Mr. NEEDHAM. Let me say

Chairman HUMPHREY. When they come in here and talk about crowding out and claim that the social security program is bankrupt and that the country is spending itself into bankruptcy, they are frightening the daylights out of people. And this is what we hear from prominent people.

Mr. NEEDHAM. You never heard that from me.

Chairman HUMPHREY. I did not say you, but I hear this continuously and it scares the living daylights out of people.

Everything is relative. Here, for example, on the matter of the public debt, the debt has dropped in terms of percentage of GNP. And that is really what is relevant. Let us face it, a businessman who has an income of $1 million a year in gross receipts and has a debt of $250,000, is a whole lot better off than a businessman who has an income of $250,000 and has a debt of $25,000. He is a whole lot better off. The debt must be related to the production, to the GNP. And I think what we have had happen here is an attempt to be overly symplistic, to appeal to what they think is the essential rural attitudes of America, the oldfashioned attitudes.

The biggest business in America today is agriculture. And the people in agriculture are big borrowers. They also are big investors. The people out in my part of the country, many of them have one-half a million dollars invested in their little business. They call it an independent business. Those people understand the difference. They are not stupid. They know that they have to borrow larger sums of money today in order to have bigger production tomorrow. They know that and they are willing to make the risk.

And I am simply saying it does not help our country to have prominent people, not you, sir, but many prominent people frightening the living daylights out of folks. I have a lot of confidence in this country.

Mr. NEEDHAM. Well, in conclusion then, let me say for the record that I, personally, have the greatest conviction that this is the greatest country in the world and that the economy of this country is the strongest economy in this world. I also believe that we have the greatest social and political system in the world. And I believe that despite these aberrations that we run into every 4 or 5 years, this country will move forward, will retain supremacy in the economic and political areas, and that the American people have the opportunity to move upward, to change their status in life in the future to the same extent that their predecessors had. And I believe there is no reason that I am aware of why any American should have any hesitancy about having confidence in this country's future.

Chairman HUMPHREY. I agree with that. I am bullish on the country. I am a little pessimistic about some of its spokesmen, but I am very bullish on the country. I just do not believe we have leaders that can stop us from going ahead. I am convinced we will overcome.

Mr. NEEDHAM. Mr. Chairman, the Government is a government of laws and not people.

Senator FANNIN. Mr. Chairman, I just have a couple of comments. Chairman HUMPHREY. Go ahead.

Senator FANNIN. When you were talking about having workers on the board of directors, I just think back to my own business experience. I was in business for 25 years and I had some of these highpriced lawyers that the Senator was talking about, the Senator from New York, in fact I was in a lawsuit with the Federal Government with the Department of Justice. I do know what he is talking about. But I also know that when you talk about having people on the board of directors and about the workers, I would have no objection to having a representative of our working people, of our employees; but I would have objection to having a representative who would just represent the union. And I think that is one of the great problems we have in this country. And we have to recognize it. I feel very keenly about that and have no objection to unions, but I certainly have objection to the unions being represented on the board of directors.

Chairman HUMPHREY. Not if they put in their money.

Senator FANNIN. Of course, if they are investors in it and, as Mr. Needham clearly brought out, he has no objection if they follow the procedures that are set up by the Securities and Exchange Commission. But I just wanted to make that comment because I think it is important. Now, another matter, we are talking about why people are not buying homes. And in my State they are not buying homes because homes have been priced out of the market. And I am very sorry about that. The cost of labor has gone up tremendously. Now, I do not say that when you compare what has been happening in our country in the last few years or the last few months in many cases, that those increases have not been commensurate with what has happened in other nations in the world, but let us look back to the time in New York when they went to the 25-hour week for some of the construction industry people. At that time wages went sky high so everything is relative. But now we have quite a problem because the wages are such that we are priced out of the market in many instances, and we cannot go back on the theory that they have not increased recently. Those increases came about and did the damage several years ago. Do you not agree with that?

Mr. NEEDHAM. Yes; I do. If you would like to resolve part of the dilemma with the housing market-and I am talking about existing structures and not new houses-then I think the Federal Government could take a very constructive step. Supply and demand really should determine prices. I think most of us would agree on that except where there is a monopoly so that there has to be some supervision of that. Now, keep in mind for the average American worker his largest single investment, other than perhaps a retirement plan or social security plan, on an accumulated benefit basis, his largest investment is his home. Now, what does the Federal Government do for that person when he sells that home? If he sells it at a profit, which is primarily the result of inflation, he pays taxes on it. They take a bite right away from him. If he sells it at a loss, the Federal Government sits by and says "well, that is the way the free market system works and you do not get any credit for that."

Now, if we want to see labor mobile in this country-if we really want to do something for the housing market to move those houses, to sell them, then the Federal Government has to learn that it has to

be a partner in losses as well as in profits. If you really want to do something that is very simple for the average working man, give him the opportunity to move. If you want to tax his home, and I am not so sure that is a good idea, then give him the opportunity to deduct against his income the loss on his home so that he can get out of the area that is depressed and go somewhere else and get a job. Many of them just sit there and say, "If I leave, the largest asset I have is gone." So he is afraid to go. So, if the Federal Government is serious, if you really mean you want the working people to have the opportunity to pursue happiness and enjoy the benefits of this country and you want to talk partnership, then let's be partners not only in growth but let's be partners in the temporary setbacks that people have and business has.

Chairman HUMPHREY. Thank you very much, Mr. Needham. We appreciate your comments.

Next, Mr. Bluhdorn, you have been patiently waiting here. We want to listen to what you have to say to us in counsel and advice. Proceed..

STATEMENT OF CHARLES G. BLUHDORN, CHAIRMAN, GULF

WESTERN INDUSTRIES, INC.

Mr. BLUHDORN. Mr. Chairman, Senators Javits and Fannin, there can be no doubt but that there has been a substantial improvement in the outlook for the Nation's economy in the last few months. The fact that both inflation and interest rates have been reduced has combined to restore the confidence factor that was sadly lacking throughout the country until very recently.

Consumer habits are based to a large degree on psychology. Words of doom and gloom have been replaced by a feeling of optimism as reflected in the performance of the stock markets in the last few months. All of this is bound to give comfort to a previously disspirited public which is rediscovering America.

I have always been the great optimist on America. In the moments of greatest darkness and fear I have said loud and clear that America is here to stay, and anyone who does not believe that fact had better give up on the free enterprise system, not only in our country but throughout the free world.

Having been a most vocal supporter of our system and a firm believer in the inherent value of American capitalism, please forgive me if at this moment when we have achieved the kind of confidence that was missing for all too long, I respectfully indulge in some cautious warnings about the future. Neither unemployment nor inflation are diseases that disappear overnight. In the case of unemployment no one in this room can be satisfied to any degree, even with the improved figures that have been forthcoming recently. Much determined effort must yet be brought into play to get that figure down in order to restore real health to our Nation.

With respect to inflation, I submit that this monster has been only temporarily contained and can come out of hiding quickly and without forewarning.

We are facing the prospect of many wage settlements in 1976 and the progress of these negotiations between management and labor

will be a high determining factor in whether or not prosperity will lead to another round of inflation, bringing with it all the self-doubt and fears of the past. Thus it is incumbent on all parties concerned to exercise the maximum amount of restraint in order to insure continued forward progress of the present psychology of confidence.

At this point permit me to reiterate my oft-expressed fear of the Organization of Petroleum Exporting Countries, commonly known as OPEC, and all that this infamous cartel stands for. I admit that this is the last thing that anyone wants to talk about now. I freely concede that I am a voice in the wilderness when it comes to this touchy subject. But someone must remind all of us that this cancer has not gone away. It is still with us. Is political expediency the solution to this terminal disease?

Let me remind you of a couple of facts. When OPEC first invoked its embargo and then raised prices 400 percent, a lot of people said we would fight these fellows tooth and nail with a policy of both conservation and development of our own energy resources right here in the United States of America.

Here we are now in 1976 and I see absolutely no progress whatsoever on the part of the Congress and the administration to get together on a meaningful wartime-like action to get our country moving away from submission to blackmail.

Far from developing and expanding our own resources, which is a matter every bit as important as our military defense budget, we are playing everyday more and more into the hands of these blackmail artists.

While the Nation suffered from the severest recession since 1929, the consumption of oil went down and so did the imports. But now we are going to be caught in the vicious cycle of gaining the benefits of a new prosperity and on the other hand having to pay the penalty of exuberance and forget fulness. This will invariably lead to higher consumption of oil products in the United States while our own. domestic production is steadily deteriorating.

During this last year we were subject to the ridiculous situation of a 10-percent increase by OPEC which was greeted with relief by most economists in the Western World. Recently a less than 1-percent reduction was applauded almost hysterically and taken to be the longawaited breakup of OPEC. Nothing could be further from the truth. OPEC is stronger today than it has been since its inception. OPEC has been waiting for our prosperity to return. OPEC will use the first opportunity to hit us hard on top of the head with new increases when they see that they again have us firmly in their grasp. And what will we do?

Let's face it. We have been lousy poker players all along. We will again submit because we will be scared to death of what an effective protest could do to our resurging economy.

The most pathetic and sad part of it all is that recent reports from the automobile industry are actually indicating the fact that the American public is returning to the usage of big gas-guzzling automobiles and are spurning gas-saving small cars and mass transportation. In other words, we have learned nothing and what is actually

happening is that business is back to normal. And this has got to be welcome news for all of the boys at OPEC who have just been biding their time for precisely this type of reaction.

I know all too well that there will be many economists who will point out that OPEC has actually done some good for us. First, it is argued that even though we have to pay them a high price, they are buying more from us now. And then it is stated almost gleefully that some of them are running up actual deficits this year. This is causing fear to some American companies who are afraid that they will lose business in those countries. But what kind of business are they going to lose? I submit mostly monkey business.

The big export item has been military hardware, and here we are engaged in a clearly vicious race with the Russians to supply the Middle East with the largest stockpile of military weapons ever assembled in one single location in the world. It has now gotten down to the point where we are also paying petrodollars to some of those fellows so they can use the money to pay off the Russians for the armaments they have been shipping in there at the same time. Don't we realize the dimensions of a powder keg explosion if someone goes insane in that area of the world or if one of the governments is overthrown by extreme radical leftists who will then be in possession of our latest military technological weapons?

What is so sad about all this is that there would at least be some rhyme and reason to this cartel if they used the proceeds to help first of all alleviate the poverty of their own people, and also did something meaningful to offset the disaster they have brought upon small Third World nations that are becoming their satellites, burdened as they are by oil bills that in some cases are simply strangling them to starvation levels.

In fact, there is no human equation for all of this. Most of these conspirators are living in such unheard-of splendor as to make the fantasies of the Arabian Nights look mediocre by comparison.

Mr. Chairman, may I quote from a press item that appeared in the New York Times on Saturday, February 7th:

"Empress Farah of Iran has returned to Teheran after a 3-week vacation in Europe. Her special jetliner from Paris was followed Thursday by an Iranian Army Boeing 707, carrying 3 tons of French rose marble for a new swimming pool for the royal family."

Fortunately, she can afford the oil bill of her personal airplane while our own airlines have been suffering enormous deficits. I just hope that those fellows don't put machine guns in the million dollar rose marble swimming pools. If they should electrocute themselves in the process, we, of course as usual, will be the one to take the blame also for that.

I don't want you to think that everyone is tranquil about this. On July 25, 1975, two distinguished lawyers, Mr. Whitney North Seymour, Sr. and Mr. Arthur Liman, petitioned the Attorney General of the United States on our behalf, charging the OPEC countries with blatant violations of the Sherman Act. I am sad to say that we have not even received an acknowledgment.