Radio Address to the Nation on the Federal Budget and Tax Reform

March 23, 1985

My fellow Americans:

April 15th is fast approaching -- that dreaded deadline each year when we must turn our attention from jobs, finances, and families to the business of government and the taxes we pay to cover its bills.

I'm sorry to tell you that many of those you elected to keep watch over government's expenditures and to keep your taxes down have been hard at work since we submitted our budget doing something else: They've been promising special interest groups -- not to save your tax dollars, but their spending programs.

Let me give you some cold, hard facts. If Congress doesn't enact the level of budget savings we've proposed, we'll add nearly three-quarters of a trillion dollars in additional red ink over the next 3 years -- a crushing mortgage on America's future. But that ocean of red ink will not result from a deficit of tax payments. Even after cutting your personal tax rates, the Federal Government still takes away about 19 cents of every dollar America earns and produces -- the same as before we came into office.

Moreover, reducing those rates has stimulated economic output and led to a bigger tax base and greater tax revenues than almost anyone anticipated. So, if Congress wants to increase revenues further, it must put aside all talk of tax increases, put tax reform on the front burner, and reduce personal tax rates as low as possible so we can free America to challenge the limits of growth.

With revenues rising faster than expected, it's clear that the deficit problem is not a problem of taxes, but of spending. But don't believe the drumbeat of propaganda that blames defense spending for government living beyond its means.

Our bipartisan effort to rebuild America's defenses only began 3 years ago after more than a decade of neglect, while the Soviets surged ahead with the greatest military buildup in history, adding countries to their empire with the ease of a thief plucking apples off a tree.

Fifteen years ago our combined domestic and defense spending amounted to only 20 cents on every dollar of gross national product -- one-fifth less than today. Had spending not then soared out of control, today we would have nearly a balanced budget, far less national debt, and no threat to our current prosperity. But Federal spending didn't get off the track because of defense. We're spending less on defense this year than my predecessor predicted he would spend in his last budget. We're spending less on defense as a percentage of the Federal budget and our total economy than we did 15 years ago. And our budget calls for us to spend 2 cents less per dollar of the gross national product next year than we did in 1970.

Spending is zooming for only one reason: The domestic budget is still bloated with waste and unnecessary programs. Even after adjustment for inflation, nondefense program spending has almost doubled since 1970. Maybe it's time you asked Congress some questions of your own; for example: Why won't the Congress stop or cut back its $4.6 billion revenue sharing program that disburses money to communities, when the Federal Government has no revenues to share and local governments are in better fiscal shape? Why won't Congress stop subsidizing Amtrak, which costs taxpayers $35 per passenger every time a train leaves the station? Why won't the Congress stop subsidizing wealthy families earning up to $100,000 a year with thousands of dollars in annual student loan subsidies? Why won't the Congress stop subsidizing a few restaurants, bars, country clubs, and similar businesses with half a billion dollars in loans, when every other small business has to pay the full market rate of interest? And why won't the Congress stop its export subsidies to a handful of corporations which account for less than 2 percent of U.S. exports?

Yesterday I invited the Senate leadership to the White House. We had a candid and constructive meeting, and I'm confident that we're coming closer to a meeting of the minds. We agreed that uncontrolled spending poses a threat to our expansion, and we agreed that we must face that threat together and face it now.

For my part, I made clear that in further reduction in defense, vital weapons systems -- either conventional or strategic -- must not be touched, period. The deficit can and will be brought down, but not by raising taxes, which would just torpedo growth and make the deficit worse, or by gambling with America's security when the Soviet Union is every bit as aggressive, expansionist, and dangerous as before.

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

Note: The President spoke at 12:06 p.m. from the Oval Office at the White House.