Part 19

And while we do not have all the answers, on the basis of its preliminary recommendations we are ready to move.

This is not a war that Washington alone can win. The idea of a national police force is repugnant to the American people. Crime must be rooted out in local communities by local authorities. Our policemen must be better trained, must be better paid, and must be better supported by the local citizens that they try to serve and to protect.

The National Government can and expects to help.

And so I will recommend to the 90th Congress the Safe Streets and Crime Control Act of 1967. It will enable us to assist those States and cities that try to make their streets and homes safer, their police forces better, their corrections systems more effective, and their courts more efficient.

When the Congress approves, the Federal Government will be able to provide a substantial percentage of the cost:

--90 percent of the cost of developing the State and local plans, master plans, to combat crime in their area;

--60 percent of the cost of training new tactical units, developing instant communications and special alarm systems, and introducing the latest equipment and techniques so that they can become weapons in the war on crime;

--50 percent of the cost of building crime laboratories and police academy-type centers so that our citizens can be protected by the best trained and served by the best equipped police to be found anywhere. We will also recommend new methods to prevent juvenile delinquents from becoming adult delinquents. We will seek new partnerships with States and cities in order to deal with this hideous narcotics problem. And we will recommend strict controls on the sale of firearms.

At the heart of this attack on crime must be the conviction that a free America--as Abraham Lincoln once said--must "let reverence for the laws . . . become the political religion of the Nation."

Our country's laws must be respected. Order must be maintained. And I will support--with all the constitutional powers the President possesses--our Nation's law enforcement officials in their attempt to control the crime and the violence that tear the fabric of our communities.

Many of these priority proposals will be built on foundations that have already been laid. Some will necessarily be small at first, but "every beginning is a consequence." If we postpone this urgent work now, it will simply have to be done later, and later we will pay a much higher price.

Our fourth objective is prosperity, to keep our economy moving ahead, moving ahead steadily and safely.

We have now enjoyed 6 years of unprecedented and rewarding prosperity. Last year, in 1966:

--Wages were the highest in history--and the unemployment rate, announced yesterday, reached the lowest point in 13 years;

--Total after-tax income of American families rose nearly 5 percent;

--Corporate profits after taxes rose a little more than 5 percent;

--Our gross national product advanced 5.5 percent, to about $740 billion;

--Income per farm went up 6 percent.

Now we have been greatly concerned because consumer prices rose 4.5 percent over the 18 months since we decided to send troops to Vietnam. This was more than we had expected--and the Government tried to do everything that we knew how to do to hold it down. Yet we were not as successful as we wished to be. In the 18 months after we entered World War II, prices rose not 4.5 percent, but 13.5 percent. In the first 18 months after Korea, after the conflict broke out there, prices rose not 4.5 percent, but 11 percent. During those two periods we had OPA price control that the Congress gave us and War Labor Board wage controls.

Since Vietnam we have not asked for those controls and we have tried to avoid imposing them. We believe that we have done better, but we make no pretense of having been successful or doing as well as we wished.

Our greatest disappointment in the economy during 1966 was the excessive rise in interest rates and the tightening of credit. They imposed very severe and very unfair burdens on our home buyers and on our home builders, and all those associated with the home industry.

Last January, and again last September, I recommended fiscal and moderate tax measures to try to restrain the unbalanced pace of economic expansion. Legislatively and administratively we took several billions out of the economy. With these measures, in both instances, the Congress approved most of the recommendations rather promptly.

As 1966 ended, price stability was seemingly being restored. Wholesale prices are lower tonight than they were in August. So are retail food prices. Monetary conditions are also easing. Most interest rates have retreated from their earlier peaks. More money now seems to be available.

Given the cooperation of the Federal Reserve System, which I so earnestly seek, I am confident that this movement can continue. I pledge the American people that I will do everything in a President's power to lower interest rates and to ease money in this country. The Federal Home Loan Bank Board tomorrow morning will announce that it will make immediately available to savings and loan associations an additional $1 billion, and will lower from 6 percent to 5 3/4 percent the interest rate charged on those loans.

We shall continue on a sensible course of fiscal and budgetary policy that we believe will keep our economy growing without new inflationary spirals; that will finance responsibly the needs of our men in Vietnam and the progress of our people at home; that will support a significant improvement in our export surplus, and will press forward toward easier credit and toward lower interest rates.

I recommend to the Congress a surcharge of 6 percent on both corporate and individual income taxes--to last for 2 years or for so long as the unusual expenditures associated with our efforts in Vietnam continue. I will promptly recommend an earlier termination date if a reduction in these expenditures permits it. This surcharge will raise revenues by some $4.5 billion in the first year. For example, a person whose tax payment, the tax he owes, is $1,000, will pay, under this proposal, an extra $60 over the 12-month period, or $5 a month. The overwhelming majority of Americans who pay taxes today are below that figure and they will pay substantially less than $5 a month. Married couples with two children, with incomes up to $5,000 per year, will be exempt from this tax--as will single people with an income of up to $1,900 a year.

Now if Americans today still paid the income and excise tax rates in effect when I came into the Presidency, in the year 1964, their annual taxes would have been over $20 billion more than at present tax rates. So this proposal is that while we have this problem and this emergency in Vietnam, while we are trying to meet the needs of our people at home, your Government asks for slightly more than one-fourth of that tax cut each year in order to try to hold our budget deficit in fiscal 1968 within prudent limits and to give our country and to give our fighting men the help they need in this hour of trial.

For fiscal 1967, we estimate the budget expenditures to be $126.7 billion and revenues of $117 billion. That will leave us a deficit this year of $9.7 billion.