a moderate increase in the minimum wage. The proposed new coverage is basically in retail trade and services, which are not affected by shifts in international trade. Moreover, experience with previous minimum wage increases indicates little effect on prices. In the four years following the 1956 increase in the minimum wage, the index of all wholesale prices increased 6.6 percent, whereas the prices charged for commodities produced in low-wage industries showed negligible change.
     Coverage should be extended to several million workers not now covered. This will extend the wage standard throughout significant low-wage sectors of the labor market. It will require the payment of a minimum starting at $1.00 for the workers newly included, and a gradual increase to the general $1.25 minimum.
     Together, these two principal changes in the Fair Labor Standards Act will go far to protect our lowest paid workers. The proposed minimum rates have been carefully set at levels which will benefit substantial numbers of underpaid workers, but not so high as to prevent ready adjustment to the new standards.

11. Accelerating Procurement and Construction.

     (a) I have directed the heads of the Departments and agencies to carry out an immediate review of their procurement and construction plans through the end of the current fiscal year with a view to expediting such procurement and construction wherever possible, giving priority to actions which will have an early effect on unemployment. The steps they are taking will be reported to me by March 1.
     (b) I have directed the Cabinet and agency heads to submit by February 17 inventories of (1) going public works projects which can be speeded up quickly, but for which additional appropriations might be seeded, (2) needed natural resource conservation and development, light construc:ion, maintenance, repair, and other work which likewise can be speeded up or started juickly, and (3) any additional construction or other projects which could be initiated at in early date.
     I have instructed the Director of the Bureau of the Budget, in consultation with the chairman of the Council of Economic Advisers, to work with the agencies in carrying out these directives. They will assemble and appraise the project inventories with a view to determining which projects may be suitable for early initiation or acceleration is part of the recovery program.
    Excellent possibilities include programs to improve the roads, recreational facilities, and forests in the Project Work Inventories of the Forest Service, the National Park Servce, and the Bureau of Land Management. A particularly high priority will be assigned to projects located in areas of labor surplus.
     (c) I have today instructed the Secretary of Commerce to make available to the States immediately the entire balance of Federal-aid highway funds scheduled for this fiscal year. This acceleration of the availability of $724 million is a first step in speeding up the highway program and getting more projects under construction and more men at work this year.
     The Secretary will urge the States to place under contract as soon as possible all those projects which are currently in the final stages of planning.
     In addition, I have asked the Secretary of Commerce to recommend to me, as part of the inventory of approved construction projects, called for earlier in this message, means of increasing the flow of Federal highway funds into actual new construction if economic conditions require such action.

12. Government Procurement in Labor Surplus Areas.

     A principal purpose of the proposed Area Redevelopment Act is to create new jobs in chronic labor surplus areas by bringing in new private industries. It would be anomalous for the Government to urge these locations on private industry while ignoring these areas in the location of its own activities. Agencies of the Federal Government, in locating new facilities or deciding upon the use of existing facilities, are directed to give every reasonable preference to labor surplus areas.
     And I have today sent a directive to the Secretary of Defense, the Secretary of Labor, and the General Services Administration requesting prompt steps to improve the machinery by which Federal contracts can be channeled to firms located in labor surplus areas.

     I have emphasized that the solution to our economic problem requires a program that goes well beyond anti-recession measures, important as these are to the relief of distress and the reversal of economic decline. Equally important are measures for the longer pull to restore our economy to its full potential and to accelerate economic growth. Fortunately, the measures to overcome recession, to take up the slack, and to speed growth all reinforce each other.
     Today, most industries have the facilities to produce well above current levels. They lack only customers. As a nation, we lose not only $30 to $40 billion of production per year. We also lose the vital incentives which capacity operation gives for expansion and modernization of plant and equipment. The measures I have proposed to reduce unemployment and stimulate markets will help to restore these incentives for economic growth.

1. Special Tax Incentives to Investment.

     Expansion and modernization of the nation's productive plant is essential to accelerate economic growth and to improve the international competitive position of American industry. Embodying modern research and technology in new facilities will advance productivity, reduce costs, and market new products. Moreover, an early stimulus to business investment will promote recovery and increase employment.
     Among the reforms of the Federal tax system which I expect to propose at a later date is a modification of the income tax laws to provide additional incentives for investment in plant and equipment. To avoid a net revenue loss, I will also recommend measures to remove several unwarranted special tax benefits, and to improve tax compliance and administration. It should be possible to reform the tax system to stimulate economic growth, without reducing revenues and without violating the basic principles of fairness in taxation.

2. Investment in Human Resources.

     Another fundamental ingredient of a program to accelerate long-run economic growth is vigorous improvement in the quality of the Nation's human resources. Modern machines and advanced technology are not enough, unless they are used by a labor force that is educated, skilled and in good health. This is one important reason why, in the legislative programs that I will submit in the days to come, I will emphasize so strongly programs to raise the productivity of our growing population, by strengthening education, health, research and training activities.

3. Investment in Natural Resources.

     The economic growth of the United States has been favored by an abundant supply of natural resources of almost every sort. But resource needs and supplies are not static. As our needs mount, as past reserves are depleted, and as technological requirements change, we must constantly develop new supplies if growth is not to be inhibited.
     Exhaustion of low-cost domestic mineral deposits is a growing problem which calls for technological advance and new national long-range minerals policy.
     Our water resources programs, including flood control, irrigation, navigation, watershed development, water pollution control - and above all, water desalinization - require priority attention. In addition, we need to develop sound and uniform standards for sharing costs between Federal, State, and local governments.
     Improvement of our forest resources will require expanded Government credit sources for the development of woodland properties, more research on forest management, additional funds for cooperative forest programs, acceleration of the national forest program, and improvement of grazing resources.
     Also essential to economic growth are long-range energy resource development and accelerated programs for economical production of energy from nuclear sources, including nuclear fusion. We must begin now also to plan for regional cooperative pooling of electrical power. Both efficiency and growth goals will be served if we interconnect our hydroelectric and thermal power resource plants.

4. Productivity and Price Stability.

     Rapid technological change is resulting in serious employment dislocations, which deny us the full stimulus to growth which advancing technology makes possible. Labor and industry have demonstrated cooperative initiative in working out solutions in specific plants and industries. Government action is also necessary, not only to maintain an environment favorable to economic growth, but also to deal with special problems in communities and industries suffering from economic dislocations and to help those who through unemployment are bearing an unfair share of the burden of technological change.
     I have dealt with some of these problems elsewhere in this message, in connection with unemployment insurance, aid to depressed areas, and efforts to broaden the services of the United States Employment Service.
     Government can help further by encouraging labor and management to find ways to smooth the adjustment to technological change and thus to maintain and re-enforce the favorable attitude toward economic progress that characterizes American business and labor alike. Accordingly, I shall issue an executive order establishing the President's Advisory Committee on Labor-Management Policy, with members drawn from labor, management, and the public. The Committee is directed to advise the President with respect to actions that may be taken by labor, management, and the public which will promote free and responsible collective bargaining, industrial peace, sound wage policies, sound price policies and stability, a higher standard of living, increased productivity, and America's competitive position in world markets. It will consider national manpower needs and the special benefits and problems created by automation and other technological advances. I look to the Committee to make an important contribution to labor-management relations and an understanding of their importance to the stability of prices and the health of the economy.
     The course of the American price level depends in substantial measure on wage and price decisions of labor and management. This dependence grows in importance as the economy moves toward full employment. All of us must now be conscious of the need for policies that enable American goods to compete successfully with foreign goods. We cannot afford unsound wage and price movements which push up costs, weaken our international competitive position, restrict job opportunities, and jeopardize the health of our domestic economy.
     Price stability will also be aided by the adoption of a tax incentive plan mentioned earlier, which will encourage a higher rate of business investment in improved plants and equipment.
     Price increases for many products and services have occurred because these industries have lagged behind in the march of productivity and technological advance. Indeed, in the present economic situation, a stepping-up of productivity improvement throughout the economy would contribute to the achievement of price stability.
     We must not as a nation come to accept the proposition that reasonable price stability can be achieved only by tolerating a slack economy, chronic unemployment, and a creeping rate of growth.
     Neither will we seek to buy short-run economic gains by paying the price of excessive increases in the cost of living. Always a cruel tax upon the weak, inflation is now the certain road to a balance of payments crisis and the disruption of the international economy of the Western World.
     Inflation has no single cause. There have been times in the postwar period when prices rose sharply in response to a rate of total spending in excess of our capacity to produce. The government will not contribute to this process, and we shall use the powerful tools of fiscal and monetary policy to arrest any such movement if it should threaten in the year ahead. Some price increases, particularly among the consumer services, have been caused by the failure of productive resources to move promptly in response to basic shifts in the pattern of demand. We shall seek means to encourage the movement of manpower and capital into sectors of expanding demand.

     I have sought in this message to propose a program to restore momentum to the American economy. I have recommended measures designed to set us firmly on the road to full recovery and sustained growth. But if these measures prove to be inadequate to the task, I shall submit further proposals to the Congress within the next 75 days. We will do what needs to be done to fulfill the high promise of the American economy.