But it was here in Detroit that we embarked on a new beginning for America 4 years ago, and I'd like to speak with you today about what I consider the most important issue in the 1984 campaign -- America's choice for the future.

This election offers the clearest choice in 50 years on the direction our country should take -- a choice of whether we go forward together with the courage, common sense, and new spirit making America strong again, or whether we turn back to those policies that weakened our economy, reduced opportunities, and reversed America's tradition of progress.

I believe America works best when we trust our people -- all our people. When we trust their vision, faith, judgment, and courage, when we give them opportunities to climb higher and reach for the stars, a million dreams can become the golden dream of America.

But we know that in the recent past, our government had stopped placing trust in the people, and too many dreams were allowed to die. Higher taxes, more government spending, and greater government intrusion -- the same approach advocated today by my opponent -- had dramatically changed the landscape of America.

We saw a once proud nation staggered by steady erosion of economic growth, punishing inflation and interest rates, a record peacetime tax burden, rising unemployment, and weakened defenses. We saw policies with devastating results -- families encouraged to break up, bedrock values of work and strength of neighborhoods undermined, crime going up, our children's achievement in school going down. In retrospect, there was only one thing fair about those policies: They didn't discriminate; they made everybody miserable.

In short, America wasn't working very well. Now, I know the last administration didn't want these things to happen. I don't question my opponent's good intentions. He sincerely believes his philosophy of bigger government is in the best interest of America. Well, I would simply suggest that all of us remember, given the track record, that there is a well-known road paved with good intentions, but no one wants to go where it leads.

You know, I was once asked how I hoped, personally, to be remembered for my time as custodian of this office. I was appearing just a week or so ago before a college group when that question was asked by one of the students. Well, knowing that I believe that Americans do better by themselves, I said that with the courage of -- millions of Americans are coming to grips with the problems that had built up for more than a decade -- I said I would hope that I would be remembered as having given the government of this country back to the people.

Together we've made a new beginning, restoring America's economic and military strength, her sense of community and fidelity to shared values, and her spirit of national unity. We recognize that much remains to be done to help the people that were hurt most by past mistakes. But we believe our policies now in effect, with the initiatives we're supporting for the future, will continue to improve life and opportunity for all Americans. And with your support, we're going to get that job done and get it done right.

In 1980 history gave us a great challenge: to rescue a nation in crisis and to save America's future. We met that challenge. In 1984 America is being challenged again, this time to shape our future. We must make this nation so strong, so united that when today's young Americans become tomorrow's leaders, they will inherit an America that can remain the great shining light for progress and peace for generations to come.

And that's why I'm urging all of us in 1984 to join together. Let us go forward and build an American opportunity society, a society that ensures that every individual will have his or her chance to climb higher, to climb up to the ultimate in individual freedom, consistent with an orderly society, to achieve the fullness of creative human potential.

There's a true and tested path to a bright and hopeful future; but it's not the path of good intentions by bigger government. It's the path of greater responsibility in government and greater opportunity for every man, woman, and child. And that's the America we've been working for, and that's the America we mean to keep working for.

Common sense and opportunity are essential to successful policies for economic growth. And economic growth is essential to a just and fair society.

Federal spending growth, which reached a 17-percent annual rate in 1980, contributed to back-to-back years of double-digit inflation and a 21\1/2\-percent prime interest rate, the highest since the Civil War.

Retirement savings were devastated. A family with the average amount of life insurance in 1976, $30,000, saw its value shrink to $20,725 in 1980. In 1979 and '80, working Americans' weekly earnings declined in real terms by 8.8 percent, the worst drop since World War II. Young families couldn't save to send their children to college; tuition costs has soared 41 percent in just 4 years. Soaring mortgage rates meant 10 million families could no longer afford to buy homes. The rates on car loans jumped from 10.9 percent in 1977 to 16\1/2\ percent in 1981. Grocery bills increased by 50 percent, and the price of a gallon of gas more than doubled.

The needy were hit hardest of all. A family on a fixed income of $8,000 in 1979 was about $600 above the poverty line, but in 1980 it was almost $400 below it, as double-digit inflation eroded purchasing power and pushed the poverty line up. Inflation reduced the real value of government benefits and especially hurt the poor who were forced to spend a larger share of their income on necessities. In the last administration, per person Aid to Families with Dependent Children fell 10 percent. The value of the maximum allotment of food stamps fell by almost 6 percent.

Now, these policies didn't just create unfair hardship, they were the very essence of unfairness. Despite the great torrents of rhetoric about compassion, the only people who benefited from those high inflation and interest rate policies were people wealthy enough to invest in expensive inflation hedges. Working Americans and the needy were left out in the cold.

Inflation and high interest rates are not caused by people living too well; inflation and high interest rates are caused by government living too well. So, we took action to bring runaway government spending under control. We cut its rate of growth by more than half. Experts warned it would take 10 years to bring inflation down to the level of the 1960's. Well, we did it in 2 years. And today the third-quarter gross national product deflater is estimated at 2.9 percent, and inflation stands at only 4.2 percent. Not only are we determined to keep inflation down, we'll not be satisfied until inflation is 0.0. Interest rates have fallen by more than one-third. That's still not enough, but the prime recently dropped, and I think we'll see more of that ahead.

What has this progress meant for Americans, especially families of average means? Well, in contrast to that 8.8 percent decline I just mentioned in real weekly earnings, in the last 2 years they have risen 3.2 percent. In December 1980 the weekly food bill for a family of four was $86.90. If inflation had continued at its double-digit rate, that family's food bill would be $127.57. But inflation, down dramatically, has kept that family's food bills down to $98.50, roughly one-fourth the rise that continued double-digit inflation would have meant.

While the value of the maximum allotment of food stamps fell by almost 6 percent in the last administration, the value of that same allotment has gone up by almost 8 percent during our administration.

We decontrolled the price of oil, and our critics claimed the cost of gas at the pump would skyrocket. Well, the price is down about 8 cents from where it was 3 years ago when we decontrolled.

The decline in interest rates, while not yet enough, has reduced the average cost of home mortgages by $143.00 a month, put home ownership within the reach of 5 million more Americans than before, and made car purchases more affordable, too.

Too many families are still not where they need to be, but our progress has made them more financially secure, they have more opportunities, and I happen to believe this is what fairness is all about.

In 1980 the misery index -- you'll remember that; it was coined in that campaign to be used against Jerry Ford. It was the combination, adding inflation rate and unemployment rate. Well, it was 12\1/2\ when they used it against Jerry Ford. They didn't mention it in 1980, because it was 20.5 by then. Today the misery index is down to 11.7.

We've made progess, but we can make more progress bringing inflation and interest rates down, if the United States Congress would make more progress bringing Federal spending down. [Applause] And some of the Congressmen here at the head table are applauding that, also, because they've been trying all they can.

I'm asking for your strongest support for two long-overdue reforms supported by the American people, but resisted by the Democratic leadership -- a constitutional amendment mandating that government stop spending more than government takes in and a line-item veto giving a President authority to veto individual items on appropriation bills.

Now, just remember, you don't need to make them see the light, you just have to make them feel the heat. [Laughter] Forty-three State Governors have this authority, and when I was Governor of California I used the line-item veto more than 900 times. But legislation for a line-item veto is tied up in the Congress. Tell the Congress to give democracy a chance, and I promise you we'll get rid of the pork-barrel spending that slips through every year. Incidentally, none of those more than 900 vetoes in California were overridden.

Democrats in the House killed the balanced budget amendment in 1982, and their leadership still resists allowing a vote on that amendment. Now, I recognize that idea wouldn't be a cure-all; it wouldn't even go into effect right away. But I believe it would force the leadership of the Congress to work with the President on long-term budgets of real discipline -- one that would not penalize those dependent on government for help -- and it's high time that this be done.

If we'd received all the cuts that we've sent to Congress over the past 5 years, the deficit would be $40 billion less than it is right now. Having inherited the legacy of 42 unbalanced budgets in the last 50 years, I can tell you one thing with absolute certainty: We do not have a deficit problem in this country because the American people are not taxed enough. We have a deficit problem because the Federal Government has spent too much and taxed too much far too long.

Getting spending under control for good will keep the deficit on its downward path, help bring inflation and interest rates down more, provide greater security for all our people, and give investors and businesses the confidence they need to make long-term investments for our future.

But the other side of that equation is pursuing incentive policies for growth. And to meet our challenge -- to build an American opportunity society -- we must have tax policies that spur America to challenge the very limits of growth.

Now, I believe that the tax policies in place before we got to Washington were antigrowth, antipeople. Government always, under the guise of compassion, had penalized Americans with record taxes that reduced rewards for hard work, thrift, and risk-taking. They wanted us to substitute limits for the American dream, and for once they managed to do what they wanted.

Economic growth fell from 5.4 percent in 1976 to a minus three-tenths of 1 percent in 1980. Savings fell as inflation raised marginal tax rates so high it didn't pay to save. By 1979 and 1980, investment was declining, inflation had driven up the replacement cost of business equipment, but the tax laws mandated such slow writeoffs for the purchase of new equipment that many businesses were using up capital every year rather than replacing it. Little wonder that workers' productivity fell in '79 and '80 -- the first back-to-back years of decline in postwar history -- and that housing, steel, autos, and our basic industries were in a slump.

In 1980 auto industry unemployment was over 20 percent, five times higher than in 1977. Between 1978 and 1980, steel workers' unemployment more than doubled; machine workers' unemployment nearly doubled. And between 1979 and 1980, unemployment among electrical equipment workers rose 57 percent and for construction workers, it rose 37 percent.

America was sinking, losing our can-do spirit and our stature as world economic leader. So, we began with a commonsense principle: Government must remove the burden of excessive taxes and restore opportunity to people.

We designed a program to take America in a new direction. And then we fought for and won: a 25-percent tax rate reduction for everyone who works and earns; tax indexing to keep government from using inflation to profit at your expense; a new capital cost recovery system, shortening depreciation schedules to encourage modernization of plants and equipment; estate tax reductions for family farms and small businesses; a reduction in the marriage tax penalty; an increase in the child care tax credit; deregulation of banking, allowing a higher rate of return for small savers; and new incentives for IRA's and Keogh contributions -- the best collection of incentives for progress since the administration of John F. Kennedy. But even with this entire program in place, taxes average about 19 percent of gross national product. That is still marginally above historic levels.

As I said, the American people are not undertaxed. Over 90 million Americans will file personal income tax returns this year at rates about 25-percent lower than 4 years ago. A family with a 1984 income of $15,000 is paying $281 less in taxes than if our rate cuts hadn't passed. A family earning $30,000 is paying $914 less. And wealthy Americans are paying a higher share of the total tax burden than they were 4 years ago.

Our critics complained our tax cuts were unfair. This was after they fought the idea of any tax cut when we made it a major issue in the 1980 campaign. They also tried to do away with the third year of the tax cut and do away with indexing, which doesn't help those in the top tax brackets at all, but does help working families trying to keep from being pushed into those high brackets. Some people have labored so long at making government bigger, they've developed a knee-jerk addiction to tax increases. And every time their knee jerks, we get kicked. [Laughter]

Now, I majored in economics, but I never appreciated, until the great hue and cry over our program, how true it is that economics is the dismal science. When the shaky economy really started to falter in July of 1981, many blamed it on our program. Well, the trouble is our program hadn't even been adopted yet. We were still operating on the same budget we inherited. Our tax cuts and budget savings were not passed until August of 1981. The first tax cut didn't become effective until October of 1981, so that made it only one and a quarter percent for the year, and the full tax cut didn't go into effect until 1983.

Nevertheless, a sizable body of politicians and economists were ready to pronounce judgment on our program early on -- in one case, very early on.

In August of 1980, before I was even elected, my current opponent said of our plan to reduce income tax rates across the board that: ``It's . . . based on a 2-cent theory. Every leading economist rejects it . . . and for good reason . . . it is obviously, murderously inflationary.'' That's right, he said it was inflationary. I would have thought he should've known better how to recognize policies that are inflationary. [Laughter]

Lester Thurow, an economist often seen and quoted, said in October of 1982 just before recovery began that: ``The engines of economic growth have shut down here and across the globe, and they are likely to stay that way for years to come . . .'' That's right, he said years.

John Kenneth Galbraith, also in October of 1982, said, ``We have . . . an unprecedented experiment in economic policy. It has failed.'' That's right, he said it failed.

And permit me to quote my opponent one more time. In December of 1982 he said, ``. . . at most, I can only see a modest or anemic recovery coming as a result of the recent declines in interest rates and some pickup in consumer buying.'' And that's right, he said anemic. Well, again, I would have thought he should have known better how to recognize anemia.

What actually happened? From strength in autos and construction and renewed leadership in high technology, from a rebirth in productivity and surging investment to the creation of 6 million new jobs, America is in the midst of the best economic expansion in over 30 years. And, my friends, you ain't seen nothin' yet.

Now, also, 1 year ago we put into place a real job training program that substitutes the make-work policies of the past with training for real jobs in the marketplace. Over 700,000 people have been served by the Job Training Partnership Act, with a job placement rate in excess of 70 percent. Next year we'll do better; we'll serve a million people.

What we're seeing all across America, but what too many old guard economists still won't acknowledge, is the power of incentives beginning to create an American renaissance before our very eyes.

Commitments to the venture capital industry increased sixfold from 1980 to 1983. Business investment has risen almost 26 percent during this recovery, faster than any postwar recovery and more than double the rate of any recovery since 1958. The U.S. Patent Office records indicate that there have been, on average, about 6,000 more patent applications filed each year of this administration than during each year of the previous administration. New business incorporations set a record last year and will probably do so again this year. And private research is growing strongly, with the computer industry's 20-percent annual increase in research and development expenditures for 1983 to '85 leading the way.

Just as many failed to foresee when I was growing up how dramatically the invention of radio would transform our economy, so are many today ignoring how technological breakthroughs in computers, robotics, biotechnology, and information processing will revolutionize our economy with new jobs, products, and progress in the future. Our economy is no longer, as some believe, an old and quivering thing in the industrial age; it's being transformed into a strapping young adolescent, flexing its muscles in the increasingly advanced technological age.

Our secret weapon is the power of productivity. We've seen efforts to expand productivity pay off right here in Detroit for your automobile industry. New leadership by management, with aggressive, wise investments in new technology, together with strong, spirited cooperation by labor, have enabled Chrysler to expand productivity from 10.2 vehicles per employee per year in 1980, to nearly 20 vehicles per employee this year.

Other currents of progress are gathering momentum and will make our economy and society stronger and more successful. Three years ago, we established a National Commission on Excellence in Education, then went forth to lead a grassroots crusade to restore in our schools needed discipline, new emphasis on basics, merit pay for teachers, greater parental involvement, and standards of excellence that again sought the best for America.

Schools and communities all across America responded, and we're beginning to see the results. After 20 years of steady decline, scholastic aptitude test scores have risen 2 of the last 3 years, and this year's jump is the biggest in 21 years. And that's just a start. Young Americans are trying harder, they're doing better, and they can and will do better still. Their improvement should give us confidence that our work force will continue to grow more productive and more competitive in a fast-changing world.

And something else is invigorating America, giving us new hope for our future. Those guiding values of mind and heart and spirit -- our faith, our love for family and neighborhood, our belief in peace through strength, and our commitment to protect the freedom which is our legacy as Americans -- all have gained a new sense of worth in our lives, all are infusing America with the bounce of confidence and optimism that many thought we'd lost.

This new spirit is not only rewarding in its own right; it, too, helps our economy, helps our productivity, when men and women from labor and management come together in the workplace with renewed confidence in what they can do by pulling together as a team. In 1980, with Washington in charge, all they ever did was fumble. Well, in 1984 the people are back in charge, and America is scoring touchdowns again. And I think the world is about to learn that once we Americans put our minds to it and are provided the proper tools and equipment, we can outproduce, outsell, and outcompete anybody, anywhere in the world.

Now, all of us know our work is not yet done. We must help all those in agriculture and in the industries not back on their feet to participate fully in the expansion. And I pledge to you that I won't rest until every American who wants a job can find a job.

But my message to this nation is: We can meet this challenge together, and we will, because all of us are creating something new and very much better than before. Not only are Americans working again, America is working again.

We see what progress opportunity is bringing, and so we know that for our future nothing less than an American opportunity society will do. But we won't create those opportunities until we simplify our tax system to bring yours and everybody's income tax rates further down, not up; extend the full benefits of IRA's to spouses working in the home, as well as those working outside the home; pass enterprise zones legislation to restore distressed areas such as you have here in Detroit; couple enterprise zones with a youth opportunity wage to help teenagers learn skills and escape dependency and get on the economic ladder; go forward with initiatives to help public housing residents purchase their dwellings and take on the responsibility of home ownership; make America's educational system a great center of leadership for excellence; and summon all our skills and determination to push back the frontiers in space, technology, and science.

Everything that we've done, everything we mean to do, is to give the American people opportunities to make this great, free nation, greater and freer still. And that's why the choice in 1984 is so clear, because my opponent's policies would take us off the path toward an opportunity society and put us back on the path toward defeatism, decline, and despair.

My opponent, who opposed our tax program, said it would be murderously inflationary -- before inflation went down; said there would be no recovery -- before recovery began; and then said recovery would be only anemic -- before the strongest economic expansion in 30 years; and now says there's no denying that the deficit must be reduced with tax increases. Well, forgive me, but judging from the record of those who are philosophically or constitutionally opposed to what we're doing, we might be better off if we consulted astrologers about what the deficit will be in 1989.

But there are two things we do know that are not a matter of prediction: First, my opponent is committed to large spending increases and a tax increase equivalent to $1,800 per household, and, second, those policies, which he has supported all his political life, gave America an economic hangover that we must never, ever suffer through again.

The differences and the choice for the future can be summed up this way: He put his faith in more power for the Government; we place ours in more opportunity for the people. He sees America wringing her hands; we see America using her hands. We see America -- or he sees America divided by envy, each of us challenging our neighbor's success; we see an America inspired and uniting for opportunity, all of us challenging the best in ourselves. We believe in knowing when opportunity knocks, and he goes out of his way to knock opportunity.

I believe that we've all worked too hard, come too far to go back to those unhappy days of Washington controlling our destiny. But if we believe in ourselves, stick together, set our sights high for growth and, like our Olympic athletes, go for the gold, then nothing can hold us back. America will be a rocket of hope shooting to the stars.

Thank you for welcoming me back to Detroit, for giving me this chance to speak with you. And thank you for what you're doing to make America the source of all the dreams and opportunities she was placed on this good Earth to provide. God bless you all.

Mr. Johnson. [Wesley R. Johnson, president of the Economic Club of Detroit] Thank you, Mr. President.

The President. Thank you.

Mr. Johnson. Now comes the hard part. We'll start the question-and-answer period with questions submitted from the audience. Mr. Fisher will be our moderator.

Mr. Fisher?

Mr. Fisher. Mr. President, the first question, of course, would be about the automobile industry, being in Detroit. The question is, 4 years ago when you successfully ran for the Presidency you said you wanted to help the auto industry. During an interview last month, you suggested the auto unions should show wage restraint and to aim at higher industry productivity. It appears the UAW and General Motors have achieved that goal. Now, what happens to the remainder of that equation, extension of voluntary restraints on Japanese autos until the yen-dollar misalignment and other problems with Japan are resolved?

The President. Now, the last part there -- on the restraints?

Mr. Fisher. Yes, on voluntary restraints.

The President. Ah, I missed the last couple of words there.

Well, I think for one thing, and some figures -- I know I threw a lot of statistics at you in there, but I think also when the auto industry's unemployment was up where I said it was, today it's down to 6.4 percent. And, yes, I guess I made a general statement when I knew the negotiations were going to begin. But with our fight against inflation, I just hope that everybody in the marketplace will keep inflation in mind and observe some restraint to make sure that we don't turn that tiger loose again.

Now, with regard to the voluntary restraints, they were put on by the Japanese industry itself and, believe me, totally voluntarily. Their Minister Abe had come here, and we met in the Oval Office and talked, and I told him our situation as frankly as I could, and what we were up against, and he went back, and very shortly they announced their willingness to have a voluntary restraint on imports. We never at any time asked for that. And we've since made great progress with Prime Minister Nakasone, who I believe is sincerely dedicated. He's got some political problems, I can understand that -- [laughter] -- with his legislature, and he is working hard.

We just had meetings recently in which we have probably increased the beef exports to Japan more than double over the next 4 years. And they again, without any urging from us, they modified somewhat, but held their voluntary restraint. And I'm hoping that they will continue. But I don't happen to believe in protectionism. There are times when necessarily, to let some industry that has been overwhelmed by some happening, let it get back on its feet, but for the most part I believe in free and fair trade because protectionism is a two-way street.

And again, I believe with what our industry is -- the automobile industry is doing, and the product they have -- I think parents out there ought to argue with their young people when their first car time comes along and they start looking at foreign brands, because I think we're making better than anybody's making.

Mr. Fisher. Thank you. Mr. President, what was it like to meet Mr. Gromyko? Were your talks constructive? Do you think you could become friends?

The President. I'm having an echo or something up here that gives me trouble, Max. I'm having awful trouble with this writing, too. [Laughter] Oh, what was it like to meet Mr. Gromyko, were my talks constructive, and do I think we could become friends?

I don't know whether we could become friends, or whether that's important, but I think the talk was very constructive. And all of us in Washington are very encouraged by the outcome of those talks. And we made it very plain: We don't like their system; they don't like ours. We're not out to change their system, and they better not try to change ours. But we are the two superpowers, and between us we could, if we got careless, we could destroy the world.

But by the same token, if we decide to stand together on some issues that should be of interest to both of us, namely, reduction and hopefully elimination of nuclear weapons, we can save the world. And I think that they've gone home with a recognition that we're looking at them realistically but, at the same time, we are ready to join with them in approaching this principal problem of runaway armaments in the world.

Mr. Fisher. I'm going to give you the last one personally.

The President. Up here I hear better.

Mr. Fisher. Yes. Who are you rooting for in the World Series? [Laughter]

The President. That's an unfair question. [Laughter] I'm supposed to be President of all the people. [Laughter]

I know why he's asking that. You see, years ago I was a sports announcer, and I was broadcasting, mainly, the Chicago Cubs games. And I was broadcasting them in 1935 when the Chicago Cubs set a record that still stands in all of baseball. The only mathematical chance they had to win the pennant was to win the last 21 games of the season, and they did it. But you can imagine that that buildup all that way, that there just had to be a psychological letdown after they had done that, and so Detroit beat them four games straight. [Laughter]

Well, thank you all very much for all of that, and I'm sorry -- I think I talked too long. I was wanting to do more questions, but I guess we've run out of time. Thank you all very much.

Note: The President spoke at 12:45 p.m. in Hall C at Cobo Hall. He was introduced by Max Fisher, a member of the board of directors of the Economic Club of Detroit.

Following his remarks, the President attended a reception for members of the board of directors of the club.