Remarks and a Question-and-Answer Session With Reporters on Foreign and Domestic Issues

December 7, 1984

1985 Federal Budget

The President. I have a brief statement here.

In the first few weeks attention has -- or in the past few weeks, I should say, the attention has been focused heavily upon ways to control spending. And that's important, but let me try to put this in a broader perspective.

In the November elections, the people made clear that, first and foremost, they wanted to continue policies that would assure strong economic growth. So, the people voted against tax increases, and they were right. And they voted against wasteful government spending, and they were right. They voted for the expansion of opportunity for all, and that's what we mean to achieve with policies that will control spending, simplify the tax system, improve America's productivity and competitiveness, so that we can keep this great nation of ours moving forward.

End of statement.

Q. Mr. President -- --

The President. No, I'm going to start back a little ways here and move forward. I've done it the other way and never got back there.

Yeah, Lou [Lou Cannon, Washington Post].

U.S.-Soviet Negotiations

Q. Mr. President, since we've last seen you there's been a number of statements from the Soviets about arms control and desiring peaceful relations with this country. How do you assess the prospects now for a genuine arms control agreement? And are the Soviets just talking, or do you think they really want some kind of agreement?

The President. Well, Lou, there's no way for me to make a judgment on that until we get in conversation with them. I was very gratified when both Gromyko at the United Nations and Chairman Chernenko publicly made statements in which they expressed a desire to see the elimination of nuclear weapons -- the same thing that I've been talking about for quite some time. So, we're willing to get into discussion with them on those subjects.

Tax Reform

Q. Mr. President, on Secretary Regan's tax package, why haven't you embraced that so far? And are you going to actually propose your own tax simplification package from the State of the Union address?

The President. No. That, like the present budget proposal that you've all been writing and talking about, is a working paper. And we have a Cabinet process, and we also have a process of consulting with our own leadership up on the Hill. And I think that it is probably the best and most complete study of the tax system and the best proposals for changing the tax system that has ever occurred within my lifetime. And it is presented, however, as a broad package in which, obviously, there are points that you want to look at. But we've been so busy with the immediate problem of the budget that we have just set aside for a bit the actual consideration of every phase of that tax proposal.

But I think that it is basically a fine proposal.

Kuwaiti Airline Hijacking

Q. Mr. President, the hostage and hijacking situation in Kuwait at the moment: What exactly is the United States Government doing about it, and do you think that the Iranian Government is at all collaborating with the hijackers?

The President. First of all, we are in touch with the heads of state of other countries, and we have, through other diplomats, been as much in contact as we can be. I have no evidence that I can lay out here that there is actual collaboration of the Iranians. I have to say, however, that they have not been as helpful as they could be in this situation or as I think they should have been.

Q. Will we do anything? Will we take any action? Will the United States take action?

The President. There isn't anything that I can discuss further about details in this whole tragic situation.

Tax Reform / Defense Spending

Q. Mr. President, you are saying this is a great tax plan -- and no one expects you to know it, you know, detail for detail -- but you have not come out for it. And until you take that kind of leadership, do you think you will get that kind of support? And I'd also like to tie in, how do you feel about defense cutting, since you have, you know, opened up with the budget situation?

The President. There are only two things in the whole budget discussion, Helen [Helen Thomas, United Press International], that actually can't be changed. One of them is social security and the other is the interest on the debt. Everything else we're discussing in the sense of -- in the context of having a freeze on overall spending; in other words, no increase in spending over the 1945 [1985]\1\ (FOOTNOTE) level. Now, that doesn't mean that, point by point, through all the government programs, there may be some increase, there may be some cut, there may be some eliminated, and a number that would actually be frozen at the same level. All of this, right now, is in the Cabinet process. We have made our first study on that.

(FOOTNOTE) \1\White House correction.

With regard to the tax program, again, as I say, when you look -- that's a voluminous document, and you don't just automatically look at the index and say, well, I'm for it or agin it.

I basically, from what I've known and the reports that I've had from the Secretary of the Treasury, I believe that this is the finest proposal that has ever been offered. This doesn't mean that there aren't certain options in there on specific items. But I think it is -- it does simplify, it does reduce for most individuals, and it does broaden the base in the sense of getting some people or some businesses back to paying more of a fair share rather than leaving it to someone else.

Q. And how about the defense cuts?

The President. What? Oh.

Q. Are you going to go for any defense cuts?

The President. On defense. Well, as I said, that's included. But, again, I can't get into the specific details within that budget process because of the state that it is in right now. But I'd like to point out to you that without cutting back on our need to improve our defenses after years and years of neglect, the Defense Department itself, on its own, has found ability to cut its original request -- its 5-year program of buildup that they launched in 1981 -- they have cut that by $116 billion to date.

And as soon as the Secretary is back from the NATO meetings, we'll be talking. Some of that has been made possible by the cut in inflation, but a lot of it has been done by improvements in management, things of that kind. So, we will discuss with him, then, as we're discussing with everyone else, each particular -- we'll discuss his defense budget to see what he can contribute.

Meeting With Bishop Desmond Tutu

Q. Mr. President, Bishop Tutu has just come out and said that while you had a good meeting, that your policies have worsened the situation for blacks in South Africa. Would you, at this point, consider changing your policies and consider at least the idea of economic sanctions or of some harsher measures against the regime there?

The President. Well, Andrea [Andrea Mitchell, NBC News], we had a good meeting, and he made some suggestions and proposals. We had an opportunity to explain to him the things that we have been doing in what I like to call quiet diplomacy. I think many of them were a surprise to him. Some of the things that he suggested are things that we're already doing. But there were others that our State Department is taking heed of and we're going to look at very carefully.

I have to disagree with him on the fact that the situation has worsened. It has not. We have made sizable progress there in expressing our repugnance for apartheid and in persuading the South African Government to make changes. And we're going to continue with that policy.

Q. But the regime has become more repressive, and the arrests have increased. Would you consider any kind of economic sanctions? And do you feel that your policies have, at all, given credibility to that regime?

The President. I know that there has been a surge of violence here and there and that has resulted in violence from the other side. We regret this. But, as I say, I think that the policy we're following -- and it wouldn't be quiet diplomacy anymore if I started talking about things openly -- but we have made solid progress, and we want to continue doing that.

Q. Mr. President, it's not just the Bishop, as you know, who's been trying to put pressure on the United States Government to change its policies. There's been growing pressure from elsewhere in the international community. And I think a lot of people might be wondering how the United States can justify dealing with a nation that does not recognize something so basic as the concept of racial equality.

The President. Maybe some nations can't because, as I say, if you're practicing quiet diplomacy, you can't talk about it or it won't be quiet anymore. And I have always believed that it is counterproductive for one country to splash itself all over the headlines, demanding that another government do something, because that other government then is put in an almost impossible political position. It can't appear to be rolling over at the demands of outsiders.

We are working -- for example, many people are critical and some of the protests and the demonstrations here have voiced disapproval of American investment in South Africa, of American companies that are in business there. Well, this is based on ignorance when they say this. The simple truth is that most black tribal leaders there have openly expressed their support in American business investment there, because our American businesses go there and observe practices with regard to employees that are not observed by South African companies.

This is a source of employment where there is fairness where there is no discrimination in these American concerns; where they have jobs with opportunity. American business has spent over a hundred million dollars so far in education, in training, in management, in business, in things of that kind, in entrepreneurship. And for those who are criticizing, it's just that they're ignorant of that, and they don't know how much gain has been made for the blacks in South Africa that we're interested in helping.

1985 Federal Budget

Q. Sir, two questions of fairness on your prospective budget cuts. Republican leaders say they've told you that unless you include some defense scaleback, they can't sell it on the Hill, because it would not be perceived to be fair. And secondly, government workers complain that when you ask them to take a 5-percent pay cut -- with a mean average working income of government workers of $24,000 -- you are asking them in a nonrecessionary time to do something that other Americans don't have to do.

The President. They're wrong about that other Americans don't have to do. We just thought in approaching this and making that suggestion about taking a pay cut -- it starts with me -- that we're doing something that has been done in a number of major industries in the United States. Coming out of the recession, labor renegotiated their contracts, and labor took cuts to help those industries in which they were employed get back on their feet, get back in business again. Is it fair for those who are employed by government, at a time when the deficit spending has become such a crisis that everyone is calling it the number one problem -- the deficit -- that government employees should be immune from the same thing that the other workers in America have done to try and help the economic situation?

The whole thing -- our plan of the budget cuts, of what this request that we are talking about, the tax simplification program -- is all aimed at ensuring continued economic growth, because we're not going to solve our problems, we're not going to solve the deficit problem without continued economic growth. And that's what all of our policies are aimed at doing.

Q. What about the other part, sir, that they will not -- the Republican leaders -- be able to sell your other cuts if you don't scale back defense?

The President. Well, we know that the image that's been created of the Defense Department -- if all of you, hopefully, will headline the news that the Defense Department has already made $116 billion in cuts, maybe the people will change the image they have somewhat of an extravagant Defense Department. But we know that that's important. We know that it's important across the board, to see that everyone participates in trying to achieve this freeze. And so, we will be sitting down with Cap. But again, as I say, I'm not going to get into specifics on this, because it's still in the process.

Q. Senator Goldwater wants to kill the MX missile.

The President. I haven't had a chance to talk to him about that yet, but I wonder if what he isn't speaking is his resentment of the continued harrassment and niggling at that program that's been taking place in the Congress. That program is essential. It is the first modernized weapon in the strategic field that we have come up with after at least five such new systems by the Soviet Union.

Social Security

Q. Mr. President, you've said repeatedly ``across the board,'' ``fair,'' ``everybody sharing in the burden of the spending cuts.'' How do you justify holding Social Security recipients harmless, other than the campaign pledge that you made under pressure from Mr. Mondale?

The President. Well, again, I have to point out, and none of you seem to pick up on it -- Social Security does not contribute to the deficit. Social Security is totally funded by a payroll tax. If there was a reduction in Ssocial Security outgo, only two things could be done: either you would reduce the Social Security payroll tax or that money would revert to the Social Security trust fund. It would not, in any way, reduce the deficit.

Q. Could you not make a reduction in the rate of COLA's without that happening? There have already been adjustments in COLA's without cutting back on Social Security payroll tax.

The President. Yes, and much of this has been based on the levels of inflation. But again, as I've said, in 1983 -- after being victimized by political demagoguery unequaled in many years, regarding our supposed enmity towards Social Security, finally, having used it successfully in the campaign of '82 -- our opponents quieted their demagoguery and joined us in a bipartisan commission to put a bankrupt program, Social Security, on its feet. And we not only have done that, but contrary to what they said, we've improved Social Security so that the average married couple is getting $180 a month more than they were getting before we came here.

Q. Why are some of your own Republican chairmen in the Senate talking about taking some downward adjustments in Social Security?

The President. As I've said, the process is still going on. And now you're trying to trap me into discussing individual items in this. We'll came back at you when we know what the program is going to be.

Meeting With Bishop Desmond Tutu

Q. Mr. President, Bishop Tutu said that when he tried -- when you had the discussion that you gave him no concrete proof of what constructive engagement has succeeded. And do you differ with that?

The President. Now, what?

Q. Bishop Tutu was asked if you had any policy -- if any of your policies worked and specific examples of constructive engagement working in South Africa, and he said, no, that you had not given any specific examples.

The President. Well, we ran out of time, as a matter of fact, in our conversation, but he continued for another hour with the Vice President and the Secretary of State and others. So, I haven't had a report yet on this continued discussion.

But, no, I did tell him a number of the things and told him the very fact of our private investment and the things that I've told you and what it has meant to those who are employed by those companies over there. I told him also we have a government program we've been spending some millions of dollars over there in education and training -- job training and so forth.

Q. Mr. President -- --

Federal Personnel Levels

Q. Sir, can you make cuts in the large, high-level Assistant Secretaries of Defense and other high-paying jobs like that, rather than cutting back the budget for women and children on nutrition and poor veterans and poorly paid civil servants?

The President. We're not destroying, in anything we're considering, the safety net. And, as I say, the cut in salaries, if this is one of the features that comes into the finished package, it will be across the board.

But I think I would like to point out also that if you compare the executive salary level in government, a great many people have to make a personal sacrifice in order to take those positions, because they are so far out of line with the comparable pay scales and benefits out in the private sector.

Q. But, sir, I mean we have more than we need in those Assistant Secretary-ships -- --

The President. You mean more personnel?

Q. More Assistant Secretaries than we need. I think we could cut those back, because each one of them requires a staff.

The President. I have to tell you, we've had a task force on management that has been operating almost ever since we've been here that has recommended a great many changes and so forth. We're about 75,000 fewer employees than we once had in the Federal Government, and we're going to continue along that same line, up to and including the benefit of the Grace commission.

Federal Budget Deficit

Q. Mr. President, you made a point in the campaign of saying the deficit was going down because of economic growth. Since the election your own advisers have put out figures that the deficit went up by 30 billion. Were you wrong when you made that prediction? And do you still believe the deficit will go down because of growth?

The President. Growth improves revenues; tax increases, tax rates -- high tax rates don't. They reduce government revenues, because they have an adverse effect on the economy. Yes, the fact that we came down about $20 billion between what had been predicted from '73 ['83] to '74 ['84] -- in the '74 ['84] deficit, that was directly attributable to the improved economy, the improved revenues with the recovery, the fact there was a decline in spending for people who had been distressed before, and as they went back to work.

So, growth in the economy -- look at what it can mean. There are 6 million more people working and paying an income tax, hopefully, than there were when we came here in 1980. There are 6 million, roughly 6 million more jobs than there have been in the past. We not only put some of the unemployed back to work -- and you do know the change in the figures as of the month of November, that there has been a decline in unemployment -- but we have also kept pace with the increasing number of people entering the job market. We now have more people employed than at any time in the history of the Nation.

Q. Why did the deficit go up 30 billion after the election, then? What accounts for the new estimates that it's over 200 billion, if it was only 170 in August?

The President. Well, some of the same things, including every year that you continue deficit spending you add that much more to the debt and that much more interest that has to be paid, a very sizable increase in that. So, that's just one of the factors.

But listen, I've used up twice as much time as I'm supposed to in here and -- --

Q. One question, Mr. President -- --

The President. All right, yours is the last question.

Federal Spending and Tax Reform

Q. During the campaign you said that taxes would be a last resort. You've spent the last several weeks looking over the budget and how to come to grips with the deficit. Are you any closer to going to that resort now than you were during the campaign?

The President. Not one bit. I believe that the two things we're looking at -- that tax proposal and the budgeting proposal, when it's finally completed -- are going to be consistent with what we've been seeking, and that is a policy that will stimulate growth at the same time that it will reduce unnecessary government spending. Let me leave you with just one figure: When you ask about puzzles, about deficits going up and so forth, between 1965 and 1980 -- or 1981, includes 1980 -- the budgets of the Federal Government multiplied by 4\1/2\ times to what they were in 1965. The deficit multiplied by 38 times what it was in 1965. So, we think that there is a structural cause of much of the deficit spending, that unless we turn government policies around it's going to continue and is out of hand and will be out of hand.

All right.

Kuwaiti Airline Hijacking

Q. Mr. President, do you know of any Americans who were killed in this hijacking? I mean, do we have any definite information?

The President. Nothing more than you already have. We don't have actual facts as yet. We believe -- --

Michael Reagan

Q. Are you and Michael closer to resolving your differences, sir?

The President. What?

Q. Are you and your son Michael closer to resolving your differences?

The President. Sam [Sam Donaldson, ABC News], I think yesterday Nancy gave you a perfect answer: ``Merry Christmas.'' [Laughter]

Q. Merry Christmas, Mr. President.

Note: The President spoke at 11:30 a.m. in the Briefing Room at the White House.