Radio Address to the Nation on the Federal Budget and Executive Salaries

January 7, 1989

My fellow Americans:

On Monday, I submit to Congress my final budget. It's a responsible plan which cuts the deficit without touching Social Security, weakening defense, or reducing benefits to the needy. And the best news is that this budget proves it can be done without raising your taxes.

Our growing economy will, in the next fiscal year, produce $84 billion in new revenues with no increase in tax rates. Since the whole economic pie is expanding, the Federal Government's slice grows along with the private sector. Raising taxes would be the surest way to kill the economic goose that lays the golden eggs. So, I leave as I came: dead-set against any new taxes. And even if there were a tax increase, history shows that Congress would almost certainly spend the additional money. It wouldn't be used to reduce the deficit; it would just mean that you had to pay for an even bigger government. And now, with an estimated $84 billion in new revenues coming in, we can both reduce the deficit and increase Federal spending.

By combining new revenues with previously scheduled reductions and savings in other areas, priority programs will grow by nearly $50 billion. There are more funds for air safety, fighting crime, housing the poor, and the war on drugs. Funds for AIDS research and prevention is increased by 24 percent. And money to clean up toxic waste goes up by a fifth. We also increased funds for the science and space program and for basic biomedical research. And student-aid funds are increased again, bringing it to a level 83 percent higher than where it stood in 1980.

Real defense spending is increased by 2 percent. This is a small increase, but an important one -- the price of peace and security for America. Through strength we achieved greater realism in the U.S.-Soviet relationship and breakthroughs in arms reduction. Our defense budget will enable us to continue on this path. Let's remember that despite the internal reforms in the Soviet Union, they are modernizing their weapons at a rapid pace, spending a far larger share of gross national product on weapons than the United States does.

Spending on Medicare and Medicaid will increase by $10 billion in the next fiscal year. But if the past is any guide, the headlines will claim we've actually cut funding. Well, 'tain't so. In Washington, when spending goes up less than had been projected, they call that a cut, even through more of your tax dollars are being spent than ever before. With Medicare, we've simply limited the increase in payments to providers of services. There is no effect on the people who receive the benefits.

So, my fiscal year 1990 budget provides for the needy; does not raise taxes; and by controlling the growth in spending, reduces the deficit next year by nearly $70 billion. This not only meets the Gramm-Rudman-Hollings deficit reduction target, it reduces the deficit even further and puts us on track to a balanced budget and a modest surplus by fiscal year 1993. This budget is a realistic program which protects the working families of America, provides adequate support for those who depend on government, and helps assure America's prosperity in the years to come.

I've often spoken of the rising incomes Americans have enjoyed in recent years, but one group lags behind. According to a new report by the bipartisan commission on Federal salaries, real pay for top-level government jobs has fallen by 35 percent since 1969 due to inflation, while private sector pay has outpaced inflation. So, my budget includes higher pay for vital positions, ranging from judges to scientists to elected officials. This increase is still less than what was lost to inflation. Even after this raise, the real income of a circuit court judge will be 19 percent less than in 1969.

The cost of these increases will be absorbed in the budget without slowing progress in the deficit, and we'll be getting something important in return. When salaries are too low, it's hard to attract and keep America's best in government. Federal judges are leaving the bench in record numbers, partly because they're paid less than junior members of some law firms. The National Institutes of Health that fight cancer and other grave diseases have vacancies for senior researchers that have been empty for 10 years due to poor pay.

Also troubling is that some officials, particularly in Congress, now supplement their income with special-interest honoraria payments. My support for the pay increase rests on my firm belief that such payments undermine the integrity of our government and should be abolished. We must be willing to pay for excellence in government or risk a government run only by people of wealth or by those beholden to special interests.

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

Note: The President recorded his address on January 6 in the Cabinet Room at the White House for broadcast at 12:06 p.m. on January 7.