Gib, would you mind going on the road with me and doing all the introductions? You're a mighty hard act to follow. In fact, I can't remember anyone saying such kind things about me. Oh, there was one time during the campaign. There was a very prominent Democrat who reportedly told a large group, he said, "Don't worry. I've seen Ronald Reagan, and he looks like a million." He was talking about my age. [Laughter]
But Gib Garrow, Gary Nagao, Jan Zook, and Christi Bartlett, my little friend—hi. We met sometime ago in Washington. But I'm happy to be here this afternoon. All of the distinguished ladies and gentlemen here on the platform, the Jaycees deserve a thanks, I think, from all of us, for your incredible outpouring of creative participation in more than 8,000 local communities. You have sponsored programs touching everything from the assistance to the elderly, the handicapped, the mentally retarded, to sponsoring junior athletics, organizing energy conservation efforts, conducting eardiopulmonary resuscitation—200 lives saved just last year alone. And, Christi, I understand the Jaycees have set their goal for raising $21/2 million for muscular dystrophy in the campaign this year. And if they say they're going to do it, they'll do it.
Well, these are just a few of the reasons why the Jaycees have always been a very special group for me. So, I'm delighted to have this chance to meet with you again and here in San Antonio. I know that Texas is first in a lot of things, but I'm glad to see it's still first in hospitality.
Now, you know, I didn't come here today to bear bad tidings. You know, if you're a fisherman, the best day to go fishing is yesterday; that's when they were biting. [Laughter] But that's only true for fishing. The good news I bring is that tomorrow will be better, and for one very good reason. You believe in America and so do I. And I believe that your Jaycee spirit has become the American spirit. It's even making inroads in one of the most remote, protected areas of our country—the Federal bureaucracy in Washington, D.C.
Now, you might have heard a rumor to the effect that we've been suggesting a few changes in Washington in recent months. All we're really trying to do is return to some basic principles which have never failed us when we've lived up to them. For example, only by making government live within its means and restricting its role in our personal lives can we unleash the spirit of individual enterprise so essential to prosperity and the preservation of freedom itself. And the way we're doing this is by changing just one little two-letter word: control by government to control of government.
Now, we've made some progress, but the advocates of a different philosophy are manning the barricades in these puzzle palaces on the Potomac. But let's be clear about where the real credit goes for our progress to date. It goes to that great group of people with a much greater force than our own, the group comprising tens of millions of people, from every profession, every background, every region of this land. They don't consider themselves Democrats or Republicans so much as just deeply patriotic Americans, concerned about their country and determined to save its future while there's still time.
I spoke of them on Inauguration Day, and I'm looking at nearly 10,000 of them right now. You know who I mean. It's the really special interest group in this country—the one that's known as "We the people."
It isn't easy to thank you for all you've done, but I'll try. Back when nearly everyone was still talking about the need for a change, the Jaycees put together a grassroots plan, then went out and made it happen. Just like Thomas Edison said: "Genius is one percent inspiration and ninety-nine percent perspiration."
When your entire membership decided for the first time 30 years to rally around a single political issue—the support of our economic recovery program—millions of Americans followed your lead and sent a loud, clear message to Washington that "Enough is enough!" I think the Congress heard you—which just proves that Washington is still the only city where sound travels faster than light. [Laughter]
But now that you've tasted victory and heard some words of praise and are beginning to feel good, I'd better warn you I have a little favor to ask. Please understand it's strictly in the national interest. I simply ask you this: Are you willing to sit back, rest on your laurels, and retire from action with the battle only half won?
The President. I expected that answer. [Laughter]
I think you want spending reductions that you approved in the bipartisan budget resolution of last month, May 7th. I think you want the 3-year across-the-board tax rate reduction for every American taxpayer-and nothing less. And as I've said before, when Congress passed that bipartisan budget resolution, they took an historic step toward bringing spending and inflation under control.
I've been criticized for saying that spending was out of control. Well, what else describes it? Consider, for example, those programs which have spending increases built into them directly by the law.
In 1967 those automatic spending programs, what we called entitlements, amounted to $57 billion—1967. Next year, they'll amount to a staggering $428 billion, and our elected representatives don't have any control over them. If we do nothing to change these laws, the uncontrollable spending will grow to an unbelievable level of more than half a trillion dollars by 1984.
The food stamp program in 1970 cost 577 million. Today, because of the built-in growth, the automatic growth, that program now costs us $11.5 billion. That is 20 times as much just in these recent years. Federal housing subsidies were $500 million just 11 years ago. Today, they're $6.5 billion, and without adding even one single new subsidy, that sum will jump to over $10.5 billion by 1985—21 times as much as it was 11 years ago.
Now, these programs have truly turned out to be good intentions run amok, budgetary time bombs set to explode in the years ahead. Their effect is to pile an enormous new debt on the backs of our children, heavily mortgage their future for the sake of temporary social cures. Any economic solution which ignores the reforms of this automatic spending program is really no solution at all.
But let me also take a moment to give credit where credit is due. I can report to the American people that this Congress made enormous progress, and for most of what they've done they deserve the gratitude of the nation. In fact, the majority of committees in the House of Representatives have taken the necessary steps which followed that resolution. They then had to take the individual programs that were contained in that single resolution and implement them, and the majority have taken the necessary steps to help us gain control of the excessive spending by reporting out of their committees the changes that we needed.
Now I'm asking those remaining committees not in that majority group and the House leadership to join me in going that last mile. Together we can take those final steps toward a balanced budget in 1984 and save our economy from the roller coaster extremes that have caused the mess we're in.
While much progress has been made, there are too many automatic spending programs that still have not been reduced sufficiently, and without those added reductions, we will have given up just on the brink of a great national victory. Without those reductions, we will have nearly $22 billion of added red ink, an unbalanced budget, and more inflationary pressure in the next few years. But more important, without those reductions, we can't guarantee the success of our economic program, and that would be the biggest tragedy of all.
I'm not here to criticize the Congress. I'm here to say that you and I and the rest of the Nation will support them if they act responsibly and courageously. We'll help them shoulder the burden of taking tough but necessary action. We can succeed only if they finish the job that's almost complete. But if they don't finish the job, America will have merely delayed the day of reckoning, a day which will cause us to slip once again into the terrible quicksand of built-in inflation, high interest rates, and government out of control.
Now, once these critically important actions on which the Congress committees have not taken action—one of them is cutting Federal red tape and wasteful spending by consolidating 83 confusing and duplicative Federal programs into block grants. It's not fair to ask the taxpayers to send their earnings to Washington and then charge them billions of dollars more to have this same money turned around and sent right back to the local communities and the States with strings attached that make it expensive. We can cut out the middleman by putting funds in the hands of State and local governments, where the citizens of America can have greater control.
Now, I want to pause here, because there's something that's been bothering me the last few days. I read a report that the chairman of the Democratic Party says that he would like to kick Congressman Phil Gramm, the coauthor of the Gramm-Latta resolution, out ot the party.
As you know, Phil Gramm has been a tireless supporter of our efforts to restore economic sanity. Controlling spending and restoring economic sanity is not just a Republican issue or a Democratic issue; it's an American issue. And I don't think it's our way to threaten to kick people out of any party for doing what they believe is right.
I can't advise Mr. Gramm what to do, but I want to assure him this: There are millions of Democrats, Republicans, and Independents who are wholeheartedly in support of what he's doing.
Now, cutting the increase in the rate of spending is only one part of our economic program. Government is also taking too great a percentage of our earnings, taking it in taxes. And this percentage must be reduced if we're going to have the incentive we need to increase productivity. And we're not going to have economic recovery till we increase productivity, which means capital investment in American business and industry.
What we've proposed is not just a tax-rate cut to relieve the over-burdened citizenry. In fact, in some ways we aren't proposing a tax cut at all. We're proposing to reduce or eliminate a tax increase that is already built into our system, just as those spending increases are built in—the biggest single tax increase in our nation's history. And it comes on top of the fact that our Federal taxes have already doubled just since 1976. How many of us have been aware of that? In these 5 years, we have doubled the tax burden in this country.
If I could paraphrase Will Roger's line about never having met a man he didn't like, it seems that some in government have never met a tax they didn't hike. [Laughter] We're living with a social security payroll tax that was increased a short time ago and which is scheduled to automatically increase several times over the next 5 years. And these increases have a double whammy. The rate increases, but at the same time the percentage of earnings that the rate is applied to also goes up. Thus, like the graduated income tax, we have bracket creep that penalizes workers whose wage goes up just to keep pace with the cost of living. That tax is now 13.3 percent on the first $29,700 of earnings, and the law already adopted calls for it to go to 15.3 percent of $66,900 of earnings.
Like the budget reforms, we seek a tax package that will help stimulate the economy by providing capital for investment to modernize and expand our industrial machine.
Individuals—even where the husband and wife are both working—have no surplus to put in savings or in insurance. Investors with capital to invest have been driven to tax shelters because of the low after-tax return on investments. There's less money for research and development. The number of patents issued to American companies has been declining for the past decade, while the Japanese patent activity here in America has increased in each of the 53 U.S. patent fields.
Ironically, some of those who helped pass these tax increases of which I've spoken are now the first and largest in charging that our proposal is designed to benefit the wealthy. Well, it's not true. Those who will get the biggest percentage of reduction in their total tax burden will be the lower- and middle-income families. Our program provides incentives so that more people can share in America's prosperity.
Their other charge is that it's too risky to cut tax rates while we're running a giant budget deficit. Well, I hope I'll be forgiven for pointing out they're also the same people who helped create those deficits.
But I'm happy to say there are others in the Congress on both sides of the aisle who have come together in a coalition supporting a bipartisan tax bill coauthored by Republican Barber Conable and Democrat Kent Hance. And this bill is the result of negotiations between the people in Congress and our own administration. It's a good bill. It deserves the kind of support you gave the Gramm-Latta budget proposal.
The principle of across-the-board cuts in marginal tax rates over a 3-year period has been maintained. Now, it's true we moved back from a 30-percent cut to 25 percent over the 3 years for personal income, but this did make possible other tax cuts which I believe will be great stimulants to savings, investment, and increased productivity.
I don't feel that I can accept any further changes even though those who are unenthusiastic about tax cuts generally want to settle for a 15-percent cut in the income tax only over 2 years. In the first place, that built-in tax increase I described will amount to 22 percent over the next 3 years. And our proposal to eliminate that will give at least a small reduction over and above it of what the tax burden is today.
Now, in addition, I believe the third year is important, particularly for small business, which creates 80 percent of the new jobs and which pays the individual tax rather that the corporate tax. Individual entrepreneurs would be able to look ahead and make plans better with the assurance of 3 years of stability in the tax picture.
Now let me say a word about marginal tax rates, rates that we propose to reduce across the board. These, as you know, are the brackets above the base income tax. They dictate how much more of every extra dollar you get—whether from a pay raise or interest on savings or income from your profession, shop, or whatever—must go to government.
In this land, born of the desire to be free, middle-income Americans are being pushed into punitive tax brackets that were once reserved for the wealthy. Not too many years ago, only 3 percent of those who work and earn were in a 30-percent tax bracket. Today a full one-fourth of the work force is paying that marginal tax rate. And when your social security and State income taxes, where there are such, are included in the total tax burden, the average family is facing 40 to 44 percent in marginal tax rates.
No wonder a middle-class family can't find money to put aside and have the means to send their children to college. The worker finds that it's not worthwhile to put in for overtime or try to upgrade him or herself, so productivity drops and we become less competitive in the world market. We must have a change from the practice of tax and tax, spend and spend, elect and elect, and we must have it now.
It's economic nonsense to say that lowering the tax rates will add to our deficits. We've had, as I have pointed out, giant tax increases, and the deficits kept right on increasing, because government doesn't tax to get the money it needs. Government will always find more needs for the money it gets.
By contrast, we find that every time that government has a broad reduction in the tax rates, the boost in prosperity is so immediate that while the taxpayers pay less individually, government revenues go up because of that increased prosperity. And the latest example, not too many years ago, in the early sixties, when John F. Kennedy, against all the advice of the same kind of people who are opposing us now, proposed an across-the-board tax cut, and the result was exactly what we've said. Even government's income in the gross went up because of the increased prosperity.
The Conable-Hance tax bill will give almost three-quarters of the income tax relief to those earning between 10 and 60 thousand dollars a year—three-quarters. They presently are paying 72 percent of the total income tax. In addition, the unjust penalty imposed on married couples where husband and wife are both working will be relieved. Individuals will be allowed to take a deduction of a thousand dollars a year for personal retirement programs, even if they're participating in some pension plan at the present. And of special interest to farmers and family businesses—the estate tax exemption will be raised to $600,000, and of even greater help, there will be no estate tax for a surviving spouse.
Now, this is just a hasty sketch, and I haven't mentioned all of the tax changes for individuals. The plan will also provide incentive, because people don't work just so they can pay taxes. They work to earn more after-tax income. To the doubters I address one question that I've asked over and over again and never received an answer—and they say its inflationary: "Why is it inflationary for you to spend your money the way you want to spend it and it isn't inflationary if government takes it away from you and spends it the way government wants to spend it?"
The Conable-Hance tax tax bill calls for lowering the 70-percent ceiling on so-called unearned income to 50 percent. Capital gains tax will be lowered. And business will get the biggest tax reduction in our nation's history—some $60 billion in depreciation allowances, et cetera.
To those who say we can't cut spending, lower tax rates, reduce inflation, and, yes, rebuild the defenses we need in this dangerous world, I have a six-word answer: "Yes we can and yes we must!"
You know, it was with sadness that I watched someone last night on the TV news suggest that our program was going to destroy America. When someone makes that kind of charge, I have another question to ask: Where on Earth has he been for the last few years? And strangely enough, the answer is right in Washington, D.C., in a most responsible leadership position in government. Inflation rates didn't reach 18 percent because of our program. Nearly 8 million people didn't get thrown out of work because of anything that happened in the last 5 months. Twenty percent interest and 15 percent mortgages didn't begin on the morning of January 20th, 1981.
Those who make such charges want to return to the same old, discredited policies that set off America's economic high fever in the first place. I ask you, if you're better off with the repeated red ink, high taxes, and monster government of the past, then you go ahead and oppose our new program. But if you're ready to try something new, come with us. Lend us your help and commit your lives. Send a powerful message to those people who live in the past and tell them, "No more business as usual and no more repeat performances, because we're going to make America great again."
You know, we survived a great depression that toppled governments. We came back from Pearl Harbor to win the greatest military victory in world history. Today's living Americans have fought harder, paid a higher price for freedom, and done more to advance the dignity of man than any people who ever lived. We have in my lifetime gone from the horse and buggy to putting men on the Moon and bringing them safely home. Don't tell us that we can't be trusted with an increased share of our own earnings.
You know, it's your money, not theirs. You earned it, they didn't. And it's time they let you keep more of it. All over America, people are yearning for the opportunity to produce once again, to save their money and to have saving it mean something, to live without the constant pressures of higher and higher prices. They don't ask for much, just for a chance to make a better life for themselves and their children.
Now, some have accused me of fighting too hard for these reforms and for not wanting to compromise on key principles. Well, to some of these accusations I plead guilty. For too long the government has stood in the way, taking more of what the people earn no matter how hard they are trying to get ahead. Who can blame our people for fearing that they're trapped inside an economy with no bright tomorrows, an economy that has lost its soul?
I happen to believe that our free country was not put on this Earth simply to make a government bigger. Families shouldn't have to work only to achieve survival. America was put here to extend freedom and to create richer and fuller lives for its people, and this is why our administration wants more than anything else to give the economy back to you, the American people.
Nearly a year ago, as I accepted my nomination-or the nomination of my party for President—I asked that we embark on a national crusade to make America great again. I never meant to do that alone. I need your help, the help of every American to lighten the burden of taxes, which are too high, and to stop feeding the government Goliath.
We must complete the task that we set out to do when we voted for Gramm-Latta. Let's remember this: America is not a second-best society. We've never accepted anything that is less than what is right. And we, with our complete economic packages, we have a chance to succeed, a chance-without that full package, however, that we can't guarantee will end the terrible cycle of economic retreat.
If you believe, as I do, that we must end this cycle, then may I suggest that Members of Congress might be interested in hearing from you and a few million of your fellow citizens again now. Why? Well, I regret to report to you that I just learned on the way down here that a few hours ago, while I was flying down, the House Rules Committee, dominated by those who suggest that I'm destroying America, ruled that our package of amendments to correct the failure of some committees to make budget cuts necessary for the success of the program, cannot be submitted to the House on the floor for the Representatives to give a yes or no vote.
It's a sad commentary on the state of our opposition when they have to resort to a parliamentary gimmick to thwart the will of the people. It is in the hands of Congress now to decide which road we shall take, and if we take the right road, once again we can dare to do great deeds and reach for the impossible.
And again I say with all my heart to you, thank you, God bless you.