Federal Budget

Next week, I'll be leaving for important summit meetings in Europe with America's allies and trading partners. One major concern we know they'll raise is the high level of interest rates in the United States. We share their concern.

The key to bringing interest rates down and keeping them down is a commitment by this government to get spending under control once and for all. It's most important that I be able to communicate this commitment to our allies. I want to tell them that the United States is not just talking about reducing deficits, we're doing something about them.

Last week, the Senate took an important step in that direction. It passed a budget resolution with deficit reduction measures totaling $358 billion. As I said over the weekend, the resolution isn't perfect. It won't lead us into the promised land. But the next key thing is it'll take us further down the road that we began last year.

Now we look to the House of Representatives for courage and leadership as we enter a crucial week of budget deliberations. Many variations will be discussed, but the final vote in the House may boil down to two main alternatives -- the bipartisan recovery budget, or the coalition budget proposed by the liberal Democratic leadership.

There are three key advantages to the bipartisan plan. It keeps taxes down and does not break faith with American families by seeking new tax increases that would destroy the recovery. It makes savings on defense while still preserving our security so we can maintain peace through strength. And it contains a real determination to begin holding down spending on the so-called uncontrollables.

Over the weekend, I made several calls to Congressmen. I'll be making more in the next few days, and I'm encouraged by my conversations. I believe the bipartisan recovery budget has a fighting chance to win if responsible Members of the House will rally to support it.

Secretary Donovan and Attorney General Smith

Q. Mr. President, I'd like to ask a question about some problems that have grown up about two Cabinet members. One, what is your reaction to the stories about the large tax writeoffs that William French Smith has enjoyed? Do you think those stories are embarrassing to the administration? And, secondly, regarding Secretary Donovan, are you concerned that the problems that have grown up between him and the Republican members on the Senate Labor Committee will mean permanent damage to relations to the Hill if he remains in office?

The President. Well, it's very difficult for me, taking the last one first, to comment on that because it is now in the hands of a special prosecutor, as Secretary Donovan himself requested some time ago. And so there isn't much that I can say in commenting on that. But nothing I've heard has reduced my confidence in Secretary Donovan.

With regard to the Attorney General's problems there, I don't think the point's been made by anyone that the so-called tax shelters are things passed by Congress to encourage investment or speculation in certain undertakings, and a tax shelter is only a shelter if you lose your investment. You actually enter it with the hope or the prospect that you'll earn additional money from that investment, in which case you'd owe additional tax. And the fact is that, like so many others that have gone into government service, as I understand it, this was done by someone that the Attorney General trusts to handle whatever investments he might have.\1\ (FOOTNOTE)

(FOOTNOTE) \1\The President was referring to the fact that the session with reporters was being filmed.

U.K.-Argentine Conflict

Q. Mr. President, now that the British troops are on the ground in the Falklands in numbers by the thousands, what should the British objective be at this point?

The President. Well, I think the objective -- I can't speak for military strategy or what they might have in mind with that, but I think the objective still is to bring this to a point where it can be resolved peacefully and without any further loss of life. And I'm sure that this is probably what is going to guide their strategy and what they're doing.

Q. But won't that affect their military strategy on the ground?

The President. Well, as I say, I think that this must be involved in whatever strategy is chosen by them, and I don't know what that strategy is.

Q. How much military support is the United States prepared to give Great Britain if we're called on?

The President. Well, we're not thinking of military support in the sense of troops or anything involved in the fighting. There are certain agreements that we have. There are no new agreements that have come out of this at all. There are certain bilateral agreements and our relationship in the North Atlantic Alliance that we fulfill regardless of what's going on there. But nothing new has come out of this.

Summit Meeting With President Brezhnev

Q. Mr. President, what did you hear from President Brezhnev? Does his letter increase the chances of a summit? Do you have anything in that connection? Where are we going now?

The President. Well, it simply was a letter that expressed his willingness to meet, and that's about all that I can comment on. I was delighted to get that, but I can't comment, then, on further details in a communication.

Q. Well, do you think there's a chance there'll be a summit this year?

The President. There was no reference as to timing other than the general terms that we both have used, that as soon as we could, we'd do it. And we're ready.

START Talks

Q. Mr. President, to follow up on Helen's [Helen Thomas, United Press International] question, you used to speak of dealing with the Soviets in terms of linkage. And they still remain in Afghanistan. Of course they're present in Poland, and you've called that an outrage. Why now this emphasis on START talks? What have the Soviets done to make you want to deal with them?

The President. Well, the START talks are based on reducing a danger to the whole world, to both sides. And I talked for months during the campaign about this, about trying to arrive not at the so-called limitation talks, but at actual and outright reductions of weapons. Now, this does not outlaw discussing these other things that are causing tensions between us and between them and the Western World at those talks. But I don't think that those are things that you headline and blatantly advertise that you're going to go there and demand this or that, because I think when you do that you foreclose the possibility of doing any of those things.

President's European Trip

Q. Mr. President, on the Falklands, sir. You're going to Europe, as you say, for this meeting with various European allied leaders. Is it possible that with the Falklands heating up you might be considering some changes in your plans to perhaps curtail or eliminate your visit to England?

The President. I haven't seen anything as yet that would suggest that. Obviously, if something unforeseen happens, we would have to consider whether we should go or not. But, no, I see no reason not to go.

Federal Budget

Q. Along the lines of the summit, you've said you want to show the European allies, Mr. President, some direction on interest rates. Five former Cabinet Secretaries, Treasury Secretaries, and a former Commerce Secretary, from two parties, several administrations, have suggested much deeper defense cuts and much bigger tax increases than you have been willing to embrace. Don't you think that this administration has not shown a big enough commitment to really reduce the deficit in some of these key areas?

The President. I have only had a chance to read one wire story that came off the line about the interviews with those various former Secretaries. I'm gratified by one thing, that they support, in general, the approach that we have taken, that it must be based on reduced cost of government, reduced spending. And we may differ on some details or amounts or percentages with them. In general, we are in that agreement.

But let me point out that what is being discussed, even with the bill that we would support in the House today and the measure that the Senate managed to pass -- all of those are much lower in total spending cuts than we had advocated in February.

Q. But, sir, just to follow up, what they are saying is that by putting certain things off limits -- social security, some big defense cuts and big tax increases, such as a windfall profits tax on natural gas or other oil and gas tax increases -- that you have eliminated the real possibility of doing something about interest rates.

The President. Well, I don't think they quite understand all that's been going on. With all due respect to those gentlemen, they're not in a position now where they have access, for example, in discussing defense budgets, to all the information that is necessary to make the decisions.

We have agreed to cuts providing they will not have us retreat from what we feel is the minimum necessity for restoring our national security. And as I say, they don't have that information. Maybe if they did, they would see our point and what it is we're asking for.

Q. Mr. President, some Members of Congress say that there are so many divisions in the House over the budget that there is a danger that the House would wind up in a deadlock and not pass any budget at all. In view of the fact that Speaker O'Neill and the Democrats have the majority there, who would be to blame if there was any effort by the House not to have any budget at all at this time?

The President. I think you've more or less answered your own question yourself as to who would be to blame. [Laughter] I just have to believe that there is more responsibility in the House than that. And I think that we will have -- and I do believe that the bipartisan bill, which preserves or calls for 87 percent of the -- wait a minute; no -- it preserves 87 percent of the tax cuts that we wanted for our people, and it gets 75 percent of what we asked for in February in budget cuts. And so we can support that, yes.

Summit Meeting With President Brezhnev

Q. There's been much on the summit. But isn't it a fact, Mr. President, as of now there is little prospect that there will be a summit?

The President. Well, I wouldn't feel that way. I've never had any reading from the communication from President Brezhnev that he was not looking forward -- and he publicly has made statements to that effect, also.

U.S.-Soviet Relations

Q. Going back to the Soviets question. On Friday, your administration released a new national security policy that many interpreted as being kind of a return to the cold war. Yet over the weekend, there were reports there may be increased grain sales to the Soviets. How would you today describe your administration's relationship with the Soviet Union?

The President. I think it's a very realistic relationship. We know that there is an adversary relationship there that has been brought about by the Soviets policy of expansionism, and we're not so naive as to ignore that in any dealings that we have. And yet, at the same time, we ourselves are proposing such things as arms reductions in trying to improve the chances for peace in the world, or reduce the possibility of war.

Q. Is it warming or cooling -- the relationship?

The President. I wouldn't know whether I could apply either one of those words to it. It is just that we are willing, realistically, to sit down with the Soviet Union and try to eliminate some of the friction points that are there.

But basically, the primary problem today is reducing the store of nuclear arms that threaten the peace of mind, certainly, of all the people of the world and that do pose a threat to all of us physically.

Medicare

Q. Mr. President, Speaker O'Neill said today that you have broken a promise that you made before the joint session of Congress on February 18, 1981. You said, ``Medicare will not be cut.'' Yet the bipartisan budget, which you support, calls for cuts in Medicare of some $23 billion over 3 years -- $5 billion in '83 alone. How does that square, and how do you respond to the Speaker that you've broken your promise?

Deputy Press Secretary Speakes. This is the last question, please.

The President. Larry says this is the last question. [Addressing Mr. Speakes:] Where were you a minute ago? [ Laughter]

I could answer that in about three phases and very briefly. And the first one is, how would I respond to the Speaker about that? I think it is very obvious after last year and this year that the Speaker is obsessed with the idea of trying to create a social security issue for the coming election. And I think that's pretty irresponsible with a program now that is actuarially out of balance, that, as we pointed out a year ago, is going to be unable to get through the 1983 year unless something is done about that program.

The proposed cuts in the bipartisan plan, in Medicare, are almost entirely aimed at limitations on the providers of health care, not a reduction of services for the beneficiaries, the recipients of social security. Those are the two.

The third one is this, even this talk in the budget, in a way I find -- I hope that they don't waste too much time debating it, because with the Speaker's cooperation we have a bipartisan task force that has been at work for months and is to report in December with a plan for solving both the short- and the long-range problems of social security. And the only thing that I have said in my own mind with regard to that plan and that I have said to those representatives that I appointed to the task force is that it must not undercut or pull the rug out from under the people who are presently dependent on social security. They must be assured that they are going to continue to get their benefits.

But there are any number of ways that that task force can go, based on the future of social security for people presently paying into the program who are not yet retired that can meet the financial problems. Indeed, the plan that we posed last year could have done that and even reduced the two built-in increases in payroll tax that are still hanging over the workers of America today.

So, to make an issue out of this when this task force is -- we're awaiting its report -- and he has appointed his own representatives to that task force, too -- I think is just, again, sheer political demagoguery.

Mr. Speakes. Thank you, Mr. President.

Q. Mr. President -- --

The President. He gets mad at me if I answer any more. I can't.

Q. You're the boss. [Laughter]

Q. Yes, sir, I want to tell you something. I just got back from the Hill. [Laughter] Mr. President, there is a mild revolt against your administration going on by communications today with Capitol Hill. People all over the country are calling in and saying that they cannot stand the cuts in Medicare and Medicaid because -- I realize you've cut off the providers, but the providers are the hospitals, and the hospitals, they say, 75 percent of them will go broke and that they will then have to ration what people they take in and which ones they cut out and that the old people will not be admitted and, therefore, the old people will die.

Now, what's your answer to that? You said you were a sweet man and you didn't cut back on old or needy people.

The President. I can't answer a question. He's just shut me off. But I would say that all of you have the means to reduce the fears of the social security recipients, fears that have been aroused by the demagoguery from those guys on the Hill.

Note: The President spoke at 1:12 p.m. in the Briefing Room at the White House.