ECONOMIC

tion and the improved state of financial markets attest to the significantprogress we have made during the past year toward reestablishing astable, noninflationary, full-employment economy.If this goal is to be fully realized, the present policy of moderation infiscal and monetary affairs and of relying on a restored vitality in the privatesector must continue. We need tax reductions to support a lastingeconomic recovery and to provide relief from the increases in real tax burdensinduced by inflation. In the long run, inflation and real economicgrowth will constantly push taxpayers into higher and higher taxbrackets unless tax laws are changed. Some believe that these additionaltax receipts should be spent on new Government programs. I do not.Instead I believe that the Congress should counteract the growing burdenimposed by the tax system—and the reduction of private incentivesthat it implies—by periodically providing offsetting tax cuts while continuingto restrain the rate of growth of Government spending.The creation of permanent, meaningful, and productive jobs for ourgrowing labor force requires a higher level of private investment. Taxreductions must be so designed that measures to stimulate consumptionare balanced by those which will increase investment. Investment hasfor some time been falling short of the levels required if we are to provideenough productive jobs for our people at rising real wage rates, andif we hope to renew and improve our capital stock so that we can meetour requirements for energy and make headway toward environmental,job safety, and other goals. Investment has grown more slowly thanwould normally be true at this stage of a recovery. A stronger spurto investment in productive plant and equipment is necessary for thefurther improvement in production and employment in 1977 and beyond.TAX REDUCTIONSIn October 1975, I presented to the Congress a program of tax cutsand spending restraints that would have reduced the burden of governmentfor all taxpayers. It would have given the American people morefreedom to spend their incomes as they choose rather than as Washingtonchooses for them, and it would have increased incentives to expandinvestment. However, the Congress decided otherwise—to increase spendingfar more than I wanted and to cut taxes far less than I wanted.Earlier this month I again sent to the Congress my recommendations tocut taxes. I have once more urged a permanent increase in the personalexemption from $750 to $1,000 to replace the system of temporary taxcredits that has so greatly complicated the individual income tax return.I am also recommending a higher income allowance and a series of per-