Radio Address to the
Nation on the Economy and Soviet-United States Relations
My
fellow Americans:
The
bears and the bulls were out on Wall Street this week with some of the sharpest
drops and gains in stock market history. So, what did it all mean? Now, there's
a question that the experts and analysts will be pondering for a time. But on one point I've been certain all week, and it's a point
that's been buttressed by some good economic news released on Friday.
This news shows that the growth of our gross national product during this last
quarter was a remarkable 3.8 percent. So, too, the inflation index showed only a two-tenths of 1-percent rise, which if worked out to
an annual rate would be only a 2.4-percent inflation rate. What this shows is
that our predictions about the direction of the economy this year have been
right on: strong growth with a slight rise followed by an encouraging drop in
inflation.
Now,
coupled with the declining interest rates we saw earlier this week, all this
speaks to the point I made after Monday's drop in stock prices: that the
American economy is sound and strong. Our historic, even astonishing, growth is
continuing -- the creation of nearly 14 million jobs, hundreds of thousands of
new businesses, rapid rises in family income -- all adding up to 59 months of
economic expansion, the longest peacetime expansion in our history. Though the
market has been volatile, let's remember, if corrections or fluctuations do
occur, that as long as consumers do not overreact by losing confidence our
expansion will continue.
Let's
also remember a critical reason for this expansion was our decision to reduce taxes
in 1981. I'm sure many of you know it was very difficult getting this through
the Congress, although with your help we achieved it. And despite all the
predictions of high inflation from our opponents, our tax cuts not only fueled
our expansion, they had a benefit that surprised some people: Far from reducing
the amount of money the Federal Government collected in tax revenues, over the
long run, those collections actually increased due to the economic activity
sparked by the tax cuts. In fact, tax revenues from 1981 to 1987 actually went
up $255 billion. Of course, this meant we had enough to pay for our defense
buildup and some left over to help get our deficit spending problems under
control. But instead of using new revenues to cut the deficit, the Congress
decided to spend even more.
In
1982, for example, TEFRA, as it was called, the Tax Equity and Fiscal
Responsibility Act, raised taxes by $131 billion over 4 years, with Congress
pledging to slash spending by $3 for every dollar of increased revenue.
Instead, 4 years later, taxes had gone up the expected $131 billion, but
spending over this same period had risen by $244 billion. In fact, every dollar
in increased revenue since 1980 had been matched by $1.25 of increased
spending.
Now,
3 days ago, I called on the congressional leaders to meet with me early next
week to outline our deficit reduction plans. And as we move toward a budget
settlement, it's good to remember that there's a fundamental difference here in
But
the simple fact is that all sides must contribute to this process if it is to
succeed and if a package is to be developed that keeps taxes and spending as
low as possible. This effort must also address the flipside of our twin deficit
problem. I mean, here, our trade deficit, a problem that would only be worsened
by protectionist legislation. So, let's keep the stock market healthy and
sound, and let's do it by avoiding protectionist legislation and by keeping
taxes and spending down so we can keep interest rates and inflation rates low.
As
prominent as the news on Wall Street was this week, I'm sure you are also aware
that Secretary Shultz and my national security adviser, Frank Carlucci, were in
Until
next week, thanks for listening, and God bless you.
Note: The President
spoke at