(0:00) the average American pays the taxes for them. Not only that, but it robs this country of jobs, because instead of coming back with that million dollars and creating a shoe factory, say in New Hampshire or Vermont, if the company takes the money down to Italy and - and builds a shoe factory, they don't have to pay any taxes on the money. Another thing is a system called DISC which was originally designed, proposed by Mr. Nixon, to encourage exports. This permits a company to create uh - a dummy corporation, to export their products, and then not to pay the full amount of taxes on them. This costs our uh - government about uh - $1.4 billion a year. And when those rich corporations don't pay that tax, the average American taxpayer pays it for 'em. Another one that's uh - that's very important is the uh - is the business deductions, uh - jet airplanes, uh - first class travel, the fifty-dollar martini lunch. The average working person can't - uh - can't take advantage of that, but the - the wealthier people - uh can. Uh - another system is where uhh - a dentist can invest money in say, raising cattle and uh - can put in a hundred thousand dollars of his own money, borrow nine hundred thousand dollars - nine hundred mi- thousand dollars - that makes a million - and mark off a great amount of uh - of loss uh - through that procedure. Uh - there was one example, for instance, where uh - somebody uh - produced pornographic movies. They put in $30 thousand of their own money and got a hundred and twenty thousand dollars in tax savings. Well, these special kinds of programs have - have robbed the average taxpayer and have benefited those who are powerful, and who can employ lobbyists, and who can have their CPAs and their lawyers to help them benefit from the roughly uh - eight thousand pages of the tax code. The average uh American person can't do it. You can't hire a lobbyist uh out of unemployment compensation checks.

(2:01) MS. DREW: Ah - Governor, to follow up on your answer. Uh - in order for any kind of tax relief to really be felt by the middle and lower-income people MR. CARTER: Yes. You need about, according to Congressional committees on this, you need about $10 billion. Now you listed some things - the uh - deferral on foreign income as estimated: that would save about $500 million. DISC, you said, was about 1.4 billion. uh - The estimate of the outside, if you eliminated all tax shelters, is 5 billion. So where else would you raise the revenue to provide this tax relief - would you, in fact, do away with all business deductions, and what other kinds of preferences would you do away with? MR. CARTER: No, I wouldn't do away with all - uh business deductions. I think that would be a - a very serious mistake. But uh - if - if you could just do away with the ones that are unfair, you could lower taxes for everyone. I would never do anything that would increase the taxes for those who work for a living, or who are presently required to list all their income. What I wanna do is not to raise taxes, but to eliminate loopholes. And this is uh - the point of my first statistics that I gave you - that - that the present tax benefits that have been carved out over a long period of years - fifty years - by sharp tax lawyers and by lobbyists have benefited just the rich. These programs that I described to you earlier - the tax deferrals for overseas, the DISC, and the tax shelters, uh - they only apply to people in the $50 thousand-a-year bracket or up, and I think this is the very best way to approach it. It's to make sure that everybody pays taxes on the income that they earn and make sure that you take whatever savings there is from the higher income levels and give it to the lower- and middle-income families.

(3.:48) MR. NEWMAN: President Ford. MR. FORD: Governor Carter's answer tonight does not coincide with the answer that he gave in an interview to the Associated Press a week or so ago. In that interview uh - Governor Carter indicated that uh - he would raise the taxes on those in the medium or middle-income brackets or higher. Now if you uh - take the medium or middle-income taxpayer - that's about $14 thousand per person - uh - Governor Carter has indicated, publicly, in an interview that he would increase the taxes on about 50 percent of the working people of this country. I think uh - the way to get tax equity in this country is to give tax relief to the middle-income people who have an income from roughly $8 thousand up to twenty-five or thirty thousand dollars. They have been short-changed as we have taken ten million taxpayers off the tax rolls in the last eight years, and as we have uh - added to the minimum tax uh - provision to make all people pay more taxes. I believe in tax equity for the middle-income taxpayer, increasing the personal exemption. Mr. Carter wants to increase taxes for roughly half of the taxpayers of this country. Now, the Governor has also played a little fast and loose with the facts about vetoes. The records show that President Roosevelt vetoed an average of fifty-five bills a year. President Truman vetoed on the average, while he was president, about thirty-eight bills a year. I understand that Governor Carter, when he was Governor of Georgia, vetoed between thirty-five and forty bills a year. My average in two years is twenty-six. But in the process of that we have saved uhh - $9 billion. And one final comment, uh - Governor Carter talks about the tax bills and all of the inequities that exist in the present law. I must remind him the Democrats have controlled the Congress for the last twenty-two years and they wrote all the tax bills. MR. NEWMAN: Mr. Reynolds.

(6.:08) MR. REYNOLDS: I suspect that uhh - we could continue on this tax argument for some time. But I'd like to move on to another area. Mr. President, uh everybody seems to be running against Washington this year. And I'd like to raise two coincidental events and ask you whether you think perhaps this may have a bearing on the attitude throughout the country. The House Ethics Committee has just now ended its investigation of Daniel Schorr, after several months and many thousands of dollars, trying to find out how he obtained and caused to be published a report of the Congress that probably is the property of the American people. At the same time. the Senate Select Committee on Standards and Conduct has voted not really to begin an investigation of a United States senator because of allegations against him that he may have been receiving corporate funds illegally over a period of years. Do you suppose, sir, that events like this contribute to the feeling in the country that maybe there's something wrong in Washington, and I don't mean just in the executive branch but throughout the whole government? MR. FORD: There is a considerable anti-Washington feeling throughout the country. But I think the feeling is misplaced. In the last two years, we have restored integrity in the White House, and we've set high standards in the executive branch of the government. The anti-Washington feeling, in my opinion, ought to be focused on the Congress of the United States. For example, this Congress, very shortly, will spend a billion dollars a year for its housekeeping, its salaries, its expenses and the like. It - the next Congress will probably be the first billion-dollar Congress in the history of the United States. I don't think the American people are getting their money's worth from the majority party that run this Congress. We, in addition, see that uh - in the last uh - four years the number of employees hired by the Congress has gone up substantial- uh much more than uh - the gross national product, much more than any other increase throughout our society. Congress is hiring people by the droves, and the cast as a result has gone up. And I don't see any improvement in the performance of the Congress under the present leadership. So it seems to me instead of the anti-Washington feeling being aimed at everybody in Washington, it seems to me that the focus should be where the problem is, which is the Congress of the United States, and particularly the majority in the Congress. They spend too much money on themselves. They have too many employees. There's some question about their morality. It seems to me that in this election, the focus should not be on the executive branch but the corrections should come as the voters vote for their members of the House of Representatives or for their United States senator. That's where the problem is and I hope there'll be some corrective action taken so we can get some new leadership in the Congress of the United States.

(9:31) MR. REYNOLDS: Mr. President, if I may follow up. Uh - I think you've made it plain that you take a dim view of the uh - majority in the Congress. Isn't it quite likely, sir, that you will have a Democratic Congress in the next session, if you are elected president? And hasn't the country uh - a right to ask whether you can get along with that Congress, or whether we'll have continued confrontation? MR. FORD: Well, It seems to me that uh - we have a chance - the Republicans - to get a majority in the House of Representatives. We will make some gains in the United States Senate. So there will be different ratios in the House, as well as in the Senate, and as president I will be able to uh - work with that Congress. But let me take the other side of the coin, if I might. Supposing we had - had a Democratic Congress for the last two years and we'd had uh - Governor Carter as President. He has, in effect, said that he would agree with all of - he would disapprove of the vetoes that I have made, and would have added significantly to expenditures and the deficit in the federal government. I think it would be contrary to one of the basic concepts in our system of government - a system of checks and balances. We have a Democratic Congress today, and fortunately we've had a Republican president to check their excesses with my vetoes. If we have a Democratic Congress next year, and a president who wants to spend an additional one hundred billion dollars a year, or maybe two hundred billion dollars a year, with more programs, we will have in my judgment, greater deficits with more spending, more dangers of inflation. I think the American people want a Republican president to check on any excesses that come out of the next Congress, if it is a Democratic Congress.

(11:31) MR. NEWMAN: Governor Carter. MR. CARTER: Well, it's not a matter of uh - Republican and Democrat. It's a matter of leadership or no leadership. President Eisenhower worked with a Democratic Congress very well. Even President Nixon, because he was a strong leader at least, worked with a Democratic Congress very well. Uh - Mr. Ford has vetoed, as I said earlier, four times as many bills per year as Mr. Nixon. Mr. Ford quite often puts forward a program just as a public relations stunt, and never tries to put it through the Congress by working with the Congress. I think under presidents For- uh - Nixon and Eisenhower they passed about 60 to 75 percent of their legislation. This year Mr. Ford will not pass more than 26 percent of all the legislative proposals he puts forward. This is government by stalemate, and we've seen almost a complete breakdown in the proper relationship between the president, who represents this country, and the Congress, who collectively also represent this country. We've had uh - Republican presidents before who've tried to run against a Democratic - uh Congress. And I don't think it's uh - the Congress is Mr. Ford's opponent; but if uh - if - if he insists that uh - that I be responsible for the Democratic Congress, of which I'm - have not been a part, then I think it's only fair that he be responsible for the Nixon administration in its entirety, of which he was a part. That, I think, is a good balance. But the point is, that - that a president ought to lead this country. Mr. Ford, so far as I know, except for avoiding another Watergate, has not accomplished one single major program for this country. And there's been a constant squabbling between the president and the Congress, and that's not the way this country ought to be run. I might go back to one other thing. Mr. Ford has uh - misquoted an AP uh - news story that was in error to begin with. That story reported several times that I would lower taxes for low and middle-income families and uh - that correction was delivered to the White House and I am sure that the president knows about this uh - correction, but he still insists uh - on repeating an erroneous statement. MR. NEWMAN: President Ford, Governor Carter, we no longer have enough time for two complete sequences of questions. We have only about six minutes left for questions and answers. For that reason we will drop the follow-up questions at this point but each candidate will still be able to respond to the other's answers. Uh - to the extent that you can, gentlemen, please keep your remarks brief. Mr. Gannon.

(14:07) MR. GANNON: Governor Carter, one uh - important uh - part of the Government's economic policy uh - apparatus we haven't talked about is the Federal Reserve Board. I'd like to ask you something about what you've said and that is that uh - you believe that a president ought to have a chairman of the Federal Reserve Board whose views are compatible with his own. Based on the record of the last few years, would you say that your views are compatible with those of Chairman Arthur Burns? And if not, would you seek his resignation if you are elected? MR. CARTER: What I have said is that the president ought to have a chance to appoint a chairman of the Federal Reserve Board to have a coterminous uh term; in other words, both of 'em serve the same four - four years. The Congress can modify the supply of money by modifying the income uh tax laws. The president can modify the uh - economic structure of a country by public statements and general attitudes in the budget that he proposes. The Federal Reserve has uh - an independent status that ought to be preserved; I think that Mr. uh - Burns did take a typical, erroneous Republican attitude in the 1973 year when inflation was so high. They assumed that the uh - inflation rate was because of excessive demand and uh - therefore put into effect tight constraint on the economy, very high interest rates, which is typical also of the Republican administration, uh - tried to increase the uh - the tax uh - payments by individuals, and cut the tax payments by corporations. I would have uh - done it opposite. I think the uh - problem should've been addressed by increasing productivity, by having uh - put - put people back to work so they could purchase more goods, lower income taxes on individuals, perhaps raise them, if necessary, on corporations in comparison. But uh - Mr. Burns uh - in that respect made a very serious mistake. I would not wanna destroy the - the independence of the uh Federal Reserve - uh Board. But I do think we ought to have a cohesive economic policy with at - at least the chairman of the Federal Reserve Board and the president's terms being uh - the same and letting the Congress, of course, be the third uh - entity with uh - with independence subject only to the president's veto.

(16:20) MR. NEWMAN: President Ford, your response. MR. FORD: The chairman of the Federal Reserve Board should be independent. Fortunately, he has been during Democratic as well as Republican administrations. As the result in the last uh - two years uh - we have had a responsible monetary policy. Uh the Federal Reserve Board indicated that the supply of money would be held between four to four and a half and seven and seven and a half. They have done a good job in integrating the money supply with the uh - fiscal policy of the uh - executive and legislative branches of the government. It would be catastrophic if the chairman of the Federal Reserve Board became the tool of the political uh - party that was in power. It's important for our future uhh - economic security that that job be nonpolitical and uh - separate from the executive and the Legislative branches. MR. NEWMAN: Mrs. Drew.

(17:14) MS. DREW: Uh Mr. President, the real problem with the FBI and, in fact, all of the intelligence agencies is there are no real laws governing them. Such laws as there are tend to be vague and open-ended. Now, you have issued some executive orders, but we've learned that leaving these agencies to executive discretion and direction can get them and, in fact, the country in a great deal of trouble. One president may be a decent man, the next one might not be. So, what do you think about trying to write in some more protection by getting some laws governing these agencies? MR. FORD: You are familiar, of course, with the fact that I am the first president in thirty years who has reorganized the intelligence agencies in the federal government: the CIA, the Defense Intelligence Agency, the National Security Agency and the others. We've done that by executive order. Uhh - and I think uh - we've tightened it up; we've uh - straightened out their problems that developed over the last few years. It doesn't seem to me that it's needed or necessary to have legislation in this particular regard. Uhh - I have recommended to the Congress, however - I'm sure you're familiar with this - legislation that would uhh - make it uhh - very uhh - proper in - in the right way, that the attorney general could go in and get the right for wiretapping under security cases. This was an effort that was made by the attorney general and myself, working with the Congress. But even in this area, where I think new legislation would be justified, uh the Congress has not responded. So, I feel in that case, as well as in the reorganization of the intelligence agencies, as I've done, we have to do it by executive order. And I'm glad that we have a good director in George Bush. We have good executive orders, and the CIA and the DIA and NASA uh - uh - NSA are now doing a good job under proper supervision.

(19:22) MR. NEWMAN: Governor Carter. MR. CARTER: Well, one of the very serious things that's happened in our government in recent years, and has continued up until now, is a breakdown in the trust among our people in the

MR. NEWMAN: failure in the broadcasting of the debate, it occurred twenty-seven minutes ago. Uh the fault has been dealt with and uh - we want to thank President Ford and Governor Carter for being so patient and understanding while this uh delay went on. Uh we very much regret the technical failure that lost the sound as it - as it was leaving this theater. It occurred during uh Governor Carter's response to what would have been and what was the last question put to the candidates.

(20:42) That question went to President Ford. It dealt with the control of government intelligence agencies. Uh Governor Carter was making that response and had very nearly finished it. Uh - he wil1 conclude his response now after which uh - President Ford and Governor Carter will make their closing statements. Governor. MR. CARTER: There has been too much government secrecy and not uh - not enough respect for the personal privacy of American citizens.

(21:14) MR. NEWMAN: It is now time for the closing statements, which are to be up to four minutes long. Governor Carter, by the same toss of the coin that directed the first question to you, you are to go first now. MR. CARTER: Well, tonight we've had a chance to talk a lot about the past. But I think it's time to talk about the future. Our nation in the last eight years has been divided as never before. It's a time for unity. It's a time to draw ourselves together: to have a president and a Congress that can work together with mutual respect for a change, cooperating for a change, in the open for a change, so the people can understand their own government. It's time for government, industry, labor, manufacturing, agriculture, education, other entities in our society to cooperate. And it's a time for government to understand and to cooperate with our people. For a long time our American citizens have been excluded, sometimes misled, sometimes have been lied to. This is uh - not compatible with the purpose of our nation. I believe in our country. It needs to be competent. The government needs to be well-managed, efficient, economical, We need to have a government that's sensitive to our people's needs - to those who are poor, who don't have adequate health care, who have been cheated too long with our tax programs, who've been out of jobs, whose families have been torn apart. We need to restore the faith and the trust of the American people in their own government. In addition to that, we've suffered because we haven't had leadership in this administration. We've got a government of stalemate. We've lost the vision of what our country can and ought to be. This is not the America that we've known in the past. It's not the America that we have to have in the future. I don't claim to know all the answers. But I've got confidence in my country. Our economic strength is still there. Our system of government - in spite of Vietnam, Cambodia, CIA, Watergate - is still the best system of government on earth. And the greatest resource of all are the two hundred and fifteen million Americans who have within us the strength, the character, the intelligence, the experience, the patriotism, the idealism, the compassion, the sense of brotherhood on which we can rely in the future to restore the greatness to our country We ought not to be excluded from our government anymore. We need a president who can go in - who derives his strength from the people. I owe the special interests nothing. I owe everything to you, the people of this country. And I believe that we can bind our wounds. I believe that we can work together. And I believe that if we can tap the tremendous untapped reservoir of innate strength in this country, that we can once again have a government as good as our people, and let the world know what we still know and hope for - that we still live in the greatest and the strongest and the best country on earth.

(24:36) MR. NEWMAN: President Ford. MR. FORD: On November second all of you will make a very, very important decision. One of the major issues in this campaign is trust. A president should never promise more than he can deliver and a president should always deliver everything that he's promised. A president can't be all things to all people. A president should be the same thing to all people. Another issue in this campaign, Governor Carter has endorsed the Democratic platform, which calls for more spending, bigger deficits, more inflation or mare taxes. Governor Carter has embraced the record of the present Congress, dominated by his political party. It calls for more of the same. Governor Carter in his acceptance speech called for more and more programs, which means more and more government. I think the real issue in this campaign, and that which you must decide on November second, is whether you should vote for his promise or my performance in two years in the White House. On the fourth of July we had a wonderful two hundredth birthday - for our great country. It was a superb occasion. It was a glorious day. In the first century of our nation's history our forefathers gave us the finest form of government in the history of mankind. In the second century of our nation's history, our forefathers developed the most productive industrial nation in the history of the globe. Our third century should be the century of individual freedom for all our two hundred and fifteen million Americans today and all that join us. In the last few years government has gotten bigger and bigger; industry has gotten larger and larger; labor unions have gotten bigger and bigger; and our children have been the victims of mass education. We must make this next century the century of the individual. We should never forget that a government big enough to give us everything we want is a government big enough to take from us everything we have. The individual worker in the plants throughout the United States should not be a small cog in a big machine. The member of a labor union must have his rights strengthened and broadened and our children in their education should have an opportunity to improve themselves based on their talents and their abilities. My mother and father, during the Depression, worked very hard to give me an opportunity to do better in our great country. Your mothers and fathers did the same thing for you and others. Betty and I have worked very hard to give our children a brighter future in the United States, our beloved country. You and others in this great country have worked hard and done a great deal to give your children and your grandchildren the blessings of a better America. I believe we can all work together to make the individuals in the future have more and all of us working together can build a better America. MR. NEWMAN: Thank you President Ford. Thank you Governor Carter. Our thanks also to the questioners and to the audience in this theater. Ahh - we much regret the technical failure that caused a twenty-eight-minute delay in the broadcast of the debate. We believe, however, that everyone will agree that it did not detract from the effectiveness of the debate or from its fairness. The next presidential debate is to take place on Wednesday, October sixth, in San Francisco at nine-thirty P. M., Eastern Daylight Time. The topics are to be foreign and defense issues. As with all three debates between the presidential candidates and the one between the vice-presidential candidates, it is being arranged by the League of Women Voters Education Fund in the hope of promoting a wider and better informed participation by the American people in the election in November. Now, from the Walnut Street Theater in Philadelphia, good night.

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