You know, I've been accused, I know, of being a believer in Norman Rockwell's America; and that's one charge that, as a smalltown boy and a reader of the old Saturday Evening Post, I've always willingly pled guilty to that charge. But looking over your membership leads me to think that many of you are also among the guilty parties. The interests and the readerships that you represent are as wide and ranging as the makeup of our nation itself. That's just another indication of the diversity and the excellence that is so characteristic not only of America but especially her journalistic past and present -- another sign that where freedom prospers, many good things happen.

You know, I'm supposed, I know, to do a little serious business here. And you're probably all expecting me to tie in this point about the benefits of a free press to the benefits of a free market and make a pitch for our budget savings and tax simplification. Now, when did I get so predictable? Well, right after inflation went down, interest rates went down, employment went up, and they didn't call it Reaganomics anymore. [Laughter]

But actually, though, I've noticed that some stories recently suggesting some remarks of mine on taxes, defense, and freedom in our hemisphere have been, well, shall we say, plain and direct. And as I said at the start of my last press conference, we have an obligation now to be as candid as we were last fall when these issues were very clearly debated and, I think, emphatically decided by the people.

And then, too, I think those of you in the press like a little candor now and then, especially if it's emanating from Washington. Seems that 25 of San Francisco's top bootleggers -- this is a little story to illustrate what I've just said about candor -- they were arrested back there in those days of the Volstead Act. And as they were being arraigned, the judge asked the usual question, of course, about their occupation. And the first 24 were all engaged in the same professional activity. Each claimed he was a realtor. [Laughter] And then he got to the last one, the 25th, and says, ``And what are you?'' he asked the last prisoner. And the fellow says, ``Your Honor, I'm a bootlegger.'' And the judge was surprised, but he laughed and he said, ``Well, how's business?'' He said, ``It'd be a lot better if there weren't so many realtors around.'' [Laughter]

Well, just like that bootlegger, this administration can make a pretty strong claim to being straightforward about its aims and views. And business is good because, unlike those realtors, we haven't been shy about where we stand. I think this has something to do with the mandate that we received last November.

You may remember a few years back, all of us were very much in need of some straight talk and decisive action. The economic pie was shrinking, and everybody was arguing about how to cut up and distribute a pie that was getting smaller everyday.

Government had grown too big, intrusive; and it seemed that government was subjecting everything we did to more rules, regulations, codes, and legal or quasi-legal proceedings. We were headed for a society where people spent more time getting around things than they did accomplishing them; where achievements were rare, but complaints many; where nothing functioned, but everything was discussed. Merit and excellence, enterprise and innovation, hard work and reward were being replaced by grievance and litigation, chatter and procedure, and gab and process.

Our whole society was in danger of becoming one massive talk show, an all-day seminar, or an unending court battle. And this was causing havoc within the economy.

Business frequently reacted to competition not by devising a better mousetrap but by filing a lawsuit. In fact, we lived in an era in which if you built a better mousetrap, the Government came along with a better mouse. [Laughter] And some businesses tended to concentrate not on their customers and how to improve for them its products and services but how to manipulate their cash flow or take advantage of inflation or the tax laws and report short-term profits and, ultimately, illusory gains.

Well, much of this is disappearing. But even today, too many businesses don't make decisions on the basis of what the public wants but what the tax code will permit or reward.

On this point, let me mention that during the debate over the Kemp-Roth bill in 1981, we pointed out that a piece of legislation's most important effects were sometimes not easily recognized or quantified, didn't become immediately apparent, that sometimes its very passage, however, can send out a subtle message and create long-term changes in a political or economic culture that are infinitely more important. We said then that in adopting our economic recovery program, especially the tax rate cuts, we would be setting loose forces whose power could not be fully estimated at the time. I borrowed a phrase from George Gilder and called it the X factor: That spirit of enterprise and creativity that is sparked by the knowledge that government was no longer going to monopolize the future and rob hard-working people of their just rewards -- a spirit that could spark not just an economic recovery but an exciting economic expansion.

Well, we saw the X factor do just that. And I hope that you'll keep this in mind as we move ahead during the next few months with the second phase of our economic reforms, especially tax simplification. I also hope that as you see the special interests concentrating on the short-term effects and asking for special dispensations, you'll keep in mind the importance of keeping tax simplification simple. We need to take the long view, to keep in mind what we might call X Factor II or the Son of X Factor -- that long-term change in economic climate that tax simplification would cause and the creative forces it would release.

Just think, for example, what it will mean if that whole army of very talented and shrewd tax lobbyists, lawyers, and accountants suddenly turn its talents and energy to more productive work. Talk about upgrading the work force. [Laughter]

So, I think we have before us in tax simplification a tremendous opportunity to further the spirit of enterprise and growth as well as to complete the greatest deregulatory task of them all: to haul ourselves out of the morass that is the Federal tax code. And believe me, this administration intends to push for passage of tax simplification this year.

I'd like to believe, too, that in our foreign policy we've shown steadiness and consistency. I remember that early in the last term some people were a little bit critical of our emphasis on the danger posed to freedom by totalitarian expansion. But if you'll look at the record, you'll see that, while we didn't underestimate the dangers before us, we were taking very early on a view of things that was basically optimistic.

When Prime Minister Thatcher first visited us in February of '81, I mentioned then that totalitarianism had spent its moral energy and that perhaps, like Churchill at the height of World War II, he could sometimes turn our thoughts to a time of ``bright, sunlit uplands.'' Well, when totalitarianism then was only a distant and tragic memory, I can remember, too, a few months later the reaction of the students at Notre Dame when I suggested that, in a sense, the struggle between freedom and totalitarianism was always biased in favor of the democratic side -- democratic with a small ``d'' -- that the moral worth and elementary appeal of freedom appeals to everything that's great about the human spirit; communism does not.

The tides are running again in the cause of freedom, but this doesn't necessarily mean the whole world has grown less dangerous. And that's why our position in the arms talks in Geneva is critically important. So, too, our defense buildup and Secretary Weinberger's budget proposals are critical to the success of those talks, indeed, to the safety of the world. Nothing could endanger us more than a perception in the East that America, after making so much progress, was suddenly losing her will to keep the peace and negotiate from strength. And that, in a few words, is the importance of the upcoming MX vote.

The Soviets will be following the vote on the MX with keen interest. And the signal to them will be unmistakable. America will be seen as united and ready to negotiate if the MX moves forward or returning again to vacillation and weakness if the MX fails.

And, so, too, our commitment is to those who are struggling for freedom around the world. That's particularly true in Central America where a democratic revolution in Nicaragua was hijacked by a small cadre of Marxist-Leninists. They are totalitarians. They share an all too familiar obsession with personal power, and they hold to a prideful and corrupt desire to rule and dominate the lives of others. We owe those who oppose these totalitarians the best assistance that we can give them.

Freedom is on the march. It's an exciting time to live and to live here in Norman Rockwell's America and all across the world.

And I'm going to quit with the monolog because they've told me that if I do, I can have a few minutes to take a few of your questions which I would like to do very well. I may be sorry after saying that but -- [laughter] -- --

Q. Mr. President, Mr. Stockman said this morning that he found a lot of good things in the package passed by the Republicans on the Senate Budget Committee last night. Would you be willing to accept some moderation in the defense increases as part of a total package that came out of Congress?

The President. I've seen the general statement made in the press. I have not yet had time to look at the -- in detail -- what it was the Senate Committee came up with. So, I don't know what it is they've called for with regard to the defense budget. But I'd like to call your attention to just one thing about the defense budget, where it is different than anything else. I know over the years we've been accustomed to seeing Congress, anytime they needed money for another program or some favorite of theirs, to say, ``We can get it from the defense budget.'' And that's how we got to the position we were in in 1980, where half our airplanes on any given day couldn't fly for lack of spare parts or pilots, where ships couldn't leave port in the Navy because they didn't have enough noncommissioned officers left on board. And we started out to do something.

Defense budget isn't something that you sit down, as you do with some other programs, and say, ``Well, here, let's spend so much or let's reduce so much.'' It's determined by what the other fellow's doing. What do you need? And you can't look at the dollars; you have to look and say, ``Okay, if we must reduce, which of these things can we do without? What should we do away with, and what will that do to our national security?''

But I'd also like to point out that we have been conscious of the elimination of waste and fraud in the Federal Government, undue extravagance. Because right now our request for the 1986 budget is $26 billion less than our own projection for that budget 2 years ago. Congress didn't do that, we've done it.

We've done it with management improvements; we have done it with the reducing of inflation. And when you see those stories or even print some about $400 hammers, let me point something out that hasn't been noticed. Those figures were true. But that's what has been going on. We're the ones that are providing those figures because we're the ones that are finding the $400 hammers and doing something about it. And there have been hundreds of indictments, some imprisonments. There have been millions and millions of dollars, hundreds of millions of dollars in rebates made to us because we have been finding these things. And that's why, right now, our projected budgets are lower than the 5-year projected budgets of the previous administration.

And, so, I want to look very critically at what it is that someone there in the Budget Committee thinks we can do without. Have they actually specified something or are they just saying you can't spend as much money as you have listed?

Q. Mr. President, Secretary Gorbachev is of a different generation than his immediate predecessors, perhaps more pragmatic and worldly and less theological. You see all those private, high-level reports that, of course, we don't see. Do you have any reason to believe that he is fundamentally different from his immediate predecessors?

The President. Well, I don't think there's any evidence that he is less dominated by their system and their philosophy than any of the others. But it isn't true that I don't trust anyone under 70. [Laughter]

I think he has spoken out there to his own people about improvements in the economy there, particularly is he noted for advocating, you might say, more private venture in the agricultural section than the present system of government farms. And I look forward to dealing with him.

I think what is most evident, and I believe that this will be reflected in him, is that the Soviet Union is in a different frame of mind than they've been in the past: That they are back at the negotiating table on arms reductions because they recognize a hard, cold fact, and that is that the United States isn't going to unilaterally disarm in the face of their military buildup.

And now that they know that they have to compete with us with regard to security needs, I think they've got a healthy respect for our technology and our industrial capacity and that they, I believe, are really going to try and, with us, negotiate a reduction of armaments.

That has never been done before. There have been agreements like the SALT agreements that only limited how fast you could increase. But this is the first time that they, themselves, have said they would like to see the elimination of nuclear weapons.

Ms. Mathis. One more quick question.

The President. Oh, dear. I should come over to this side. I'm on that side all the way.

Don Hanrahan, of Sport magazine. I have two questions, Mr. President. Georgetown going to repeat, and what are the chances of the Chicago Cubs making it to the Series? [Laughter]

The President. Well, now, I have to tell you I have a healthy respect for Georgetown because I remember when one of your magazines came and asked for a cover picture of me standing between their coach and Ewing, their star player. And I looked at that cover. It looked like I was sitting down. [Laughter]

And then one of your people said to me while I was holding a basketball between these two -- one of them said, ``Why don't you act like you're taking a shot and he's pretending to block you?'' And I said, ``What do you mean, pretend?'' [Laughter] But I wouldn't count them out. But then, I was a sports announcer too long to make predictions.

In that sports announcing, I also broadcast the Chicago Cubs games. And I was broadcasting something that still lives in the record books. It's never been equalled since. And that was when the Chicago Cubs only had one mathematical chance of winning the pennant, and they had to win the last 21 games of the season to do it. And the final series was with the team they had to beat for the pennant, and they did it. They came through straight, all 21 games. And it was quite an exciting experience. And then they lost 4 straight to Detroit. [Laughter] I've always said that I think, having been in athletics myself, it was the letdown after that other achievement that they couldn't get back up there. But it's also led me to hesitate to predict when they'll win a series. [Laughter]

Well, you tell me that's all I can do. Well, I'm sorry. I should have cut the other remarks short. But thank you all very much.

Note: The President spoke at 11:32 a.m. in Room 450 of the Old Executive Office Building. Susan K. Mathis was Deputy Director of Media Relations.