Economic Report of the President

have unlimited resources. Other national goals cry out for attention,and we cannot afford waste in attempting to achieve any of them.During the coming years, when many of our most important industrieswill be facing difficult adjustment pressures, we must avoidtaking shortsighted actions which block rather than promote this adjustment.Federal policies should indeed cushion the blow whensharp external shocks force an industry, its workers, and the communitieswithin which it is located to undergo massive change in a shortperiod of time. The programs of economic development and tradeassistance which exist to meet these needs should be humanely andeffectively administered. But such aid must be aimed at facilitatingadjustment to change, not preventing it. While we can and shoulddemand that all nations abide by internationally agreed-upon rules oftrade, we must avoid the temptation to use the discretion open to usto prop up weak industries.Summing Up: The Need for BalanceIn the years immediately ahead, our country will be wrestling withtwo central domestic issues. The first is economic in nature: How canwe reduce inflation while maintaining the economic growth thatkeeps our people employed? The second is even broader: What isthe proper role of government in our society as spender of tax revenuesand regulator of industry?I am confident we can successfully come to grips with both ofthese issues. We would make a costly mistake, however, if we approachedthese problems with the view that there is some singleanswer to the economic problem and a single criterion for determiningthe role of government. The resolution of both of these greatissues demands a balancing of many approaches and many considerations.Indeed, the only helpful simple proposition is the one whichstates that any simple and quick answer is automatically the wrongone.The approach I have set forth in this Report will successfully meetthe economic challenge. But it relies on not one but a number of essentialelements. To reduce inflation we must be prepared for aperiod of sustained budgetary and monetary restraint. But since weknow that this also tends to depress the growth of output and employment,we must not conclude that the greater the restraint thebetter. We want a degree of restraint that takes into account society'sinterest in employment and production as well as its concern tolower inflation. We can improve our prospects significantly by introducinginvestment-oriented tax cuts that increase supply and productivity.But the supply response will not be so quick or so great as toconstitute an answer in and of itself. And, in particular, it would bevery dangerous to make budgetary policy in the belief that the supply17