Remarks to the Senate Republican Caucus on the Budget Deficit

March 21, 1984

I have to explain something, confess to something, here, that I came around to the wrong side here where I was supposed to sit, and was directed over to this side, but coming in this short aisle, I realized that if I came directly this way, I had to turn left. [Laughter] So, I did it backward.

But I've come here and asked for permission to talk to you this morning -- and I appreciate this opportunity -- on the so-called downpayment that we have come together on, some of your colleagues and ourselves, and the importance of it.

As you know, in the State of the Union Address, I had asked for a possibility of a bipartisan group from both Houses of the Congress that we could get together, and without polarizing or making it an election issue, that we could come to an agreement on a downpayment -- called a downpayment because we realize that there is nothing that we can do, right now and in this short span, to completely resolve the ongoing deficit problem. But that doesn't mean there aren't things that we can do over the long range, looking to a date possible when we will have a balanced budget. And that's why I continue to hope that we can convince everyone of the need for a constitutional amendment that will make a balanced budget mandatory.

It seemed that we couldn't get the cooperation we sought in trying to come to that bipartisan position. So, with your leadership -- Howard Baker, Ted Stevens, and John Tower, and Pete Domenici, and Bob Dole, Mark Hatfield, Jake Garn, and Paul Laxalt -- we did, in a series of meetings, move to and come to agreement on this plan which would call for $43 billion over a 3-year period in savings in the domestic side of the budget, $57 billion in budget authority in the defense budget, and $48 billion in increased revenues, but without a tax increase as to rates. We believe that there are loopholes, there are provisions in the tax law that, in some instances, say, are unfair generally, or some can take advantage -- unintended advantage of them. And in looking at these, we believe that this sum of money was possible.

Now, we know that there are others. Your colleagues on the other side of the aisle, who want -- or profess to want -- a reduction of the deficit, but they would put the major emphasis on defense and increasing taxes and increasing tax rates.

We believe that this is a good package. Let me just say that -- I have to say that I believe the cuts that we're proposing in defense will mean a slowdown in what we're trying to accomplish. But I don't believe it's unacceptable -- that it isn't enough to overcome the need for us to deal with this deficit problem.

Now, I know that we're hearing all sorts of things about the deficit, and I think it's wonderful that suddenly after all these 40-odd years in which our opponents had the majority in both Houses of the Congress, and during which time we virtually without exception had deficits, literally as a matter of policy -- that they have now decided that we should share and that the deficits are ours. Well, we don't want them. So, what we're going to try to do is get rid of them.

I think that as an issue, it's going to be rather difficult for those who have, as I say, participated deliberately in a policy of deficit spending that accounted for virtually a trillion dollars in national debt before we got here, to now turn around and say to those of us who have been asking for reductions in spending in these last 3 years -- and have only gotten about half of what we asked for -- to now say that we are responsible for these, when, at the same time, we are the ones who are asking for a balanced budget amendment, and they are the ones who are resisting that.

But I do hope that we can be bipartisan to the extent that there will be well-meaning legislators on the other side of the aisle who see the necessity for getting this downpayment. And then, as I indicated a moment ago, that there is further distance to go -- then I believe that we must seriously study the structural changes that have to be made in government in order to come to that day of balanced budget.

About half of the deficit, this vastly increased deficit, came about because of the added dip in the recession that took place in July of 1981 -- 10.8-percent unemployment and so forth. The other half was structural. Now, the half that was due to the deficit [recession] is going away. It's going away because I have been hearing from some very noted economists who have contacted me on their own to tell me I should stop calling it an economic recovery. They said we have passed the recovery stage; we are now in economic expansion. And some of the figures certainly bear that out -- the most recent one, the flash estimate 7.2 percent for this quarter of growth in the gross national product; what has been happening with unemployment.

I just received some figures yesterday. The automobile industry, which was in such dire straits when we came here in 1981, has added some 83,000 more employees working today in the automobile industry than were working in 1981 in that industry when we came here. Their rate in the industry now of unemployment is 5.9 percent, which is well below the 7.1 percent national average. But there are figures -- all of these things -- the retail sales, the personal income, the housing starts -- everything indicates this recovery that we're having. So, that part, that half of the deficit is being taken care of.

It is up to us now to face up to the structural, built-in causes of deficit and look toward a long-term change in that structure to where we can have government under control. Now, I know we want to run and say, ``Stop the presses'' or ``I have a story that'll crack this town wide open'' or something if I say what I'm going to say, and I will, and that is: I've dug in my heels on taxes. I want you to know that if -- first of all and this third part of the downpayment, the $150 billion downpayment -- the $48 billion in added revenue -- if an effort is made and is successful enough to reach my desk, that attempts, first of all, to get that without keeping the promise for the spending cuts, I will veto. I will veto also if there's an effort made to increase rates.

But I will say at the same time, if when we have finally brought government down to the percentage of the gross national product that government is taking, and we believe ourselves and can honestly say this is the minimum -- this is as far as we can go, and this is now the cost of government if we're to do the things that are required of us -- and if that figure then is still above the percentage of gross national product we're taking in revenues, then I would be the first one to say we would have to adjust to meet this standard of government. I happen to believe that there's a good chance that will not be necessary if we do what we should do with regard to shrinking the cost of government.

So, I think I've covered the point here, except that I believe, in this year particularly, it is absolutely essential that we appear as -- the group of us, your leadership and ourselves -- that we appear united in our determination to get this package and stand together. And I think it will benefit all of us very much in every way. It will not only be good government; it will be good politics.

So, I know that we're going to have a chance to visit a little bit, so I'll sit down. I've said enough.

Note: The President spoke at 11:24 a.m. in the Old Senate Chamber of the Capitol.