Being in the business you're in, I know that you're aware that after 2 years of back-to-back double-digit inflation, we've brought it down to 3.9 percent for 1982. You might not know that for the last 3 months of '82 -- and this is significant, I think; it certainly is in my mind -- inflation was running at an annualized rate of 1.1 percent. Now, this has made an enormous impact on real wages. For the first time in 3 years, they increased by 1.8 percent in 1982 and, in the last 3 months of the year, at a 3\1/2\-percent annual rate. Interest rates have dropped significantly from -- the prime rate is down nearly 50 percent.

And in December the economic indicators, the index, was a full 6.2 percent above last March's low point. Housing starts are also up by 45 percent during the last quarter. The new homes sales have grown 75 percent since April of last year. Housing permits are up 75 percent -- or 61 percent, I'm sorry. And the inventories of unsold homes are now at the lowest levels in more than a decade.

Auto production, in this quarter, is scheduled to increase 22 percent over last quarter. And General Motors alone is recalling some 21,400 workers. The sharp decline in unemployment last month, which is usually the last indicator to show any upturn out of a recession, was the most heartening sign of all.

We still have a long way to go, but we've turned the corner and are moving forward. And I'm proud of one thing. We didn't panic when we hit the heavy weather and go for the fast bromides and quick fixes, the huge tax increases or wage or price controls that were recommended by a number of people. I think our stubbornness -- if you want to call it that -- will quite literally pay off for every American in the years ahead.

The second issue I want to mention is defense spending. And I won't launch into another statistical report and tell you this year that defense spending is only 26.7 percent of the Federal budget. I won't even tell you that the Soviets are still outspending us by devoting 13 to 14 percent of the gross national product to defense while we're devoting 6.7 percent of ours -- only about half the rate. I could tell you about the strides we've made at the Pentagon under Cap Weinberger's superb leadership.

During the 6 months ending September 30th, 1982, the end of the fiscal year, the Department of Defense auditors had identified more than a billion dollars in potential savings on waste and fraud and from management efficiencies. Over the next 5 years, through multiyear procurement and other acquisition initiatives, we'll save over an additional $15 billion. That's more than the entire budget for the Department of Housing and Urban Development.

Thirty-two percent more of active duty units are combat ready, and reenlistment rate is up at 68 percent. That's the highest since 1964. But you know, our progress in that goes far beyond statistics, beyond bombs and rockets and budgets and bureaucrats. The real issue is the security of the United States and the American people -- our willingness to bear the burden that comes with freedom.

We have begun to correct a decade of neglecting America's defensive needs, but we've only begun. President Kennedy once said that there was no discount on defense. He was right, and I think the American people knew that he was right. The defense issue is one of the most potent in American politics. And time after time, the American people, when given the facts, have made it clear that they support a strong defense program.

They've never had patience with politicians who want to have a fire sale on national security or a bargain basement military. But right now, they've had a drumbeat of criticism based on false charges. Defense spending is not the cause of our economic problems, and without it, we'd have no chance of negotiating on arms reductions and getting an agreement with the Soviet Union in that field.

And that's all I'm going to talk about now, because I know you'll have some questions.

Representative Phil Gramm

Q. Mr. President, I'm Frank May from Bryan, Texas, and we're having a special congressional election involving one of the chief architects of your economic program down there Saturday. My question is, do you see that election as a referendum on Reaganomics, and how do you view the outcome? How will it affect getting your budget proposals through Congress, win or lose?

The President. Well, I think it would have an effect either way. I recognize, though, that it may be portrayed as being a referendum on some policy of government. On the other hand, there are some other issues in there. Here is a man who had the courage to -- he could have just changed parties and stayed in the Congress. But he said, no, he had run and won as a member of the Democrat Party, and he felt that it was only fair that he go back and give them a chance, now knowing that he has switched parties.

I admire his courage very much, his principle. And I admire very much his mind, because he was an outstanding help to us in getting our economic program started. So, obviously, I've got a great interest in how he does down there. And I'm going to watch him with great interest.

Yes. I'm sure that it would be taken as a referendum in some ways by many people -- if he's turned away.

Defense Spending

Q. Don Mulford of the Montclair Times, sir. Do you feel that ``The Winds of War'' is helping you keep the defense budget from being cut? [Laughter]

The President. You know, I asked somebody the other day -- having looked at a couple of installments of that myself -- I said, ``Do you suppose that this could be a help to us'' -- [laughter] -- ``because it reminds us of how blind so much of the world was to the threat that many years ago?'' And, of course, how much of it is -- it's more than half the population of our country today was born after the World War II. So, it's kind of like the Civil War must have been when I was born. [Laughter]

Oil Production; Agriculture

Q. Mr. President, we've discussed the problems of the cities. We've heard a great deal about that. But there are some problems in, primarily, agricultural and energy producing States -- Oklahoma being one of them -- a combination of wheat farmers going bankrupt and very concerned, an oil industry that is staggering right now under not only windfall profits taxes but a new excise tax being proposed -- a per-barrel price of what I understand now is $7 a barrel. They're worried about incentives to produce. Why should they buy it?

The President. Well, we hope they'll keep on producing. I remember that when I first proposed decontrolling oil -- getting rid of the government controls -- voices were raised saying that the price of gasoline would go to $2. Well, I've always believed in the marketplace, and this confirmed it, because the price of oil has gone down. I think that, maybe, the marketplace is still going to take care of it.

I never was in support of the windfall profits tax. This new proposal, I think, if you look at it fairly, is a tax that I hope would never be put into effect -- that or the surtax. What we did was propose a tax that would only be implemented under certain conditions. And one of the primary considerations was only if the Congress had joined in continuing to reduce Federal spending and get the cost of government down. And if they haven't adopted those proposals and done that, then this tax bill would never go into effect. There were some other things, also, that we still have. We had to be definitely out of recession, and the deficit had to be a certain percentage of the gross national product.

With regard to the farmer, we're doing a number of things and working on this very much. The farmer is truly a victim of the cost-price squeeze. And the farmer is one who, many times, borrows to plant, and through harvest, and then pays back. And with the high interest rates, they have been really caught in a trap. And when the price of their product went down -- so, we're doing everything from working on promoting international markets, more export for them to meeting some of their problems, and some of the problems of soil conservation.

We have a plan that we've proposed, also -- and many farmers are most supportive of it -- and that is, rather than cash helping in their problems, using that great surplus that the Government owns and that is stored in Government surplus, but which, hanging over the market, has a tendency to depress prices just psychologically by virtue of its being there. And we're talking about a trade in kind, that a farmer who leaves idle some of his land in the interest of soil conservation, we'll give him the amount of crop that he would have raised out of that surplus. Maybe we can get rid of that surplus.

I'm going to have to move out there a ways.

1984 Presidential Campaign

Q. Mr. President, last night Mr. Meese[Edwin Meese III, Counsellor to the President] said in Cambridge -- I'm Joe Davis of Boston, Massachusetts -- and last night Mr. Meese said in Cambridge that, he indicated that he thought you probably would run again. Do you care to share with us your thoughts on that particular subject?

The President. Well, I think that it's, first of all, it is too early for anyone in this position to make a decision on that. So, my answer has always been if you state too early you're, one way you're a lameduck, and if you state too early the other way, then everything you try to do is viewed as being politically inspired. And so, my safest answer is I will let the people determine whether I should run again or not.

Volunteer Programs

Q. Mr. President, Mort Crim of the Post-Newsweek stations in Detroit. Some of our autoworkers in West Germany have taken pity on the unemployed autoworkers in Detroit, and they're sending food parcels to them. And they've discovered that it's not practical, because the cost of transportation is worth more than the food. They have further proposed that U.S. military aircraft be used to airlift some of these supplies, sort of a reverse Marshall plan.

Would you be willing to authorize the shipment of these donated goods to Americans, to Detroiters in particular, on military aircraft? And if you do accept that plan, would it be a recognition that we need a Marshall plan?

The President. Well, I don't think we need a Marshall plan that we cannot provide. We provided the first Marshall plan; I think we can provide the second.

I had heard about this situation and have not had an opportunity yet to speak to Secretary Weinberger about it. I think it would have to be -- if it were done -- and I would have no quarrel with that -- I would think it would have to be in planes that were making regular runs, because we could just simply add to our deficit at a greater cost than, again, the food would be worth -- --

Q. But that was the proposal.

The President. -- -- if we were to set up a regular transportation line, because those planes don't fly for nothing.

No, but something that we were speaking about here earlier -- and I would like to pass this on to any and all of you for your communities -- we've had for a year a task force of citizen volunteers, called the Private Initiative Task Force, that was out finding out what the people can do at a volunteer level, at the people level, to help with many of the problems that we have. And they've concluded a year's work, and we now have a computer-manning staff here in the White House, a computerized program that contains more than 2,500 programs that arrange everything from things of this kind, providing food to the needy to intercepting and heading off dropouts in school, every kind of program that you could imagine -- some of them totally volunteer, some of them combination of volunteer in connection with public officials through grant programs -- 2,500 or more of them with the names, the communities where they're successful, the names and the phone numbers of the people who manage them. And for anyone in their communities and for you who are in the business you're in of communications, to put people in touch with this, to find out how someone else is solving a very real problem that you have in your community -- I highly recommend it, because out of all of this problem that we have, it is amazing the ingenuity of the American people, the willingness, and their ability to come together and solve many of these problems.

Incidentally, in connection with this need and whether the Air Force could or not, I want you all to know also that the problem -- another one that we happen to be talking around the table here, of the people with no shelter, that are on our streets now, our military is already checking on military installations for barracks space that can be made available for shelter for those people.

Views on the Presidency

Q. Mr. President, Ed Lecius from Nashua, New Hampshire. We've been reading in the Union Leader in recent weeks and hearing from our senior Senator Gordon Humphrey, that they feel that you're moving away from the policies and principles that got you elected. How would you react to those statements by them?

The President. Well, I had a fine conversation with Nackey Loeb recently. We ran across each other when I was in Boston. And I know that it can look that way.

I'm not retreating an inch from where I was. But I also recognize this: There are some people who would have you so stand on principle that if you don't get all that you've asked for from the legislature, why, you jump off the cliff with the flag flying.

I have always figured that a half a loaf is better than none, and I know that in the democratic process you're not going to always get everything you want. So, I think what they've misread is times in which I have compromised -- for example, our entire economic program.

I proposed three 10-percent-a-year cuts in the income tax, retroactive to January 1st, 1981. There was no way I could get that with the House of Representatives dominated by the other party. So, I settled for a 5-percent cut the first year, not retroactive but on October 30 -- or on October 1st, the beginning of the fiscal year; then two following 10-percent cuts. Well, I think 25 percent, a little delayed in starting, was better than going down fighting and not getting anything at all.

And I wish that I could get more people to realize, no, I have not retreated from what was our original purpose. I am very stubborn in that regard. And I'm just going to have to try and communicate better, and make people realize that, you know, I come back and I ask for more the next time around.

Q. Mr. President?

The President. Excuse me. I'll take the lady, and then I'll come back to you.

Employment Programs

Q. Thank you. I'm Chris Wagner from WPVI in Philadelphia. You were just talking about compromise and not getting everything that you want. It seems that both sides of the fence in Congress now are really pushing for some type of jobs bill that goes beyond what you have already proposed. In which areas are you willing to compromise now? And when can we expect to hear a compromise proposal from you?

The President. Well, some of the things that have been proposed are the type of job bills that we've used in the seven other recessions that took place after World War II up until now. They were make-work job programs; they were temporary; and they increased the deficit spending. They set back the economic recovery. And no one paid any attention to the people who lost jobs over here in the private sector as this money was moved over here to create jobs.

We disagree with that. But what we do have in our budget already -- and we are working together for a bipartisan approach to this -- is that we are looking at all the agencies and departments of government that have already built into the budget programs of construction, of maintenance, of upkeep, and so forth that they need -- and with the idea of accelerating those and, wherever they have them scheduled, doing them now.

But we also have in the budget, and we have passed, job training. And we have some approaches to working with the States in their own unemployment insurance to see if this cannot be utilized not just as insurance payments or benefit payments but utilized to further job training and even for relocation from people for where there are no jobs to other places where their skills might be desirable.

All told, we've got $93 billion in the proposed budget for the needy and for the help to the unemployed. And we have a program that is several billion dollars already -- that I think when they have time to study it, that it is dealing at work. But it won't be make-work. It'll be legitimate work such as the highway program, the 5-cent gas tax for that. And to all of those of you who said that I had stood in a press conference and said I would only give in to a gas tax if there was a palace coup, at that time I was talking, the gas tax had been proposed as a contribution to general revenues.

But more than a year ago, the Secretary of Transportation had brought us a report on the state of the highways and the bridges in our country and the very risk of -- it was almost an emergency situation. And I asked him then if he would come back a year later with it, because of our economic problems. He did. And that's why the present gas tax is devoted completely to the repair and the building of those bridges and so forth. And is already taking an effect in employment in the various States for construction.

Q. Can I just follow up on that a little bit? So, you're saying that the compromise part -- the new part then in which you will work with Congress -- will be speeding up, accelerating construction programs that were in the works for later on down the road?

The President. That's principally it. Yes.

Q. When will the specifics of that be spelled out?

The President. Well, that's pretty hard for a President to say, once something gets up on Capitol Hill. But our people are in contact with them and talking about it.

The Middle East

Q. Roger Sharpe with WABC in New York. Earlier this week, you voiced some criticism or at least frustration over the Israeli attitude on the discussions with the pullout in Lebanon. Do you think the report now from the judicial commission on the massacres in Beirut will help speed up this process, or do you think it'll further complicate it?

The President. Well, I'm really afraid to comment on that either way. That's a strong democracy. It's an internal matter. And I think we stand back and keep hands off of an internal matter of that kind.

We sent Phil Habib [President's Special Representative for the Middle East]back with further recommendations in the plan that we had originally proposed. We hope that we can accelerate the withdrawal not just of the Israelis but of all the foreign forces -- the Syrians and the remnants of the PLO that are still there -- because we believe it essential to the overall peace plan that I proposed -- must be the reestablishment of a government in Lebanon that will be sovereign over its own territory. And that can't happen, and we can't get the cooperation we need from all parties until everyone withdraws to their own borders. And we're going to continue along that plank.

Can I take just a couple more?

Ms. Small. One more, Mr. President?

Social Programs

Q. Mr. President, Liz Walker from Westinghouse in Boston. First of all, I bring you greeting from the Eire Pub. [Laughter] Their economic future has been brightened with your visit. [Laughter]

I've heard a lot of numbers this morning, and I'm trying to put that on human terms, especially with some of your budget proposals' cuts. For instance, about a quarter of a million meals would be cut from the elderly meals program. And I'd like to, on human terms, be able to tell those people, those 50,000 elderly in the Bay State, what that's going to mean or what they can do to sustain themselves, having lost a quarter of a million meals with your proposal in the budget.

The President. I can only tell you that the only cuts that we've proposed are cuts that are aimed at eligibility that ensures that what we're doing is going to people who require the help. Many of our programs -- the eligibility requirements that have gone on over the years have been weakened or loosened, or administrative practices have been such that we found that we're helping people that really are not eligible for that help.

We are providing in the budget that we've submitted -- we will be providing 95 million meals a day in this country. Now, some people I've seen have suddenly seized upon a figure that has to do with school lunches, and they've said, ``Ah, there's a reduction in the number of school lunches.'' Yes, there is, because for one thing there's a reduction in the number of children in school. That has fluctuated. Maybe the baby boom is over, but suddenly their enrollment has dropped. So, there is that need.

We also have eliminated from school food programs a number of rather exclusive, high-priced schools in which there's no question about the ability of the parents of the students in those schools to provide for them. And between those two and between ensuring that the eligibility rule either reduces the food support for students from families with incomes that are above a level where they should not be getting help from their fellow taxpayers, we haven't harmed anyone who has real need. They'll all be provided for.

And, as I say, 95 million meals a day -- I've noticed that in the criticism that we have -- with regard to food stamps, there are more people provided for in our budget than have ever received food stamps before. The amount of money being spent on food stamps is greater, but what we have cut is a projected increase that was based again on standards and eligibility. For example, we have already uncovered over a billion dollars in error and fraud in food stamps, and we don't think that the people that are paying for the food stamps should be helping those who are fraudulently using food stamps.

The safety net is intact and is providing for those people that have real need.

Q. Mr. President?

The President. What? I've got to -- --

Q. One more?

The President. All right. I know, I'm supposed to -- --

Federalism

Q. Tim Weigel from Chicago -- and I apologize. My question is, we read so many studies about how tax dollars leave the Midwest and the Northeast. They go to Washington, and then they distribute it to California, Florida, Texas, for defense spending. What can we do to make defense spending more equitable for the entire country and to turn off the outflow of dollars from the Midwest to the Northeast and just make it a little bit fairer for everybody, or more fair?

The President. In this regard, the Government is a customer, and the first requirement is to give the contracts where the product is being made and where you can get the best buy for the money invested. So, national defense has to be the first priority.

We have and do make efforts where there are items in contracting that can be spread more in the civilian nature -- not particularly weaponry -- we have made efforts to aim at the economically distressed areas to spread that more evenly. But, for example, if you're going to build warships, you have to go where the shipyards are. If you're going to build airplanes, you have to go where the airplane companies are. But since the target is the security of the entire Nation, it's only fair that the entire Nation pays for it.

We could say the same thing, couldn't we, about private industry, that certain States have almost a monopoly on a particular industry that services the whole country, and so the people in all those other States -- but then by the same token, the people in those other States make things and grow things that are sold nationwide. And we've never had in our country a kind of a -- making State borderlines like national lines with tariffs and so forth.

I feel that what probably is more irritating to some than whether the money goes back for something the Government must buy, as any customer has to buy something -- and we go where it can be sold -- is the truth that in many of the Government programs, practically all of them, it is true that there are a number of States in the Union that are considered the rich States, and the amount of tax money that they provide to Washington, when it is redistributed in programs, is redistributed to other States that are not paying proportionately the same share. And it's based on the idea that some of those other States have greater need. This is one, though, that I think should constantly be watched, that a little cluster of States, industrial States, for example, don't wind up supporting the people in others.

My criticism of many Federal programs over the years has been -- and we're trying to correct this -- has been that when suddenly the Federal Government says, ``We're the only ones that can have a program of aid to rapid transit,'' well, then you find since 75 percent of the people live in cities and the cities are where they have the rapid transit, so that 75 percent of the people are paying the taxes and couldn't they be much more efficient and do it better if they taxed themselves at the local level, because if the people in Chicago are being taxed to help Metro in Washington, D.C., or rapid transit in New York, but the people in New York are being taxed also for the rapid transit program to help the people in Washington and in Chicago. And maybe if the Federal Government would just get out of the way and say, ``Look, we'll give up the tax source, and you just do what you want to do for your own problem here at home,'' because the Federal Government has a larger carrying charge than most local and State governments have.

And I think that there's a lot of room, and these are some of the controversial things we've been trying to do. And we're sending our missionaries up on the Hill as often as we can to convince them that it'd make more sense if local governments -- and, incidentally, we haven't done enough to tell you how far we have gone with our federalism program and how much we have re-altered the whole structure of government in turning back to States and local communities functions they can perform better than the Federal Government can perform for them.

Now, I know that I have to go and I know there - - -

Ms. Small. Thank you, Mr. President.

The President. That's got to be the last one, and then I'll go. All right.

Minimum Wage

Q. Jane Waldman, Boston, Massachusetts. You proposed the subminimum wage for teenagers to reduce unemployment. Can you explain how this will reduce youth joblessness while not increasing adult joblessness?

The President. Now, wait a minute. You're talking about -- --

Q. Subminimum wage for teenagers.

The President. A second minimum wage, a different minimum wage for them.

Q. That's right.

The President. Yes, the figures of the minimum wage that we have seen going back to its very beginning and then every increase that went on -- you can look back at that, and the line on the chart of unemployment for teenagers, or young people, goes right along, increasing with the increase in the minimum wage. In other words, young people basically do not have a job skill. They're entering the job market for some job that the employer can afford to hire an unskilled person for and teach them whatever needs to be taught. But many of those jobs are jobs that if you make them too expensive, the employer does without the job being filled.

And I have believed for many years, and my experience as Governor and working with youth groups on this, that the minimum wage, which is really based in mind of the mature employee, the person with some job skills and so forth, this never should have been applied to young people that are going to school, that are looking for summer jobs, that are looking for after-school jobs, and so forth. And I think that the best thing that we can do -- I know that it would be this, again, your question about am I retreating, I know it'd be hopeless to ask to eliminate that for such young people. That would be the right thing to do.

I can take you way back before there was such a thing -- when I got my first summer job. It was with a construction gang that was remodeling old homes and reselling them. And before the summer was over, I ended up laying hardwood floors, shingling roof, painting -- did everything but electrical and plumbing. And there weren't any government programs that made the employer have to hire an auditor and deduct from my paycheck for social security or other programs of that kind. He could just reach in his pocket every week at the end of the week and count out what he owed me and hand it to me in cash.

And I wouldn't give up that experience I had for anything in the world. And I think that young people today are in that same situation and would like to do that. But today it's not only the minimum wage, but with all the many useful social reforms that we've put in, of unemployment insurance and social security and other things of that kind, we have made the wedge for the employer. The difference between what the employee actually gets and what it costs the employer to hire him is so big that he just can't afford to take those young people on.

With regard -- I know I mentioned the untouchable: social security. But I remember when I was doing the ``G.E. Theater,'' and they one day wanted our 3-year-old daughter to be in a commercial. Now, she wasn't starting to make television a career at 3 years of age. I don't think she was ever going to have a job again for many, many years. But I thought she was cute, and I thought if they want to photograph her and put her on TV, I'd like to see that, too. So, I spent 4 hours downtown with my 3-year-old getting her signed up for social security. [Laughter] She was going to get the minimum, the Guild minimum for doing the commercial, which I think then was $50. But she was signed up. And that was all deducted and so forth.

But -- well, I know that I've taken -- and I can't get to all the hands that are here, and it's very heartbreaking. I wish I could. I'll tell you, those of you who didn't get your questions asked, if you'll write them down and leave them with Karna and your name and address -- [laughter] -- I guarantee you, I will answer them in writing and send you the answers in writing.

And I thank you all very much again for being here. It's been a wonderful experience, and I hope we see each other again soon. All right. Thank you.

Note: The President spoke at 1:02 p.m. in the State Dining Room at the White House. The editors and broadcasters were at the White House for briefings by administration officials on the fiscal year 1984 budget and administration programs.