I had some remarks here, but John has just told me that possibly you'd rather have a dialog and maybe some questions and anwers than me standing here and giving a lecture on why we ought to have the budget passed immediately. And, if so, that's what I'll do. I'll be very happy to put this back in my pocket.

Let me just say now, though, that, seriously, the importance of this Senate race this year, I'm sure you must know, the few-vote margin that we have in the one House and for the first time in a quarter of a century that we have at least one House of the Congress Republican. There would be no budget cuts such as we've known them. There would be no tax cuts as we've had. I don't think there would be the necessary rebuilding of our national security if we did not have that majority. And we have that majority in large part because a gentleman here on the platform was in charge of the committee that handled the election 2 years ago, congressional committee, John Heinz. And because of that, we're in that good position. But I'm going to lose a lot of sleep if I ever thought that -- I had 8 years in California of being up against both houses of the legislature, on the opposite side, and it almost got to be a habit. I vetoed 993 bills. [Laughter] So, I don't want a repeat of that kind of career.

But John did a great job in that for the Senate. And he's -- both of your Senators are doing a great job, and I know that we're going to have one back for sure. And I think I'm going to say we're going to have two back for sure, because I think you know how important that is.

Now, you've possibly heard some rumors to the effect that we're discussing a budget in Washington now, and if so, if you would like, fire away, and we'll have a dialog instead of a monolog.

Administration Accomplishments

Q. Since you've been in office, what do you consider your greatest contribution to the United States?

The President. Since I've been in office, what has been my greatest contribution to the United States? Well, it's one that I would have to share the credit with an awful lot of -- not only our Republican Representatives and Senators but also some good, responsible Democrats who also joined us. And that is the turning around of the direction that government was taking.

When we took office, the interest rates were 21\1/2\ percent, inflation was 12.4 percent, and it was the second year in a row that we'd had back-to-back double-digit inflation. The unemployment, it is true, was not as deep as it is today. But there's no question it had started clear back in '79, and, as a matter of fact, I was campaigning about the tragedy of that unemployment in 1980. And all of these factors seemed to be worsening.

But while the inflation -- or the interest rates have not come down to where we want them, they're down about 20 percent. We reversed -- oh, incidentally, spending -- government spending was increasing at the rate of 17 percent a year. The budget we've presented for next year will only represent about a 6.8-percent increase in spending. And we're aiming at even a lower rate of increase, to where the budget will finally -- or the cost of government will be increasing no faster than the general increase that comes with growth in our tax revenues. And then we will be back where we should have been a lot of years ago.

Q. A shorter answer to that young lady's question is the fact that you're the President.

The President. What?

Q. A shorter answer would be that you're the President.

The President. I'm even -- I know that everybody didn't hear that, and I'm a little hesitant to even -- [laughter] -- repeat it. I'll let somebody else tell them.

Yes?

Unemployment

Q. Mr. President, in light of Philadelphia's 11-percent unemployment factor, what can be done to bring more defense business into this city?

The President. Well, we do have your Navy shipyard pretty busy right now. I couldn't tell you, with regard to all the defense contracts that can be let and will be let, where they're going to go. I must say that, however, the first priority is going to be where the job can be done the most economically and, at the same time, do it the way it's necessary for our national security. I also can say that if there's ever a place where everything else is equal, then I would -- and it was a choice, then I would think that you'd choose those places where it could also help the economy.

But let me say about your unemployment here, the most necessary thing that has to be done, the Senate just recently passed out of the Budget Committee, the Senate Republicans, passed out a budget program for 1983. I have been meeting in the last week or so with business leaders, chief executives, with the leaders of the small business community -- which is the one that produces about 80 percent of our new jobs -- heads of farm organizations, trade organizations, and with the money world -- bankers and financiers and investment trusts and so forth. All of them have one thing to say, and if I don't say it first, they say it back to me -- that is, interest rates, which are the big block to faster recovery, will come down if and when the Congress passes this budget and guarantees that for the second year in a row we're continuing on the path of reducing government spending, then the rates will come down.

They tell me that the one thing that's keeping them up is simply having been burned in the seven or eight recessions that have taken place since World War II, where the government turned to a quick fix, flooded the money market, artificially stimulated to make the economy look as if it was getting well -- this morning I described that as trying to cure a fever by eating the thermometer -- [laughter] -- and then up came inflation again. And if they had loaned money on the basis of lower inflation, they would be stuck with these long-term loans at a rate that was too low to match the depreciating value of their money.

And we now have inflation -- I didn't add this, with what we've done -- we have inflation down from that 12.4 percent to where for 6 months it's averaged 3.2 percent. And last month, for the first time in 17 years, it went below zero. The prices actually were going down, not just not increasing as fast in price. That is enough, if they have the confidence that we're going to continue and that we're not going to do that other quick-fix thing.

So, anything you can do to pressure and make sure that the Congress will give us those additional cuts -- and may I also say -- I'm taking too much time on this answer -- all this talk of budget cuts, all this talk of -- that we're doing something to the needy and the poor and we're not taking care of the people who must have help from the rest of us. There have been no budget cuts; all we've cut is the projected increase by the big spenders, the amount they want to increase the budget.

The '81 budget, which we inherited, which was already there -- and we managed to reduce by about $13 billion, even though we only had a few months left of the year to do it in -- that budget was bigger than the 1980, the present '82 budget is bigger than '81, and the '83 budget we've submitted will represent about a 6.8-percent increase over the present budget. But where it comes to the poor, the poor and the needy and all the people that, as I say, must have help -- and I've said that we'd preserve a safety net.

In 1980, in the last Carter budget, $195 billion was Dick Schweiker -- was the Health and Human Services budget. Now Dick Schweiker, who's Secretary of that and doing a great job with that -- Dick's budget for '83 will be -- remember 195 and a fraction in 1980 -- his budget for '83 will be 274 billion and a fraction. And that is a bigger percentage of the entire budget than the Carter budget for humanitarian affairs was. And it happens to be the third largest budget in the world. The only two budgets greater is the entire budget for the United States and the entire budget for the Soviet Union.

So, we are keeping the safety net, and yet, at the same time, we're making the savings that can bring back the economy.

Small Business

Q. Mr. President, you were elected President by the majority of people that cared enough to go out and vote. You said that you wanted to get government off the backs of the people and that you were a strong believer in free enterprise in the private sector. I also feel this way. So, my question to you is, what are you doing or what would you like to do in regards to breaking up some of the monopolistic structures in this country, whether they be private or governmental, so that the small guy could have an opportunity to break into the free enterprise system?

The President. Well, this is what we are doing with regard to monopolies and to give the smaller man a chance to get started. Actually, I think that our very tax program, for one thing, is of great benefit to independent business. The overwhelming majority of them pay the personal tax, not the corporate tax.

There is no relaxing of -- in the field of antitrust or antimonopoly -- on the part of our government at this time nor will there be. And so, all I could tell you is that that is still part of it.

At the same time, however, for all business, big and little, but particularly the small businessmen, George Bush is heading up a task force aimed at something else we promised. And that is the blizzard of paperwork that is imposed on the private sector today and on local and State government today by excessive Federal regulations and unnecessary regulations. And he has made a tremendous cut. There are 23,000 fewer pages in the Federal Register, which lists the Federal regulations. The actual savings amounts to about -- I won't put it in cash -- amounts to a savings of about 200 million man-hours of work filling out government paper to comply with government regulations.

So, I think that the path is as open as it has ever been or better for the entrepreneur, small business. And we have, in addition to just the simple tax rates, income tax rates, we have done some other things in which we have increased, and it will be phased in even higher -- eventually the elimination of the inheritance tax, which will be a great salvation for family-owned businesses that in the past have had to sell the business in case of death in order to pay the inheritance taxes. That is one thing that we have done. The regulatory thing -- and there are other things in the tax brackets the same way of benefit to small business.

Now, I hear a lady's voice, and there hasn't -- yes?

Defense Spending

Q. Mr. President, in light of the budget difficulties you were expressing, would you ever consider reducing the defense budget?

The President. Reducing the defense budget. The defense budget, incidentally, today is only 29 percent of our budget. Back in the days of President Kennedy, the defense budget was running about 46 percent of the national budget. But there've been a -- several -- we're trying to make up for a number of years of starvation.

When I became President, at any given day half of our airplanes couldn't get off the ground for lack of spare parts. Many of our ships couldn't leave harbor -- Navy vessels -- for the same reason. We only had a very limited supply of ammunition. And in one of those computerized war games where you see what would happen if, for example, there was an attack on the NATO line in Europe and so forth, we lost in 3 weeks.

Now, the bulk of our budget is for maintenance and pay. We also had a volunteer military that was based on wartime draft wages. And we were losing noncommissioned officers faster than we could promote them simply because they couldn't afford -- they were actually eligible for welfare at the time that they were serving in the noncommissioned ranks in our military. So, the bulk of our budget's going for that. But I do anticipate a time when it won't be as great.

We have asked the Soviet Union, as you know, to sit down with us with regard to not only the reduction -- reduction, not limitation -- reduction of nuclear arms, but in Vienna we're meeting, hoping to get reductions in conventional arms. And in Geneva right now we're meeting with regard to the strategic missiles that they have aimed at Europe from Eastern Europe, and we have nothing to counter that there -- or our allies don't -- and we're going to provide Pershing missiles. And when we announced that, the Soviets said they would sit down and talk disarmament with us -- or arms limitation.

What I think is that we have strengthened our case for getting arms reductions by going forward with a military buildup. For the last 10 years they've sat opposite us at any table discussing this -- and they're building the greatest military buildup in history -- but they saw us unilaterally disarming. There wasn't any reason for them to give up and meet us in any kind of disarmament.

But I can explain it all with a cartoon that I love very much that appeared recently. It was Brezhnev speaking to a Russian general, and he said, ``I liked the arms race better when we were the only ones in it.'' [Laughter]

That gentleman behind you there.

Views on the Presidency

Q. Do you enjoy being President more than being a movie actor? [Laughter]

The President. Yeah, because here I get to write the script, too. [Laughter]

Senator Heinz. Mr. President, they want this to be your last -- the last -- --

The President. Oh. Oh, dear.

Oh, they tell me -- --

Monetary Policy

Q. Mr. President, what do you -- --

Q. Excuse me, sir.

Q. Mr. President, has there been an attempt to achieve long-term cooperation and coordination of the Secretary of the Treasury's department and the Fed in order to make your job easier?

The President. Has there been cooperation -- now, wait a minute.

Q. Has there been any attempt to make long-term cooperation and coordination of the Treasury Department and the Fed in order to make your job easier?

The President. I think that we have a better relationship than we started out now and largely thanks to Don Regan, the Secretary of the Treasury. And I must say that the Fed is cooperating, and there is not, as some people suspect -- that the interest rates are where they are because they are going too deep in reducing the money supply. No, they are on a steady track that I think is proper with our growth today. And I believe that they, like those other people I quoted, will be the first to be willing to bring down the interest rates, the prime rate, the discount rate when we prove that we can get the Congress to adopt this budget.

So, now, I've just been told by the Senator here that there's only time for one more, and there's a little lady -- --

The Middle East

Q. Mr. President, this was my third chance.

The President. Well, I'll take two more then. [Laughter] I'll make the answer shorter. All right, okay -- all right.

Q. In light of our country's participation in and support of Camp David accords, how do you justify the projected sale of extremely advanced jet fighters to Jordan and the hand-held heat-seeking missiles?

The President. How do we justify selling weapons to Jordan, high-level fighters and so forth at the same time in our agreement with and our alliance with Israel. Well, first of all, there has been no request as yet -- there's been a lot of talk that I've read about it also -- there's been no formal request from Jordan. But, on the other hand, it is -- whatever is done, I want you to know what our policy is and what we're trying to accomplish. And Prime Minister Begin knows this.

Menachem and I exchange letters all the time on these subjects. [Laughter] We think one of the -- and, yes, we're on a first-name basis now. [Laughter] That's kind of a shock to the striped-pants fellows over in the State Department that we call each other by the first name, but we do. And he knows that I meant it when I pledged to him that we will never allow them to -- their qualitative and quantitative military advantage to be done away with, but that what we're trying to do with the more moderate Arab States is persuade them to become additional Egypts, to do as Egypt did.

The greatest thing that we can do for Israel is to bring peace to the Middle East. And if we're to be a believable broker, we can't impose that peace, of course. But if we are to be believable, then those moderate Arab States -- and I've met with King Hussein and must say that I was greatly impressed by his whole approach and his views toward the Middle East. If we can persuade them to acknowledge the right of Israel to exist as a nation and enter into negotiations in that Camp David framework as Egypt did, that will be the greatest thing we can do. And in order to do that we have to show them that we're willing to be a friend other than just talking about it.

But, as I say, the Prime Minister knows that we are pledged and, I believe, morally bound in a commitment to the preservation of the state of Israel, that it must continue to exist.

Now then, this one has to be the last one, they tell me.

Latin America

Q. It's an historic pleasure to speak to you as President of the United States. I would like to have your response to this statement with reference to the Western Hemisphere. Now we are involved not only with a war in this hemisphere but with the South Central America. And it seems to me that we must now consider uniting with the Free Americas in order for us to have a more viable defense. And I'm wondering, is anything being done like you did to Jamaica, in helping them to develop their trade, so that they can be economically independent by exporting and importing?

The President. This is about our alliance with our neighbors to the south and the other continent and my statements about an accord, in which the full strength and the development can go forward, of North and South America. And we did -- I think we have established better relations on the North American continent now than we've ever had -- with Mexico and Canada. But -- and I have just seen the President of Brazil off, who has been visiting in Washington with us. And, as you know, there has been some -- quite some ill feeling between Brazil and the United States for some time. I think I can safely say they realize there's a whole new relationship now there.

The tragedy of the Falkland Islands -- the quarrel that's going on there -- I'm worried as perhaps -- and I hope only temporarily slowed what we intend to be a real relationship and an accord with our neighbors to the south. We've done our best and are continuing to do everything we can to, again, broker a peace down there.

At the same time, we can't ignore the fact that the aggressor was our neighbor here in these continents, Argentina, who, with military force, invaded the Falklands and took over. And if we -- we must establish that that cannot happen in the world -- that the rule of law prevails, not the rule of force. Where would we draw the line if we say, ``Well, it's all right there''? Then how many other places are there in the world where there are boundary disputes? And do we literally say, ``Well, it's all right for the one that thinks they're strong enough to do it, to go grab the territory''?

And we've been trying, as I say, and it's been very frustrating. We sometimes come where it seems as if we're almost to agreement, and then there still seems to be one hitching point. But we're going to keep on trying to bring that peace.

And then I recognize that because of our long-time friendship for Britain, that there are probably those in Latin America who have now drawn back and who feel that maybe we weren't sincere in our overtures to them. But we're going to go right back at that, because a dream that I nurse above all is that if you look at the potential of these two continents, linked by Central America -- 600 million people here in these two continents, probably a wealth of resources of virtually everything that you need for an industrial society -- so much of it still underdeveloped -- and all of us bound together by the common heritage that we were all once colonies, and we now are all independent.

We want freedom for ourselves, and I think the rest of the world would really have to look on in awe if they saw us with our democratic ideals, banded together here, not giving up our national sovereignty or our culture or our customs or languages, but friendly allies bound together in the Western Hemisphere. And this is our dream, and we'll have at it again if we can just finish off this little business that's going on down there right now.

Thank you all very much. Thank you.

And the ``thank you'' that I have just said several times for your warmth of welcome and your kindness is only a fraction of what the ``thank you'' will be if, in November, you've told me that you're sending John Heinz back to Washington.

Note: The President spoke at 4:40 p.m. in the Dominion Ballroom at the Franklin Plaza Hotel. Following his appearance at the reception, he attended another reception for Senator Heinz and then returned to Washington, D.C.