Radio Address to the Nation on the Economy and on National Defense

May 26, 1984

My fellow Americans:

I want to talk to you today about a few elements of America's progress. First -- the economy. We've seen some increases in interest rates in recent weeks, and, of course, we don't like that. But we're not about to panic or be buffaloed by the pessimists who ignore the great progress we've made during these last 3\1/2\ years.

In 1980 double-digit inflation was a silent thief of every paycheck. Today, it's been cut by nearly two-thirds. For the last 2 years, it's been under 4 percent.

I mentioned interest rates. Recently the prime rate climbed from 10\1/2\ percent to 12\1/2\ percent, and that means mortgage rates have also risen. These increases must be laid to fear that inflation is coming back. Well, we're determined to see that it doesn't.

Tax rates have also dropped by nearly 25 percent. If our tax program had not been passed, a median-income family would be paying over $900 a year more in taxes than it does today. And next year, your tax rates will be indexed. From then on, a cost-of-living raise won't bump you into a higher tax bracket. For years, government has used inflation as a silent partner to raise your taxes without having to pass a tax increase and take the heat for doing so. With indexing, you'll be protected against that kind of theft.

So, with inflation down, interest rates still down significantly, and taxes no longer rising, America is moving forward with impressive power. By virtually any yardstick, our economy is coming back. America is coming back. And for the first time in a long time, hope for the future is coming back.

The strength of the economy continues to defy the experts. Gross national product -- the sum total of what our economy produces -- rose 3.4 percent in 1983 and a healthy 8.8 percent in the first quarter of 1984. Back in 1980, gross national product went down by three-tenths of 1 percent.

Jobs are coming back. Nearly 5\1/2\ million Americans found work during the last 17 months -- the fastest drop in unemployment in over 30 years. Today, some 106 million of us are working -- more than ever before in our history. And last year, some 100,000 new businesses started up. That's a 5-year high that means more jobs for the future.

Housing is coming back. Three years ago, even the smallest house seemed completely out of reach. The median monthly mortgage payment shot up from $333 in 1977 to $688 in 1981. During that time, the median price for a home went up by $23,000. Since then monthly mortgage payments have risen only $10. Today, more Americans can afford homes, and more of us are buying homes -- some 10,000 each day.

The auto industry is recovering. Domestic car sales dropped by almost 3 million units between 1977 and 1981. Since then they've increased by 1 million, and they're selling at the fastest rate in 5 years.

Past recoveries from recession were snuffed out by a rekindling of inflation. Well, this time inflation is staying down, and we mean to keep it down. In the last 12 months, the Producer Price Index for finished goods -- one indicator of future inflation -- has risen less than 3 percent. If inflation stays down, interest rates will come down, too, and our economy will keep expanding.

There's another area where America was weak, but is now regaining strength -- national defense. Our ability to deter war and protect our security declined dangerously during the 1970's. By 1979 defense spending, as a percent of our total economy, had reached its lowest level in 20 years. Since 1981 we've begun to rebuild America's security and restore the morale, training, and readiness of our Armed Forces. Our precious freedoms are more secure today than they were 3 years ago.

A stronger economy and greater security are good news, but we still face great challenges. We must eliminate billions of dollars in wasteful government spending. We must make our tax system more simple and fair so we can bring your personal income tax rates down further and keep our economy growing. And we must keep our defenses strong, so the Soviets will decide it's time to return to the negotiating table and work with us to reduce armaments and assure a more peaceful world.

We've made a new beginning. Americans feel prouder and stronger that things are getting better, and rightly so.

Until next week, thanks for listening, and God bless you.

Note: The President spoke at 12:06 p.m. from Camp David, MD.