Remarks in an Interview With Managing Editors on Domestic Issues

December 3, 1981

The President. Well, I'm happy to have a chance to say welcome, and particularly when there are at least six here from California. But all of you are just as welcome. I know you've been briefed on a number of subjects, and so almost anything that I might say would be plowing ground that's already been plowed. And yet I will do that, just to put emphasis on one, and that is what I think is the overall problem here of trying to get control of Federal spending and a realistic approach to the budget.

We're now into the 14th month that we've been without a budget. Our entire year of '81 went through with nothing but continuing resolutions and no budget. And we're now 2 months into this fiscal year, and still no budget. And I frankly don't know of a State that has ever run itself that way. Part of it is evident reluctance of some to see any curb put on Federal spending. So, we're still working on that.

And now I'm going to save all of the rest of the time here for whatever questions you may have.

Let me just say that with regard to our program, which has only just now begun to be put into effect, contrary to the impression that a lot of people seem to have had that it's been tried and found wanting and is a failure, and that was decided before it started -- we don't believe it is, and we think that some of the signs are very encouraging already.

And that is that a year ago, or when we took office, inflation was above 12 percent, around 12\1/2\ percent. For the first 10 months of this year, it's down to 9.6 and last month came in at 4.4. Interest rates, which were 21\1/2\ [percent], have of late begun to drop and are down to 15\3/4\, and we think are going to continue coming down. The wholesale inflation rate has been running 7\1/2\ [percent], which means that I think we can look forward to further drops in the days ahead, because the wholesale inflation rate determines, in advance, what the regular cost-of-living index is going to be just a ways down the road.

But I know that you must have some questions, and I'd rather try that than continuing, as I say, plowing this already plowed ground.

Q. Mr. President, you talked about the great need to cut spending, yet on this emphasis of the need to get a budget, you've appeared before a veterans' group and you've said that you're not going to make them make any sacrifices. You appeared before a council on aging and you told them you're not going to make them make any sacrifices. What groups are you prepared to appear before and say, ``You have to make the sacrifices?''

The President. No, I think with regard to the veterans, we were talking about medical benefits for the veterans and so forth. And I do believe that this is a contract that you have to take care of those who have served their country. Social security -- what I said to them was -- and this was the basis of the plan that we submitted, but which was widely distorted in the debate that followed and I think for pure political demagoguery -- that all the way through the campaign I cited the immediate problem of social security, of its running out of funds, and the long-range actuarial imbalance which is in the trillions of dollars, if you look on down the road, for those people who are just beginning their working years.

What I pledged to do was to have a social security -- to put it on a sound fiscal basis, and yet not at the expense of those people who are presently retired; that you pull the rug out from under them and reduce their benefits. The only thing that could be called a reduction in any way in the proposal we made, of those existing benefits, was we were going to try and get social security onto the fiscal year basis with regard to the cost-of-living adjustment. That would mean that for 1 year alone, they would go 15 months instead of 12 before their cost-of-living adjustment was computed. And that would, as we figured it out, average probably a $90 reduction of increase, not a reduction of existing benefits, reduction of their increase over their lifetime. That would be the only single thing.

The other things that we had suggested in that program were not aimed at deserving and eligible recipients. They were aimed at the abuses in the program, people that are collecting disability benefits and are not disabled. A recent story of a family, a heartbreaking story, that made it look as if we had suddenly taken this family off disability benefits -- and we looked into it to find out if this was true. We found out they were taken off of their disability benefits under the previous administration, and they were taken off because for 3 years, the disabled household head had been working. And now the question is, working, moonlighting on the side -- a check is being made to see whether he was paying income tax all that time.

This is the type of thing that we think there's much more of it than anyone realizes, as was evidenced in Chicago a couple of years ago with the -- or a few years ago -- with the welfare queen who went on trial. And it was found that in addition to collecting welfare under 123 different names, she also had 55 social security cards. So, this is where we were going to try and make some of the changes.

Q. Mr. President, a regional question. What do you see as the Federal role with regard to California in terms of the Medfly, which is a terribly expensive battle, and also the vast number of refugees from Asia that have moved into, particularly, Los Angeles? What do you see as the role there to perform?

The President. Well, we've been dealing with a reform of the immigration laws on all of this, except that with regard to the refugees -- people who are fleeing persecution and who, if they were made to return to their own country, would probably face death or imprisonment -- I think that our traditions -- there's no way that we can abandon those traditions or the words that are on the base of the Statue of Liberty. And we have a particular problem, I know, with our neighbor to the South. But we think that this program is going to meet our needs and the needs of the refugees coming in, so that we won't be abandoning that. We are also looking at how we can handle these and probably a fairer distribution in our country.

I know, in 1980 -- the administration then was caught by the great exodus from Cuba in addition to the Haitian overflow and so forth. No planning had been made for that. We're also looking at available sites and facilities for a detention center for those who are apprehended and are illegal aliens, who will probably be returned.

Q. Mr. President, one of the potential detention centers that you're considering is in northern New York, where I'm from, where the climate is about as different as you can get from the Haitian climate and still be in the country. How humane is it to consider that, a site like that?

The President. Well, I know the climate problem, and we've thought about that and talked about it. One of our problems is finding a facility that would have all the factors and the capacity that we need for estimated larger numbers, and also finding one that the inhabitants of the State would be willing -- you'd be surprised how difficult it is to find some State that wants it.

We think that the one that we have settled on not only meets the needs, but also happens to be in an area that would benefit economically from having an installation of that kind there because of the abnormally high unemployment rate, economic problems.

Q. Mr. President, the State of Florida claims the Federal Government owes a lot of money to the State because of the refugee problem. Although you didn't inherit it, are you considering additional funds, or -- --

The President. To tell you the truth, I can't answer that right now. We have not come in with the -- we have not had our meeting yet with the new presentation from OMB of suggested budget cuts for `83, so until we do, I don't know just how some of these problems have been treated.

Q. Mr. President, is there any thought being given to changing the make-up or the limits of your safety net in light of the recession? Any thought being given to changing any of the benefits that have been cut or restoring any?

The President. Well, again, this would be something that we'll face when we see the `83 budget, although I don't believe that the so-called safety net has been much changed.

This recession -- remember that when we came here, January 20th, we had a great unemployment problem, severe in several areas far more than in others. It's easy to look at, say, an 8 percent inflation rate and think of that as the nation as a whole. That isn't true. We have States, and some of you are probably from those States, where inflation is approaching the 20 percent mark. That's like the Great Depression of the thirties, due to the particular industries that have been affected -- in addition to construction, the steel industry, automobiles, and so forth.

We think that the best thing that we can do is to go forward with this plan, which we think is going to stimulate the economy. I think we're due, for several months yet, of hard times, but I think that in `82 we're going to see -- later in the year -- a change in the situation. The falling interest rates indicate that -- the inflation rates that I mentioned -- so that I think the safety net is still there for those people of real need.

Q. Is there an unemployment level at which you rethink that?

The President. Well, I think it would be based on if there's actual distress. I don't think anyone is going to stand by and see people in actual distress.

Let me just say one thing about that particular problem. I was as surprised as anyone when suddenly the announcement was made that in a month we've increased the unemployed by 500,000. Now, as you know, there's no accurate way of counting the unemployed. There is an accurate way of counting the people who are in the work force. And it's difficult for me to understand this sudden surge of unemployment when, at the same time, there are 266,000 more people employed in the work force than there were on January 20th, when this administration started. I can't believe that we've suddenly added three-quarters of a million people to our population.

But let me point out one reason why there could be some fluctuations. First of all, any unemployed, other than those who are voluntarily between jobs, is too much. So, I don't want to sound callous about that. As a matter of fact, there's nothing that is harder for me to do than to think of putting somebody out of a job. I came into the work force myself in the depths of the Great Depression. I saw what took place there.

But unemployment is determined by some 60-odd thousand telephone calls, like a Nielsen rating on a TV show, throughout the country -- random. And the question is, ``Is anyone in the household looking for work?'' If the answer is ``yes,'' that's a statistic -- unemployed. If the answer is ``no,'' they pass on. And on the basis of these calls and the percentage, the percentage of unemployed is determined. But there's room for discretion there and shading, depending on the callers.

Suppose it's a housewife who says to you on the phone, ``Well, you know, the children are getting along now and if I could find something that didn't interfere with family and was right, yes.'' Well, the person can put that down as she's looking for work, or the person from this end of the phone can put that down as ``no.'' Nor are we dividing between all those teenagers, that on the other end of the phone someone might answer and say, ``Well, my son would love to have an after-school job if he could find one, and so you can put him down unemployed.''

The millions of unemployed are not, all of them, heads of household, leading a family without earnings. Maybe I'm overly suspicious, but I keep remembering that when I was Governor of California, they decided to do some changing in counting the unemployed, here in Washington. I protested as loud as I could, but didn't get anyplace with it. Our unemployment rate in California at the time was 5.2 [percent], and in 24 hours, our unemployment rate went to 7.2, just based on a little change in the procedures here in Washington.

So, I've been a little worried here that sometimes we -- and I don't mean to do any less about trying to get them the work, we're going to -- but I think that our program is aimed at that. I'm aware that -- I know somebody is waiting to tell me I have to leave -- [laughter] -- but I'm also aware that when Kennedy had his across-the-board tax cuts, aimed at the same thing, to stimulate the economy, and the same economists and many of the same voices were raised, advising against it and saying that was absolutely the wrong thing to do, he persisted. And immediately thereafter the rate of savings, personal savings in the country -- the percentage went up from 2.9 percent of the earnings in the country to 8 percent. The rate of increase in employment -- not unemployment, in employment -- doubled. The percentage of the gross national product or, I mean, the gross national product increased sizeably, and the government's revenues increased at the lower rate of taxation.

Now, one of the economists who has previously, and all these past months, been opposed to our proposal, Walter Heller, a very distinguished economist, when the recession was announced a short time ago, Walter Heller said how lucky we were that our tax reduction was just going into effect and that that just turned out to be exactly the right medicine for a recession. Well, if it's the right medicine to maybe help cure the recession, why wouldn't it have been good medicine to have prevented the recession?

If we, taking those personal savings -- if we could increase by 2 percentage points the rate of savings in this country, through these tax cuts, that adds $40 billion to the capital pool that is available for investment and for people for mortgages and so forth. And incidentally, since the construction industry is one of the hard hit things right now in this recession, we have taken action -- and I maybe sticking -- --

Mr. Gergen. It's out.

The President. It's out. All right, it's been announced. I don't want to be one of the White House leaks. [Laughter]

This morning we had a group from the construction industry in, and we have -- over in the Labor Department -- made some definite changes in regulations. Those changes are going to free up the billions and billions of dollars in pension funds for -- that they can now be invested in home mortgages. Previous to this, they have not been able to. The total pension money available for investment in this country is over a trillion dollars -- will be 3 trillion by 1984 -- and for the first time, this money will be made available for that kind of investment, which we think should go a long way toward beginning the revival of the housing industry.

You know, part of the lull in housing construction right now is the lowering of interest rates. The slump was caused by the high interest rates, but when the high interest rates start down, there's a lull while everybody says, ``Well, let's wait till they get lower.'' That's going on right now, too. Maybe we can, with this new decision, maybe we can increase the speed with which those rates come down.

Q. What would be your advice, Mr. President, to Americans who want to know how to volunteer their time and their effort in a program that you have talked about -- voluntarism?

The President. Oh! Listen -- [laughter] -- we just had a meeting yesterday of our national task force. That's exactly what they are set up to do -- is to not only spread the word of where volunteer efforts have been tried someplace and are working successfully, and then spread that so that other people can do it, but also to answer that question of the many people who are trying to volunteer.

There is estimated an $100 billion worth of time and effort right now being contributed in this country in work in voluntary causes, in addition to $47 billion in actual cash contributed in volunteer efforts. And some of the things we're finding -- and the mail that I'm getting is the most inspiring thing in the world -- of communities that have just moved and said, ``Why have we been sitting here, letting government do this? We should have been doing it long ago.''

I believe this is beginning to sweep the country. So, people like that, I think will find that they're being sought out by the task force. If they don't get their volunteering in beforehand, somebody will be around to see if they want to volunteer.

Ms. Small. Thank you, Mr. President.

The President. Thank you all very much for being here.

Note: The President spoke at 3:55 p.m. in the Roosevelt Room at the White House. David R. Gergen is Assistant to the President for Communications, and Karna S. Small is Director, Media Relations and Planning.