Radio Address to the Nation on the Federal Budget Deficit

 

December 17, 1988

 

My fellow Americans:

 

Today I want to ask you a question: Will you help me to reduce the Federal budget deficit and then balance the budget once and for all? No, I'm not asking you to pay more taxes. I think you already pay plenty, and those trying to tax away more of your hard-earned money should be ashamed of themselves. Instead, what I need is for you to help me fix a budget system that has broken down.

 

First, let me describe the problem, and then I'll tell you what we can do about it. The record is not good. In all but 8 of the last 56 years, the Federal Government has run a deficit, and every dime of deficit spending over these many years has been mandated by Congress. You see, under the Constitution, only Congress can spend money; the President can't appropriate a penny. Up until 1974, the President did have one effective way to control spending: He could refuse to spend money appropriated by Congress. And this ability to impound funds was routinely used by such Presidents as Thomas Jefferson and Franklin Roosevelt. In fact, three of my predecessors -- Presidents Kennedy, Johnson, and Nixon -- used this power each year to reduce Federal spending by between 5 and 8 percent. During my Presidency, that would have reduced the deficit by billions each year, but all that changed in 1974.

 

In the 1974 Budget and Impoundment Control Act, Congress stripped the President of his ability to refuse to spend funds. Let me try to describe the effect of this change. Suppose the rules of hockey were changed and the goalie was removed from the game. Would you be surprised if hockey scores quadrupled? Well, since Congress changed the budget law, Federal spending has in fact quadrupled, and it has come right out of your pocket. And under the new rules, the deficit has taken off. For a quarter century, the average annual Federal deficit was just 0.7 percent of gross national product. Then in the mid-1970's Congress changed the rules, and since then the deficit has been running five times higher than before.

 

The verdict is in: The current system does not work. Can you imagine if a head of a household or a business were forced to spend every dime that was budgeted, even if savings were available? Well, that's the situation the President is in now. All he can do is ask Congress to take back funds it appropriated. Since 1982 I have requested Congress to take back unneeded funds more than 460 times, and 83 percent of the time they refused. Most of the time they didn't even bring it up for a vote. They simply said: No, spend it all.

 

During my two terms, Congress appropriated over $100 billion more on domestic spending than I requested. But this is typical. Between 1976 and 1987 -- a period spanning three Presidencies in which we ran a deficit each year -- Congress spent an average of $30 billion per year more than the President requested. The budget system simply has no control and no internal discipline.

 

And that's the problem. Now, here's what must be done. To solve the deficit problem, it is essential that we restore the constitutional balance and repair the system. We need to give the President greater authority to limit spending -- that means the line-item veto, which 43 Governors have -- and also greater authority for a President to return unneeded funds to Congress. Congress must reform its faulty budget process. And we need a balanced budget amendment to the Constitution so the Federal Government does not spend more than it takes in. After I leave office next month, I will campaign for these reforms. So, today I'm asking you to join me in this vital campaign for the future by making your voice heard. If we achieve these reforms, the deficit will be ancient history in no time.

 

What won't solve the problem is raising taxes. In fact, over the last 40 years the record is this: On average, every $100 of new taxes has led to $158 of new spending. And since 1981, yearly tax revenues have gone up sharply -- by some $375 billion -- but that hasn't balanced the budget because spending has gone up $450 billion. And less than a third of that went for defense. Yes, we've heard a lot about cuts, but by their terms, even when spending goes up, they call it a cut. For example, Medicare spending, which we've been charged with cutting, in fact has doubled.

 

The only way to reduce the deficit is by limiting the increase in spending, and that's what my last budget will do. Without touching Social Security or raising taxes, our fiscal year 1990 budget will reduce the deficit by some $35 billion, more than meeting the Gramm-Rudman target. You see, economic growth will increase revenues by $80 billion without new taxes. Just by holding spending increases to less than $80 billion, we will reduce the deficit and put ourselves on track for a balanced budget by 1993. And with your help that will be done.

 

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

 

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