State of the Union: I'm an Optimist'

It was billed as the most important speech of Gerald Ford's presidency--or his career. In his annual State of the Union address to Congress this week, Ford hoped to do much more than assess America's strengths and weaknesses and outline his legislative program for the coming year. The speech was designed as a campaign platform, a document that would help overcome his image as an indecisive leader. It was also crafted to help Ford in his neck-and-neck race with conservative Ronald Reagan for the Republican nomination.

As always, Ford approached this crucial address and his budget message, due later in the week, in an optimistic mood. While he and his aides were putting the final touches on his speech, the President took time out last week to meet with a group of TIME editors and correspondents. A year ago Ford began his message by saying: "The State of the Union is not good." Now, with inflation cut from 11.7% to 6% and the real growth rate, which declined 2.9% last year, expected to rise as high as 7% in 1976, he projected a sense of confidence about both the nation's future and his chances of being nominated (see box page 12).

"We have come out of the recession and the economic news is encouraging," he told the TIME group. "I believe if we don't lose our cool, it will be a solid recovery and not a short-lived one. I believe in the area of foreign policy we have re-established good relations with all of our allies. We are still in the area of sound negotiations with potential adversaries and, as far as our faith in the public institutions, I believe most Americans feel that there has been a restoration of honesty and candor.

"So I am an optimist, and I think in time there will be the perception that the country has recovered from this traumatic period and that we have an excellent opportunity of making progress, whether it is domestically, internationally or otherwise."

Rejected Suggestions. While preparing his State of the Union message, Ford asked Vice President Nelson Rockefeller, who runs the White House's Domestic Council, to develop some new programs. Rockefeller and his staff, headed by Director James Cannon, conducted hearings in six cities and compiled 12,000 pages of testimony and exposition on domestic problems. In December, the Vice President recommended that Ford advocate a sweeping national health insurance plan and a minimum income for the needy.

Given his own conservatism and Reagan's threat to his right flank, Ford rejected the suggestions. Rockefeller's aides were philosophical about the outcome. "Once Reagan announced, it was inevitable," said one. "Personally, my instincts would be to put some distance between myself and Reagan rather than pattern myself after him. But we're out of it now."

Ford was convinced that the American people were worried mainly about the economy and inflation, a belief borne out by surveys conducted for the Republicans by Pollster Robert Teeter. The President also felt that the Federal Government could do little to solve such enduring social problems as poverty and racial discrimination. He questioned the wisdom of continuing to commit billions of federal dollars to programs for alleviating other social problems such as raising educational levels and cleaning up the slums. To indicate just how convoluted and complicated the federal programs had become, Ford noted that James Lynn, director of the Office of Management and Budget, had developed some visual aids that were promptly labeled "mess charts." Describing one of the charts, which detailed various health measures, Ford gestured as he told TIME's contingent: "You could take one of them from that curtain over there to here, about like that. There are lines which cross all over. It is unbelievable" (see following page).

As inspiration for his address, Ford turned to a yellowed, dog-eared book given him by White House Counsellor

John Marsh--Tom Paine's Common Sense. The President fixed on the title of the work by the 18th century pamphleteer who roused sentiment against the British before the American Revolution.

Common sense was on the mind of Presidential Counsellor Robert Hartmann when he composed the draft of Ford's speech, working in Colonial Williamsburg, Va., with the ghosts of Patrick Henry and Thomas Jefferson hovering around him. (Hartmann wrote in the same dining room where Revolutionists plotted strategy against the British.) The main theme that emerged from these sessions and that Ford was to emphasize in his address to Congress on Monday night: "Common sense tells us we simply cannot do everything at once."

The notion of restraining the Government--and the actual phrase "common sense"--occurred throughout the speech. Ford pledged his commitment to greater individual freedom in the face of ever greater Government control. He strongly endorsed the traditional Republican position that private enterprise should be allowed more freedom to function.

When it came to specifics, Ford's State of the Union and budget speeches were largely shaped by his concern with the economy and his determination to hold down Government spending. His recommended spending ceiling for fiscal 1977 is $395 billion. That represents a $25 billion rise above the figures for fiscal 1976 and would produce a $43 billion deficit. But it still represents something of a victory in Ford's terms.

Without a rigorous cutback in existing programs, spending would have risen by $53 billion. One major category that Ford allowed to grow was defense. He earmarked $101 billion for the Pentagon, an $8.2 billion increase over fiscal 1976.

To ease the impact of reductions in social programs, Ford suggested increasing their efficiency by consolidating 16 health, 15 nutrition and 24 education plans into new packages. In addition, Ford recommended giving state and local officials much more say in how the money should be spent. Ford believes that this form of "revenue sharing" would be much more popular with the nation's Governors and mayors than Reagan's ill-defined proposal to transfer to the states full responsibility for many federal programs.

The most important of Ford's new proposals:

TAXES. If Congress promised to hold spending below $395 billion, Ford said, he would endorse a $10 billion cut in taxes as a spur to the economy. Combined with the temporary reduction voted by Congress in December, Ford's proposal would increase the tax cut to $28 billion. The principal beneficiaries would be Americans with incomes in the $10,000-$30,000 range--a group that has been notably cool to Ford in private polls. Average savings: between $2 and $4 a week. "The President," says an aide, "wants to let people spend that $28 billion as they desire rather than send it to Washington and let Congress spend it as it sees fit." But Ford also wants to increase Social Security taxes from a maximum of $895.05 in 1976 to $1,014.75 in 1977.

UNEMPLOYMENT. With the unemployment figure still stubbornly hovering around 8.3%, Ford asked Congress to continue until October 1977 an emergency $2.5 billion program creating 310,000 public service jobs.

HOUSING. To appeal to both young and middle-aged voters, Ford proposed a series of steps aimed at relaxing credit and increasing the supply of mortgage money. As a stimulus for the moribund housing industry, the President announced plans to release frozen federal funds.

THE ELDERLY. Ford tried to enhance his popularity with voters over 60 by proposing health insurance that would cover their hospital expenses over $500 a year and their doctors' bills over $250.

The elderly, however, would be asked to increase their Medicare payments. Under another plan, people on Social Security would be given cost of living increases.

Ford will follow up his State of the Union and budget addresses with more detailed messages to Congress. Each will be shaped and closely watched by White House aides, who are acutely aware that the President's election campaign is moving at dead slow. To infuse new life into it, Ford last week named Rogers C.B. Morton, 61, a former Congressman and Secretary of Commerce, to his White House staff with the rank of Counsellor. But Morton immediately became the center of a political controversy. Democratic National Committee Chairman Robert Strauss protested that it was "disgraceful and shameful" for a basically political operative to be paid out of federal funds. At the same time, former G.O.P. Congressman Thomas B. Curtis, 64, chairman of the Federal Election Commission, warned that Morton might be violating the law if he worked on the campaign while being paid by the Government.

Morton's and Ford's troubles may be only beginning. The Democrats' counterattack on the State of the Union will start this week when Maine's Senator Edmund S. Muskie gives his party's official response and critique. In the months ahead, the liberal Democrats on the Hill are bound to argue that Ford's budget is so tight that it will choke off the nation's recovery from the recession.

By designing his legislative program for 1976 in such relatively conservative terms, Ford may well have succeeded in disarming the equally conservative Reagan. However, as liberal and moderate Republicans have been pointing out for months, Ford is thereby running a considerable risk. The very tactics that might help him to win the nomination could jeopardize his chances of defeating the Democratic nominee, whoever he might be.

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