Q. Mr. President, there has been a good deal of praise since your announcement yesterday concerning a new flexibility with respect to our negotiating position at the arms reduction talks in Geneva. A lot of people think it's the right medicine at the right time to get these talks moving toward a favorable agreement with the Soviets. But part of our position requires the Soviets to destroy, do away with, nearly two-thirds of their heavy missiles. Do we have any signs, any indication, inkling that they'll go for this feature?

The President. Well, both sides, according to our proposal, are going to have to do away with some of their weapons. I think what you're referring to is a thing -- on which we can be very flexible -- and that is whether there is a sub-limit. I doubt very much that there will be much of a problem about the mix of weapons. The whole -- our whole aim is a reduction in the number of missiles for both sides to the 5,000 limit and a reduction in the destructive power. This is another place in which they are superior to us.

Q. Do you detect a new spirit of compromise in the Kremlin, especially since Ambassador Harriman's trip?

The President. Well, that, or before it. The thing that makes me hopeful is that the Russians, who so many times just simply say ``nyet'' to everything, they did in previous meetings propose a lower figure than they presently have. And at least that's a starting point. We're willing to come up from the figure that we had, as I indicated yesterday, and so if one's the Moon and the other's green cheese, maybe we can meet some place in between.

Possibility of U.S.-U.S.S.R. Summit

Q. Mr. President, is it possible or is it now probable that you might have a summit meeting with Mr. Andropov between now and, say, next summer?

The President. I think it's possible. The only thing -- there's no reluctance on my part to have one, except that there's a great danger if you have a meeting simply to have a meeting and get acquainted, and then everyone says, ``What happened in the meeting?'' And you say, ``Well we got acquainted.''

I think we have to have an agenda. And I think it has to be one in which both sides have agreed that they're really going to try to settle some of the issues between us.

July Tax Cut

Q. Okay. July 1st, a Federal tax cut is scheduled to take effect. In the past week, Speaker O'Neill has been demanding that a ceiling be put -- a $700 ceiling be put on the maximum amount that any taxpayer can receive under this cut. He apparently wants to soak the rich or the wealthiest taxpayers more. Are you going to tamper in any way with this tax cut?

The President. No, I'll fight to the death against that tax cut. And I'd like to point out that this whole thing about whether -- soak the rich or something else -- he had set the figure at $50,000. Under his proposal, a married couple that have a $35,200 income would find that their top bracket now is 33 percent. It would go to 37 percent under -- or it will be 33 percent when the tax cut goes into effect.

At $48,000 and something, the same married couple would find that they go from 38 percent up to 42 percent under his proposal. And this isn't up to the $50,000 mark, and they're losing money. Seventy-two percent of all of the tax relief in this coming tax cut on July 1st will go to people below $50,000.

Now, when you stop to think that with our graduated income tax the top 10 percent of earners in this country pay 50 percent of the total amount of tax and the top half, the top 50 percent of earners pay 93 percent of the total tax, I think it's only fair that a tax cut goes across the board, ``even Steven,'' the same percentage cut for everyone.

Inflation

Q. Your top budget people are warning that the money supply is growing too fast, and there's a fear, at least among some of them -- Stockman and Feldstein -- that we could be headed for more inflation. Are you worried about that at this point?

The President. Not really, because I think that there's no question the market's been a little frightened by a surge there. And probably what makes them worried about that is the 1980 -- before we got here, there was a giant surge, and that was the one that took us up to 21.5 percent interest rates and so forth. And then the string was pulled very firmly -- 1981 -- bringing it down. In fact, if that string hadn't been pulled for so long and so hard, we might not have had the depth of recession that we've had.

But it is a kind of an uneven thing. It isn't something that you can actually specify and say it's going to grow exactly at this amount -- the money supply. And a few weeks ago, there was something of a surge. The Fed has immediately moved on that, and I don't anticipate that.

Chairman of the Federal Reserve Board

Q. Sir, speaking of the Fed, will it be Mr. Volcker continuing, or might it be Mr. Greenspan? Can you give us any clue?

The President. All of that argument and speculation -- we haven't even gotten around to making a decision yet.

Education

Q. Okay. You're well aware that State and local governments, school districts, say they're strapped for money badly these days. Under the recommendations of the Commission which you appointed on Excellence in Education, part of the recommendation is for the Federal Government -- all levels of government -- to help finance this. Are you satisfied that local governments can, in fact, find the money it's going to take to implement the longer school days and the back-to-the-basics curriculum that the Commission recommended?

The President. Well, the Commission report also made it plain that just throwing money at it isn't the answer. Right now, the highest tax finance program in the United States is public education -- some $215 billion. And incidentally, it has increased over the last 20 years, when everyone is so concerned about the decline in education, funding for education has increased by 600 percent. And in that some period, allowing for inflation in constant dollars, we have added a $66 billion increase in constant dollars over that same period in the per capita cost for each student.

So, I don't think that money is the problem. But what is necessary is to work out Federal, State, and local, and what are the proper functions for each to perform in education, and then have the responsibility of funding those.

Now education is basically a local and State function -- always has been and always should be. At this moment, the Federal Government only supplies 8 percent of the total educational budget, and yet, one of the problems has been that over the years the Federal Government for that 8 percent has wanted about 50 percent of the control of the schools.

President's Decision on Seeking Reelection

Q. Sir, the economy is rebounding. There's a business recovery in progress. And the Williamsburg summit appeared to go very well. Your health looks great. You look wonderful.

The President. I feel good, thank you.

Q. You seem ideally suited to a man who would be up for reelection. Can you give us some idea of what your thinking is -- [laughter] -- on seeking a second term right now?

The President. [Laughter] Well, my thinking, basically, is that it is far too early for anyone of my position to announce his intentions. [Laughter] And I can tell you why. If I did, and the answer was ``no'', then it wouldn't do me any good to ask Congress for anything. I'd be considered a lameduck. And if I said the answer was ``yes'' at this point, the media -- forgive me -- but the media, very largely would be tagging everything I did, including a trip to Minneapolis, as political in nature.

Q. When can we expect to know?

The President. I haven't even really decided on that.

Q. All right. Mr. President, thank you very much.

The President. You bet, thank you.

Q. I appreciate it.

Note: The interview began at 3:47 p.m. in the Hall of the Cities at the Leamington Hotel.