Remarks and a Question-and-Answer Session at a Luncheon Meeting of the St. Louis Regional Commerce and Growth Association in Missouri

February 1, 1983

The President. Thank you very much. Thank you. Thank you, Bob Hyland, Governor Bond, Senator Danforth, the Representatives of our House who are here, and the other distinguished guests, you ladies and gentlemen.

I didn't know I was in the movie until the last scene came on, and then I couldn't clap. [Laughter] But believe me, I do applaud that picture -- until that moment. It was beautiful. And I would have enjoyed it even more if I wasn't the one who had to follow it with a speech. Those pictures, the words and the music to touch our hearts. And I believe they capture a feeling that's very much with us today. The spirit of St. Louis is alive, and that's the spirit that will rebuild America.

It's a great privilege to stand before your group. I've always believed that entrepreneurs are the forgotten heroes of America. In your dreams and in your courage to take great risks rest America's best hopes for more jobs, stronger growth, and a higher standard of living. Two of every three new jobs are created in firms in America with fewer than 100 employees. If we're to remain true to America, we must preserve and enhance the possibility for every small business man and woman to make it big.

Just 1 week ago, I addressed the Congress and I told them that, thanks to the courage, the patience, and the strength of people like you, America is on the mend. One of the networks, following that speech, did a telephone survey to find out if the people felt that way. Well, 73 percent of your fellow citizens said, ``Yes, it was.''

Well, we still have a mountain of challenges to surmount, but the evidence of recovery continues to build. Leading economic indicators are up 8 of the 9 last months. Housing starts and permits are up. Real wages are growing. Auto sales are strengthening. Construction contracting is rising. Unemployment claims are heading down. And there's one more venture capital -- or one more figure, I should say, venture capital. Investments in the development of small businesses have actually reached -- in this time of recession -- record levels in our history.

Sometimes statistics seem mighty impersonal. Well, today I saw a different kind of proof, the kind that warms your heart and gives pause even to the most hardened cynic. I've just come from that Chrysler plant at Fenton, and I can report to you the men and women are back on the job. They're moving cars off the line. They believe this great nation is on her way back to the top, and they're right. General Motors and Ford are calling back workers and creating jobs, too. By some estimates, auto employment here could increase up to 71 percent, here in the St. Louis area, by next August. What a shot in the arm that would be for Missouri's economic growth.

We're beginning to receive the payoff that we've all been waiting for -- the reward for painful but essential steps to cure a disease that was crippling America and undermining our security. This is not a fashionable idea in some parts of Washington. But the record inflation, interest rates, and taxes of 1980 were caused by a government Goliath growing too fat, spending too much of your money, and only the people were saying, ``This has got to stop.''

There seems to be a little confusion about a sentence I used in my State of the Union speech last week -- that we, in government, must take the lead in restoring the economy. Some people seemed to think that I was advocating a return to the old ways. I didn't mean anything of the kind. What I meant was, government was largely responsible for creating the economic mess of recent years; now it must recognize that and start undoing the damage it has done.

We have a plan for America's future. It isn't easy, and it isn't quick. But it will work, because it's designed to attack problems at their roots rather than pretending to legislate them away with still another quick fix.

We had to take the lead in bringing down double-digit inflation by slowing the growth of spending and money growth. Well, we did bring inflation down -- all the way from 12.4 percent to 3.9. And now, we must keep it down.

We had to take the lead in bringing down the interest rates that were wrecking small business, and we have brought them down -- from 21\1/2\ percent to 11 percent. And we're determined to do better. We must do better and get them down further.

We had to take the lead in doing something about runaway regulations that were smothering enterprise. So, we're pursuing a long-term program to deregulate key areas of the economy. By next fall, Americans will spend 300 million fewer hours on government required paperwork than they were doing just 2 years years ago when we took office. That bureaucratic monster who would slay private enterprise is being taught a new command. It's called ``heel.'' [Laughter] You're still forced to spend too many hours on government forms, but we're continuing to work on that, and we're going to get a few hundred million more of those hours done away with.

We had to reverse the dangerous decline in savings and investment choked off by higher and higher taxes. All personal tax rates are being reduced still 25 -- or another 10 percent. It'll be a total of 25 percent, the first real reduction in nearly 25 -- or 20 years. And this is especially important for small businesses -- which are mainly self-proprietorships -- and for encouraging venture capital.

We're raising the estate tax exemption for family farmers and family businesses to $600,000. Of even greater help, there will no longer be any estate tax for a surviving spouse. And, beginning in 1985, tax rates will be indexed to protect people from being pushed into higher tax brackets when they get cost-of-living pay raises.

Let me say that I will fight any move against the third year of the tax cut or indexing. They must go into effect on schedule. Without that final tax cut, that final installment, Americans will shoulder a higher tax burden than ever before. And repealing indexing -- well, indexing is just a sleight-of-hand -- or, I mean, not indexing is sleight-of-hand, inflation is. Rather than bringing spending down closer to revenues, government simply raised revenues the sneaky way. It used inflation to push every working family in America toward higher and higher tax brackets. Ironically, they call this progressive, compassionate, and fair. It reminds me of Samuel Johnson's comment about a fellow who couldn't see the difference between virtue and vice. And Samuel Johnson's advice was, ``When he leaves, count the spoons.'' [Laughter]

Must the people always do with less so government can spend more? Or should government hold the line so that people can save and America can grow again? We aren't reducing tax rates in 1981 and '82 and '83 just so we can turn around and raise the rates in '84 and '85 and every year after that and do it by way of indexing without anyone having to pass a tax bill.

There'll be an attack that we believe they should end. This is particularly true of the indexing. But I say that not indexing, government, has made a profit on inflation. And there is no way that we should permanently leave in place an incentive for government to again stimulate inflation in order to increase its own revenues without having the nerve to pass a tax bill.

Lowering the tax burden is vital to our strategy for lasting growth through greater savings, investment, and production. And that strategy is beginning to work. Those who would destroy the incentives to reduce projected deficits will instead sabotage recovery and make deficits much worse.

So again, we in government must take the lead with a genuine recovery budget. First, we believe that Federal spending in 1984, overall, should increase no more than the rate of inflation. Our budget includes the 6-month freeze and the cost-of-living adjustments recommended by the bipartisan Social Security Commission. We are also requesting a spending freeze on many Federal programs, including a 1-year freeze on Federal pay and pensions.

I hated a little bit to do that with regard to the military, because they for so long have been on a starvation diet, and we finally were just getting their pay scale up somewhat commensurate with what our men and women in uniform should get. But the other day on television, I saw a sergeant over at Ft. Myers. They caught him out there on the grounds and asked him how he felt about having his pay frozen. And he said, ``Well, I'd like, like anyone, I'd like to get a pay raise.'' But then he said, ``If the Commander in Chief says that that's necessary to make our country better, I'm for the pay freeze.'' Having access to a few phone numbers, I couldn't help but call him and tell him how grateful I was and how proud I was to have him in uniform.

Well, many of the people who pay the government's bills have already endured tremendous hardships themselves. And that's why I feel that we can ask others and those in government to sacrifice, too. People who work in the world of risk have no guarantee of profits, income, cost-of-living pay raises, or indexed pensions, let alone a job. Yet, they're the ones who must produce the abundance to fund the government programs which keep America strong and assist those in need.

Second, you've all heard that much of Federal spending is uncontrollable. These are the automatic spending programs, the so-called entitlements. They have a built-in cost increase. Well, in our budget, we propose basic structural reforms in those programs. We will insist on fairness. Those in genuine need will be protected. But if we receive bipartisan support, what used to be out of control will be finally brought under control.

Third, we're adjusting our program to restore America's defenses by proposing $55 billion in defense savings over the next 5 years. I share the desire for defense savings, and I'll continue to seek them. But our Armed Forces were neglected for more than a decade, while the Soviets forged ahead with the most massive military buildup in history. We cannot negotiate strategic arms reductions -- which we're trying to do -- with only trust and good will.

Americans will no longer tolerate just a facade of security. They expect our planes to fly, our ships to sail, and our helicopters to stay aloft. And only a few years ago, we couldn't guarantee that they would. Yes, defense is expensive. But how much would we have spent to avoid World War II? Who will put a price on the lives of our soldiers lost at Guadalcanal and Tarawa, Omaha Beach, Anzio, or Bastogne? It's my duty as President, and the duty of all of us as citizens, to make sure that America is strong enough to remain free and at peace. There have been four wars in my lifetime. We didn't get in any one of them because we were too strong.

Finally, our budget does propose a standby tax that would not start until 1986, but would only start if the Congress had already passed our spending and budget control program, and only if the deficit still exceeded 2\1/2\ percent of gross national product, and only if recovery from the recession was fully underway. Now, I personally believe that economic recovery will make this standby tax unnecessary. In the meantime, this is our way of protecting the tax cuts and indexing that we've won for the American people. And I think it will reassure many of those out in the money markets today that we do mean to control inflation and interest rates.

Now, before I take your questions, which I know I'm going to do, let me just mention a few other initiatives where we're taking the lead to assist small business and encourage greater growth.

I've had the privilege of signing three pieces of legislation of special importance. Prompt payment legislation requires the government to pay its bills promptly, or pay interest penalties.

The Export Trading Company Act of 1982 will increase U.S. exports and jobs by encouraging the formation of export trading companies to serve as intermediaries for businesses in the international marketplace. It's time to start increasing American exports and to stop exporting American jobs.

The Small Business Innovation Development Act provides mandatory set-asides from the existing Federal research and development budget. This will allow small business to participate more fully in research efforts for our nation's future. For example, during the current fiscal year, this program will direct some $40 million to $50 million to small, high-technology firms for innovative research and development. By 1987, the program will provide nearly half a billion dollars to small business entrepreneurs for high technology, new products, new ideas, and new jobs.

The private sector is providing strong leadership here in St. Louis. I understand that Monsanto is giving the single, largest corporate grant to any university ever for high-tech research and development, about $25 million to Washington University here in your city.

To strengthen our firms, to compete more effectively, to better mobilize the tools and resources of science and technology, we are creating a nonpartisan commission on industrial competitiveness to make specific policy recommendations. So, I'd like to ask you today, please, lend us your wisdom and all the time you can spare, that you have to spare, and we'll make good use of that time and your ideas.

We're a society that's in transition. Those who are hurting need help. We'll provide it. Yet, we must keep our eyes on the future and step up our efforts to train today's work force for tomorrow's world. We want America to remain in the forefront of the technological revolution. We have great hopes for the landmark Job Training Partnership Act that was passed last year. And we very much admire your strong commitment to training and job creation through organizations like OIC, the Metropolitan Re-employment Task Force, and the Say Yes program.

We're submitting to the Congress the Employment Act of 1983, designed to get at the special problems of the long-term unemployed. We'll propose extending unemployment benefits with special incentives to employers who hire the long-term unemployed and young people seeking summer jobs.

One of my great regrets last year was our inability to get our enterprise zones proposal passed by the Congress. And we'll be pressing hard for it this year. Your fine Governor, Kit Bond, he didn't wait. He helped Missouri become one of the 11 States to pass its own enterprise zones proposal. And since I used an old-fashioned word a few weeks ago that caught the press by surprise, I'll say he didn't wait for the government to get off its keister.

Speaking of Kit Bond, he played a major leadership role in shaping the Small Business Revitalization program, together with the Small Business Administration and HUD. Already, 21 States, led by Missouri, have become active partners in this program. It's been estimated that this effort could result in billions of dollars for community development and the creation of thousands of new jobs, as Federal, State, and private resources are brought together.

We're a country with great problems. But we can solve those problems because we're a good people. From coast to coast, on the job and in the classrooms and laboratories, at new construction sites and in churches and community groups, neighbors are helping neighbors. They've already begun the building, the research, the work, and the giving that will make America great again.

Thank you for being Americans like that. Thank you for the spirit of St. Louis. I have no ambition higher than to prove worthy of the standards that you have set. God bless you all.

And now, I think I'm supposed to take some questions in the time that remains.

Budget Deficits

Mr. Hardy. Mr. President, we welcome you to the townhall forum which has become a part of the RCGA program. We have two microphones set up, one to your left and one to your right. We'll ask people to come up and ask their specific questions of you.

With your permission, sir, the first one -- which may be a composite of a good many small businessmen here: With the budget deficit projections of a couple hundred billion for this year, $188 billion for next year, and the subsequent competition for the funds for the Federal Government, what kind of help, if any, can you offer small business for access to what's going to be left in that available capital pool for their own expansion, their own inventory -- anything at all?

The President. Well, for one thing, let me say that, already, the increased rate of personal savings has increased the amount of capital, private capital, in the capital pool which should, to some extent, offset government's increased borrowing.

I wish I could give more of an answer than that for these next 2 years, but we do know that we're pretty much bound in by these two deficits. The recession is certainly responsible for probably half of those deficits, and a large part of them then is the thing that I mentioned -- the structural problems, the built-in, unreducible things but which we're starting to reduce.

I can tell you that our projections call for, as we get beyond '84, for a decline and a rather steep decline in the deficits on out through 1988 that would take it considerably down and leave that capital pool available there. And I think with this next tax increase, what we're -- tax cut, what we have already seen in the increase in personal savings rate, which has amounted to billions of dollars, tens of billions of dollars, will further increase that so that government won't have a monopoly on that available capital.

Mr. Hardy. Thank you, Mr. President. Would you direct your attention here, sir? Your question, please?

Flood and Dioxin Contamination in Times Beach, Missouri

Q. Mr. President, my name is Laine Jumper. I represent the Times Beach Businessmen's Association, and I think I come from the single most depressed area of small business in the United States of America. The question we have for you is three parts, basically. One, is there anything that you can do to help the small businessmen recover on a short-term basis from the double whammy of both the flood and the dioxin -- the contamination situation in the Times Beach area? Two, would you be willing to allow a delegation from Times Beach to speak with you on the long-term solution to the terrible problem we have in Times Beach? And, three, would you be willing to appoint a citizen from Times Beach to your special task force to deal with the Times Beach situation?

The President. To the third one, yes. To the second one, I think that I've been kept pretty well aware and abreast of the problem that I know is there.

Let me just say about that that we are, as you know -- and in response to your Governor's request, we have named -- out of all the bureaus and agencies that could be involved to get by some bureaucratic entanglements -- we've named one man in charge of the Federal effort and working with the people of the State and the local level there. We have finished taking the samples, which we had to do with regard to the possibility of dioxin, one of the most toxic matters that we know of. We've taken those samples. We have tripled, now, the number of laboratories that are now running the tests to make sure if there is a threat, and the extent of the threat both in homes and in the area, in the open spaces and so forth of that area.

I know what it did to your business with regard to having to close that area and put up the barricades, but I don't think -- until we know the threat from that dioxin -- I don't think we could have done anything other and been responsible in our action if we had not said that people must avoid that until we know what the effect can be.

With regard to small business and others, having declared that an emergency area, as we did -- again, at your Governor's request -- that makes small business there available for Small Business Administration loans at the considerably lower rate of interest.

And we'll do what we can. We're housing about 80 percent of the people. They were the only ones who requested it. Some others have either returned to their homes or are living with friends or relatives. We're doing everything we can. And the community cooperative project that has been in the planning -- we are expecting that to be completed 4 days from now, on February 5th. And we're expecting, also, to be hearing the results of the other problems I mentioned before the month is out. We're working as fast as we can on that.

And incidentally, as I saw a clipping in a paper that I was supposed to have received a letter about this that was never answered, I've had everybody combing through everything. We never received the letter. Now, whether the Post Office is to blame or not, I don't know. But we didn't get the letter. [Laughter]

Q. Mr. President, I have here a message for you from the citizens and the businessmen of Times Beach. Would you be willing to accept that now? I guarantee you it's not dioxin contaminated. [Laughter]

The President. I'd be very delighted to, and you could just bring it down -- --

Q. Thank you.

The President. -- -- and hand it to somebody down here on this side of the rope.

Mr. Hardy. Mr. President, to your right, sir.

The President. Yes.

User Fees

Q. I'm Bill Schierholz of Chemtech, here in St. Louis. Mr. President, may I express our appreciation for your diligence and perseverance in bringing to final passage the 5-cent Federal excise tax on motor fuel? And may I tell you that here in Missouri, we're already putting it to good use. In expectation of these added funds, last Friday bids were received for about $45 million in construction work on highways and bridges, and like amounts will be committed this month of February and next month in March. And very shortly, many of our citizens will be back at work on these important construction projects. And shortly after that, those of us who use the highways will be benefiting from the improvements which were much needed. The attractive feature of this whole thing was that it was a user fee, and funds are provided by users.

Now, a moment ago you referred to the concern for the Federal deficit. And many of us are terribly concerned about that. We also want to protect your position on the tax decreases. But I wonder if any consideration is being given to other user fees which will, in part, offset Federal expenditures?

The President. I can't tell you that there's, right now, any plan for anything of that kind. I know there was a great deal of talk and criticism that the 5-cent gas tax -- that I had gone on record as saying it would take a palace coup before I would approve such a tax. I did say that. But I said it in answer to a question back at a time where they were talking about using it simply to raise general revenues.

Our Secretary -- and now former Secretary -- Drew Lewis of Transportation had come to me more than a year ago with a review of what we were up against with regard to the highways -- the deterioration -- and the bridges -- how many bridges in this country that school buses stop now and make the children get out and walk across, because they consider it too dangerous to carry them across, and so forth. I, at that time, had to say, ``Drew, can you come back next year, bad as it is?'' And he did. And we approved it, as you say, as a user fee.

Just a few weeks ago in Illinois, a group of roadbuilders met with me and gave me a hardhat -- which I expect to use in my dealings with Congress this session. [Laughter] But they were saying the same thing you are about how many jobs, already, are in the works because of this program. And I view it as, again, a user fee; that when it is no longer needed for the purpose it was passed, then it should be repealed. So, I thank you.

I would have to look. I do not know how far we can go in that without offsetting the incentive feature of the tax cuts, because when you're in a recession, there is no question but that more money to the people in the private sector is a necessary incentive. So, I would have to review any further ones as against -- the need, against what they might do to reducing those incentives.

Q. Thank you, Mr. President.

Mr. Hardy. May we have your question for the President, please? Over here, Mr. President.

The Economy

Q. Mr. President, given the scenario that we have a nation on the mend and that we also have very high national deficits, do you feel as we move into 1984 that we'll be able to maintain the same relatively low level of inflation and low interest rates that we have today?

The President. Yes, I do. I think the only thing that's keeping interest rates up today is fear. Those in the lending market know that they have to get back enough in interest to offset the depreciated value of the dollar, which is inflation. And they're watching us very closely to see if we are going to stay the course or if we're going to go back to that era of quick fixes that always resulted in more inflation and then interest rates following them up. This is particularly true of long-term lending.

My goal is to eliminate inflation. I have made speeches out on the mash-potato circuit for about 25 or 30 years, and back when inflation was only running at about 2 or 2\1/2\ percent a year. I used to warn then. And how many of you will remember that the people that were deliberately putting that inflation in -- it didn't come down upon us like a plague of locusts; it was planned -- and they said it was part of the new economics, that it was necessary to maintain prosperity. Well, I said then and I say now that inflation is like radioactivity -- it's cumulative. And sooner or later, it gets out of control. And my goal is zero inflation. And then let interest rates be honest.

Just one last factor, also, as to why I don't believe that it's necessary, as we begin to return prosperity, for inflation to go up, is when you've got a full third of the industrial capacity of the Nation idle -- that much capacity -- it's difficult to see how suddenly a demand on the part of consumers for more goods and products could, thus, by supply and demand, cause inflation and cause prices to go up. We've got a long way to go before we reach full capacity of industry.

Mr. Hardy. May we have your question, please, sir?

Withholding of Interest on Dividends

Q. Mr. President, my name is Jim Walsh, the vice president of Jefferson Savings and Loan. And during your State of the Union message last week, you indicated that you would resist any of the efforts of Congress to abolish the 10-percent withholding law that is going to come into effect July the 4th. How do you, or how can you choose to oppose the wishes of 90 million Americans who are small business people and small savers?

The President. Now, wait a minute. I think I can only recall speaking -- are you speaking about the 10-percent tax cut that goes into effect July 1st?

Q. The 10-percent withholding of interest on dividends that will become effective July the 4th in all financial institutions.

The President. Oh. Yes, I know. Now, I know that that was very unpopular with a lot of people. And they think that it is a way of taxing people on their savings and so forth. But what we have discovered is that one of the largest areas of avoidance of tax is in that field, that this has been the biggest loophole whereby people just simply do not pay a tax they legitimately owe. It's virtually impossible, even in a computerized age, for the Treasury Department, bureau of internal revenue, to be able to track this down. So, we passed this.

But I would like to call to your attention that there is a very definite level above which that withholding will take place, and that for most of the people, and certainly most of our retired people who are dependent on savings and the income from them, there is no withholding. We put it at quite a high level. But it was done for that reason alone, that there definitely is a large amount of tax that is owed to the government that is not now being paid.

Mr. Hardy. Mr. President, I have been signaled that we have time for one more, sir, because of your schedule. Over here, if you will?

Pro-life and Antiabortion Position

Q. Mr. President, my name is George Thornton. I'm the president of George the T-Shirt Man, Incorporated, and I'm thrilled to be here to speak to the President of the United States.

The President. Thank you.

Q. And the only thing I want to say to you is I'm glad my factory is in St. Louis, in America, and I don't live in Russia. God bless you. Thank you, Mr. President.

The President. Thank you very much. Thank you. That was one of the best questions I've ever had to not answer. [Laughter] But since that wasn't a question, and since we started on that side, I think it's only fair that we make it even and we finish with one over here.

Mr. Hardy. I feel like a sergeant. You're the Commander in Chief. [Laughter] Yes, sir? Go ahead, your question, please.

Q. Mr. President, my name is George Maty. I am executive vice president of Lindburg Cadillac Company, here in downtown St. Louis. On Sunday evening, right in this very auditorium, the automobile dealers of Greater St. Louis completed a 5-day show, where we set new attendance records for this convention center at 180,000 -- people who paid an average of two and a half dollars to see our automobiles. Four hundred cars were displayed, and over 160 were sold right from the floor here.

However, on another subject, aside from merchandizing Cadillac cars, I am a worker in the pro-life, anti-abortion movement. I can assure you that many citizens voted for you in the last election only because of your pro-life position. Can we now count on you to use your tremendous powers of persuasion to unite our pro-life Members of Congress behind legislation that will stop the killing of the unborn?

Thank you, Mr. President.

The President. Yesterday afternoon I spoke to an audience of this same size, 4,000 people, in Washington, and pledged to them that I am going to continue to do everything I can.

I realize this is highly controversial. I realize that there are people who sincerely and honestly believe that it is an unwarranted intrusion into the privacy and the right of choice of women who may choose to go that way. But I have to feel that until and unless someone can prove beyond shadow of a doubt that the unborn child is not a living human being, then we have to opt in favor that it is alive, and it is killing to do what is being done today. And that we only condone in self-defense.

Q. Thank you, Mr. President.

The President. Thank you. Thank you all very much. I'm sorry that I talked as long as I did. I'd rather do this for the whole period than try to make a speech first.

But again, I just want to say to you, I think I'm going home more rewarded than you, because being out there in that plant and meeting the workers today, seeing what's going on, hearing things like these first few words there about what happened here with the increase in sales and all, and seeing all of you, I'm going back to Washington convinced more than ever that there isn't anything the people of this country can't do when the people get together and decide it needs to be done.

Thank you again, and God bless you.

Mr. Hardy. Thank you, Mr. President.

Mr. Hyland?

Note: The President spoke at 1 p.m. at the Cervantes Convention Center. He was introduced by Robert Hyland, immediate past chairman of the association.

Prior to the luncheon, the President attended a reception at the convention center for head table guests. The reception and luncheon were part of the first small business forum sponsored by the association, a private sector organization that periodically sponsors luncheons and seminars to discuss the problems of area businesses.

The question-and-answer session was moderated by Bob Hardy, of KMOX radio in St. Louis. Following the session, Mr. Hyland presented the President with a Steuben eagle as a memento of his visit.

Following the luncheon, the President returned to Washington, D.C.