Next year the budget deficit will be only slightly less than this year.  But one-third of the deficit is due to the necessary tax cuts that I’ve proposed.  This year the right choice is to reduce the burden on taxpayers and provide more jobs for our people.

The third element in our program is a renewed attack on inflation.  We’ve learned the hard way that high unemployment will not prevent or cure inflation.  Government can help us by stimulating private investment and by maintaining a responsible economic policy.  Through a new top-level review process, we will do a better job of reducing Government regulation that drives up costs and drives up prices.

But again, Government alone cannot bring down the rate of inflation.  When a level of high inflation is expected to continue, then companies raise prices to protect their profit margins against prospective increases in wages and other costs, while workers demand higher wages as protection against expected price increases.  It’s like an escalation in the arms race, and understandably, no one wants to disarm alone.

Now, no one firm or a group of workers can halt this process.  It’s an effort that we must all make together.  I’m therefore asking government, business, labor, and other groups to join in a voluntary program to moderate inflation by holding wage and price increases in each sector of the economy during 1978 below the average increases of the last 2 years.

I do not believe in wage and price controls.  A sincere commitment to voluntary constraint provides a way, perhaps the only way, to fight inflation without Government interference.

As I came into the Capitol tonight, I saw the farmers, my fellow farmers, standing out in the snow.  I’m familiar with their problem, and I know from Congress’ action that you are too.  When I was running Carters Warehouse, we had spread on our own farms 5-10-15 fertilizer for about $40 a ton.  The last time I was home, the price was about $100 a ton.  The cost of nitrogen has gone up 150 percent, and the price of products that farmers sell has either stayed the same or gone down a little.

Now, this past year in 1977, you, the Congress, and I together passed a new agricultural act.  It went into effect October 1.  It’ll have its first impact on the 1978 crops.  It will help a great deal.  It’ll add $6 1/2 billion or more to help the farmers with their price supports and target prices.

Last year we had the highest level of exports of farm products in the history of our country, $24 billion.  We expect to have more this year.  We’ll be working together.  But I think it’s incumbent on us to monitor very carefully the farm situation and continue to work harmoniously with the farmers of our country.  What’s best for the farmers, the farm families, in the long run is also best for the consumers of our country.

Economic success at home is also the key to success in our international economic policy.  An effective energy program, strong investment and productivity, and controlled inflation will provide [improve] our trade balance and balance it, and it will help to protect the integrity of the dollar overseas.