Mr. White, Dean Sayre, distinguished guests - gentlemen:
     I want, first of all, to express my personal thanks to all of you for having come to our city, and for participating in what I hope will be a most useful and helpful proceeding which will benefit this Government and our country.
     It has recently been suggested that whether I serve one or two terms in the Presidency, I will find myself at the end of that period at what might be called the awkward age-too old to begin a new career and too young to write my memoirs.
     A similar dilemma, it seems to me, is posed by the occasion of a Presidential address to a business group on business conditions less than four weeks after entering the White House - for it is too early to be claiming credit for the new administration and too late to be blaming the old one. And it would be premature to seek your support in the next election, and inaccurate to express thanks for having had it in the last one.
     I feel, nevertheless, that I can claim kinship here, and have that claim allowed. For I am convinced that the real spirit of American business is not represented by those involved in price-fixing, conflict-of-interest, or collusion. The real spirit is in this room - in your recognition of your public responsibilities, your pursuit of the truth, your desire for better industrial relations, better technological progress, and better price stability and economic growth. And because your organization portrays that picture of American business, I am delighted and proud to be here with you.
     The complaint has often been made in business circles that the Federal Government is a "silent partner" in every corporation - taking roughly half of all of your net earnings without risk to itself. But it should be also realized that this makes business a not always "silent partner" of the Federal Government - that our revenues and thus our success are dependent upon your profits and your success - and that, far from being natural enemies, Government and business are necessary allies.
     For example, the 1960 drop in expected corporate profits of some six to seven billion dollars also caused a loss in Federal revenues of over three billion dollars - enough to pay the Federal share of all of our anti-recession, health, and education proposals for the next fiscal year and still have enough left over to start closing what the Democrats in this administration used to call "The Missile Gap."
     An equally critical gap separates the tax revenues of a lagging economy from those which are potentially within our grasp: a gap of at least twelve billion dollars. Even after we are able to launch every program necessary for national security and development, this amount of revenue would still leave a substantial surplus - a surplus essential to help defend our economy against inflation - and, equally important, a surplus that, when applied to the Federal debt, would free additional savings for business investment and expansion.
     In short, there is no inevitable clash between the public and the private sectors - or between investment and consumption - nor, as I have said, between Government and business. All elements in our national economic growth are interdependent. Each must play its proper role - and that is the hope and the aim of this administration.
     If those of you who are in the world of business, and we who are in the world of government, are necessarily partners, what kind of a partnership is this going to be? Will it be marked by mutual suspicion and recrimination, or by mutual understanding and fruitful collaboration?
     On behalf of my associates in the Cabinet, I want to be very precise: we will not discriminate for or against any segment of our society, or any segment of the business community. We are vigorously opposed to corruption and monopoly and human exploitation - but we are not opposed to business.
     We know that your success and ours are intertwined - that you have facts and knowhow that we need. Whatever past differences may have existed, we seek more than an attitude of truce, more than a treaty - we seek the spirit of a full-fledged alliance.
     Today, I would briefly mention three areas of common concern to which that alliance must be devoted in the next few years: economic growth, plant modernization, and price stability.

     First: Economic growth has come to resemble the Washington weather - everyone talks about it, no one says precisely what to do about it, and our only satisfaction is that it can't get any worse.
     The economic program which I have set before the Congress is essentially a program for recovery - and I do not equate recovery with growth. But it is an essential first step. Only by putting millions of people back to work can we expand purchasing power and markets. Only by higher income and profits can we provide the incentive and the means for increased investment. And only when we are using our plant at near capacity can we expect any solid expansion.
     Capacity operation is the key. No matter what other arguments or stimulants are used, the incentives for investing new capital to expand manufacturing plants and equipment are weak as long as manufacturers are operating at less than 80 percent of their capacity. From 1950 to 1958, we put only one-sixth of our total output into capital formation, while Japan, Germany, Italy, the Netherlands, Canada, and Sweden were all investing one-fifth or more of their total output in capital goods. So it is not surprising that each of these and other nations over the past several years have all surpassed us in average annual rate of economic growth.
     I think we can do better. Working together, business and Government must do better - putting people back to work, using plants to capacity, and spurring savings and investments with at least a large part of our economic gains - beginning not when our economy is back at the top, but beginning now.

     Secondly: New plant investment not only means expansion of capacity - it means modernization as well. Gleaming new factories and headlines about automation have diverted our attention from an aging industrial plant. Obsolescence is slowing down our growth, handicapping our productivity, and worsening our competitive position abroad.
     Nothing can reverse our balance of payments deficit if American machinery and equipment cannot produce the newest products of the highest quality in the most efficient manner. The available evidence on the age of our industrial plant is unofficial and fragmentary; but the trend is unmistakable - we are falling behind.
     The average age of equipment in American factories today is about 9 years. In a dynamic economy, that average should be falling, as new equipment is put into place. Instead the available evidence suggests that it has been slowly rising.
     Private surveys of machine tools used by manufacturers of general industrial equipment found less than half of these tools over 10 years old in 1949, but 2/3 over that age in 1958. Nineteen percent of our machine tools were found to be over 20 years old.
     Meanwhile, other countries have been lowering the average age of their fixed capital. The German example is the most spectacular - their proportion of capital equipment and plant under 5 years of age grew from one-sixth of the total in 1948 to two-fifths in 1957.
     All of these facts point in one direction: we must start now to provide additional stimulus to the modernization of American industrial plants. Within the next few weeks, I shall propose to the Congress a new tax incentive for businesses to expand their normal investment in plant and equipment.
     But modernization and productivity depend upon more than investment in physical resources. Equally essential is investment in human resources. And I think that this is obvious to those of us who have considered the problems of unemployment and depressed areas. There is no doubt that the maximum impact of a reducing economy falls upon those who are at the bottom of the educational ladder. The first people unemployed are those with the least education, the last people to be hired back are those with the least education. So there is a direct connection between increased emphasis on education in this country and also upon increased productivity and technological change.
     Without strengthened programs for health, education, and science and research, the new modern plant would only be a hollow shell. Many of these programs are within the province of State and local governments. Full recovery will increase the tax revenues that they so sorely need. But the Federal Government will have to pay its fair share of developing these human resources.

     Finally, Government and business must turn their attention to the problem of price stability. Concern over the resumption of inflationary pressures hangs over all our efforts to restore the economy, to stimulate its growth, and to maintain our competitive status abroad. In recent days, complaints have been voiced in some quarters that this administration was not meeting its responsibilities in this area. But the facts are that, whatever one may regard our responsibilities to be, we are almost totally without direct and enforceable powers over the central problem. A free government in a free society has only a limited influence - provided that they are above the minimum - over prices and wages freely set and bargained for by free individuals and free enterprises. And this is as it should be if our economy is to remain free.
     Nevertheless, the public interest in major wage and price determinations is substantial. Ways must be found to bring that public interest before the parties concerned in a fair and orderly manner.
     For this reason, I have announced my determination to establish a Presidential Advisory Committee on Labor-Management Policy, with members drawn from labor, management and the public. I want this Committee to play a major role in helping promote sound wage and price policies, productivity increases, and a betterment of America's competitive position in world markets. I will look to this Committee to make an important contribution to labor-management relations, and to a wider understanding of their impact on price stability and our economic health. And in this undertaking, I ask and urge the constructive cooperation of this organization and its members.