Remarks to the House Republican Caucus on the Budget Deficit

March 21, 1984

The President. Well, Jack and Bob, I want to thank you very much for this opportunity and making it possible. I've come down here to talk to you about our $150 billion downpayment and try and -- if I can -- express the importance that we place on it, how essential I think it is that we all stand together in this particular time. And I would like to commend at the same time, Bob Michel, Trent Lott, and Silvio Conte and Barber Conable and Del Latta, and their colleagues in the Senate for our coming together as we have on this $150 billion downpayment -- working together. And we did have consensus on this.

I think we have to remember with all that's going on where we were 3 years ago: the inflation rates, the interest rates, the economy that had faltered so badly. Everyone seemed to think that when the bottom kind of fell out a little further in July of 1981, that that was the recession. They're forgetting a little bit that some of us campaigned in 1980 in areas where employment -- unemployment, was over 20 percent. I remember being castigated by some because I referred to the situation then as a depression, not a recession. And when they took me on and said that technically it wasn't, if you will remember, I said that a recession is when your neighbor's out of work, and a depression is when you're out of work. And there were a lot of the people I was talking to who were out of work.

But I promise you that in this we're not going to play politics with the economy, and we're not going to take risks with our national security in what we do with regard to the defense budget. But today, the change that has come about in these 3 years, I've had some letters recently from well-known, nationally known economists who have criticized me for continuing to refer to what we have today as an economic recovery. They said, ``We are past recovery. This is economic expansion.''

Well, the latest figures for this quarter are 7.2-percent growth in the gross national product. There has never been a recovery in the seven preceding recessions since World War II of that level. But at the same time, I don't think it's overheated. And I think it's a solid one because it has been based on solid practices. It hasn't been a quick fix with flooding the money market and artificial stimulants of spending programs and which we know seven times previously resulted in another and worse recession just 2 or 3 years after the one that we had come out of.

Our package calls for $43 billion in domestic savings. It calls for $57 billion in defense savings. This is in authority -- I'm not talking, now, the outlays; I'm talking the budget authority. And it calls for $48 billion in increased revenues. Now let me hasten to say this does not represent a tax rate increase. This is finding provisions in the tax laws and some loopholes which we would be justified in closing even if there were no deficit to be handled.

But this is a downpayment, $150 billion over 3 years, at the same time that the Treasury Department is going forward with a study on how we might be able to simplify and broaden the tax base, and even be possible to reduce the rates at the same time; a tax program that possibly could catch that $100 billion in revenue that is now being denied us and that is legitimate revenue because it is people who actually owe the tax and are not paying it at all.

I will tell you now that if anyone sends to me the tax package of this $150 [billion] and has not given us at the same time the spending cuts, I will veto the tax package.

Now, we believe that all these things are possible. But we also believe that then, with the Grace commission reports that we have -- and, incidentally, some of those Grace commission recommendations are responsible for some of the cuts that are in here, including in defense. As a matter of fact, Cap Weinberger and his team cut $16 billion out of their proposed budget -- some of it was Grace commission findings that they found could be utilized -- before he delivered the first budget to us, and which our group now -- the Republican group of Representatives, Senators, and we of the administration -- he had cut that much, and then we further reduced that, but with his -- he was a part of the negotiations, and he agreed that we could do it. Now, we have to say it does slow, somewhat, what we think is necessary for national security, but not to the point of an unavoidable -- or to a risk that we can't take. It is not that much of a risk and with the necessity of getting control of the deficit.

Now, let me, if I can, just touch on something else with this deficit since it seems to be becoming a campaign issue already. And I'm a little astounded at how far out on a limb some of our opponents have gotten with this campaign use of the deficit. Because are we to forget that for more than 40 years they have dominated both Houses of the Congress, and for more than 40 years, deficit spending has been a deliberate part of their policy? How many of you, when you tried to protest, heard in the past that we didn't have to worry about the national debt, we owed it to ourselves? -- and that deficit spending was necessary, and a little inflation was good for us, also; it maintained prosperity? And those of us who kept saying, ``It will one day catch us, and the bottom will fall out,'' well, it has happened.

Now, about half the deficit, the estimated big deficits, were the result of that further dip, plus what had gone before in the economy, because half of the deficit is cyclical. Now, that is the part that is shrinking right now. The other half is structural, and you and I know it. It was built into government policy. You didn't have to each year increase spending or anything, it was automatic. And it'll be automatic and keep on going unless we do something about it.

So, once this downpayment gets in place, that doesn't mean we're finished. No. We're going to go to work. And I hope it'll be a bipartisan study of what can be done to make the structural changes that must be made to let us control deficits and deficit spending.

How can they claim that we are the ones that seemingly want deficit spending, when for 2 years we've been asking for a constitutional amendment to prohibit deficit spending by the Federal Government, require a balanced budget, and they are the ones who are opposed to it? Now, I still believe that we should have that amendment to the Constitution. Granted, we would have to point to a year of implementation that we could foresee with what we could legitimately do without causing chaos and disruption in bringing government spending down to the level of government revenues. And that we will proceed with.

And with the 2,500 recommendations of the Grace commission -- they will be a part of our study, what we're going to try to do. But let me just point out some things. Recently, the figures were thrown at us that poverty has increased. And the period they chose to say that it increased was from 1979 to 1982. Well, we weren't here until 1981, and in 1981 we were still using their budget and their spending policies because you come in in the midst of a fiscal year.

The truth of the matter is we started an increase in the number of people living in poverty back in the late sixties and early seventies when the Great Society, the War on Poverty actually was implemented and got underway. And rather than decreasing poverty, it increased the number of people that were declared in poverty.

Nineteen seventy-four -- and many of you participated in it -- there was a budget process that was passed for us to get control of the budget. And from 1974 when that was passed until 1981, the deficits totaled $560 billion, on top of the almost -- well, that made the almost trillion dollars that was here when we came.

Now, I'm saying all of this to you, and I know that you agree because -- --

Q. Mr. President, the mike has gone off.

The President. What?

Q. Did somebody touch the mike out there? I think somebody touched the microphone.

The President. You mean this went off?

Q. Yes. Is it back on?

The President. Well, I'll just talk louder, in case -- there it is! [Laughter] All right.

Well, again, I think if we all stick together and if we recognize that we're not being unfair, that we're feeding more people today who are hungry than have ever been fed, we're providing more food stamps, we are sending more young people to college -- 40 percent of the people going to college today are going there with the aid of Federal grants, loans, and so forth. In other words, all of this talk about fairness and unfairness, they who want to cancel -- as an aid to curing the deficit -- want to cancel the tax indexing -- and they say that would be fair -- well, maybe you'd be interested in knowing that we figured out what would happen.

The tax penalty in canceling the index would only amount to 2 percent additional tax for people at $100,000 a year. It would amount to a 9-percent tax increase for people at $10,000 a year. If you're already in the upper brackets, indexing doesn't do anything for you.

We're trying to help the people that are down there. The cuts that we've made in many of the social programs have been cuts in administrative overhead. I came here with the knowledge, as previously having been a Governor, that there were a number of the social reforms here in which it cost the Federal Government $2 to deliver $1 to a needy person. And these are the things that -- where we have been trying to cut and trying to bring some sense into government. And it's what we're continuing to try to do.

More people are getting food stamps today than have ever gotten them. But there are 860,000 people who were getting them that are not getting them because we found they morally had no right to them. Their income was above 150 percent of poverty.

So, we've got a story to tell, and I hope that we'll get out there and tell it to all of the people in this campaign. And it's a story in which 12.4-percent interest -- or inflation rates, are not fair to people at the bottom of the economic ladder. But I think that -- not completely out of it, but 3 percent, and right now, only around 4-percent rates are a little more fair than 12.4. And this is what we've been achieving here.

We have a solid recovery on its way. Let me just give you a couple more figures. I know I've gone over my time here, and I have to let you go, but let me just tell you that the automobile industry, the industry as a whole now has 83,000 more people working than were working in that industry when we came here in 1981. Their unemployment rate, believe it or not, in that industry is now only 5.9 percent, as contrasted to the general average of 7.1.

We could go on with the figures of that kind, of the housing starts, with the fact that on the cyclical part of the deficit, the further help that we're going to be -- that in the last 15 months, we've put 4,900,000 more people into jobs in this country. Now, that hasn't had time to have, really, the impact -- only the first ones for the first year -- but from here on, to have almost 5 million more people, many of them no longer wards of the government, not getting unemployment insurance and food stamps and things of that kind, but working and paying taxes, we can see that the cyclical part of the deficit is being taken care of.

When we, last August, told you that it looked like the deficit was going to be a little over $200 billion, and now it comes down to about 185 -- do you know how that happened? We couldn't even project back then what the recovery was going to be, and then we found out that we got $15 billion more in tax revenues from the reduced rates than we had anticipated just a short a time ago as August to January.

So, if we will stick together on that other part -- the structural reforms that are needed -- I think we'll find it's not only good government, it's good politics.

Thank you very much.

Note: The President spoke at 12:05 p.m. in the Foreign Affairs Committee Room of the Rayburn House Office Building.

In his opening remarks, the President referred to Representatives Jack F. Kemp of New York and Robert H. Michel of Illinois.