Remarks and Question and Answer Period Before the American Society of Newspaper Editors.

Mr. President, directors, editors:

Two years ago tomorrow we met in this city at a painful moment in the history of this country and in the history of this administration. I told you then that we intended to profit from this lesson, and I think we have. I told you that we intended to intensify our efforts in behalf of freedom, and I think we have. And I told you then that this Government would not hesitate to take the initiative in this hemisphere in meeting its primary obligations to our security whenever that should prove necessary, and last October we acted to meet those obligations and are prepared to do so again when necessary.

In part, as the result of last October's events, there is today more widespread assurance that both peace and freedom can prevail in the world. And while our vigilance cannot be relaxed, there is a tendency among many of your readers, as well as your writers, to devote more attention to our domestic scene and to the quality of life on these shores, and I think it is very appropriate that we should do so. Mr. Khrushchev has said that the hinge of history would move when the Soviet Union was able to out-produce the United States. Quite obviously, as the leader of the free world, as the keystone in the arch of freedom, as the country--and I am convinced of this more and more--as the country upon which the cause of freedom and its survival in the world and its ultimate success finally depends, I think it most important that we develop for our own people not only a more fruitful and productive life, but that we also demonstrate to the world that a system of freedom offers an example which they can hopefully follow. Therefore, we must concern ourselves as part of the worldwide struggle as well as, because of its own sake, with the efforts to build a strong economy here, to concern ourselves with the fight against unemployment, to concern ourselves with the fight against periodic recessions, ever-increasing, and to concern ourselves, as I have said, with the quality of life here in this country.

Unfortunately, too many of your readers find domestic affairs as baffling as foreign. Government seems too remote, too big, too complex. A tax cut they can understand-but the rest of this year's legislative program seems only a distant blur. They think it is for someone else, not for them; that it is an expense, not an investment; that it could all be cut out, without harm to the economy or the Nation, and it could be done in the interest of helping a tax cut.

It would not be appropriate for me to review at this time the full scope of this year's legislative agenda. It is short, consisting of less than 30 top priority measures. And it is not expensive--inasmuch as their total elimination would reduce next year's $12 billion deficit by less than $2 billion. Instead, I would like to try to bring home the meaning of a few of these programs and to explain why I advocate them so strongly by translating them into the needs of that familiar mythical creation--the average family. I will go even further and place that family in the typical neighborhood in a normal American city.

With the help of the Census Bureau and others, I want to describe to you a precise cross-section of America--a hypothetical subdivision we shall call "Random Village," where the population abides by all the laws, including the laws of probability.

Of its 100 citizens, 6 live alone and the rest with their families. Ten percent of the households are members of a racial minority. The typical family income is $5,700 a year. Nearly half of the families have two wage earners at work.

Most of the families in Random Village are home-owners. They spend their incomes somewhat differently than formerly--partly because their incomes are higher and partly because the prices of the things they buy have changed, some up and some down. Today, for instance, they are spending more on housing, automobiles, insurance, medical care, and the local newspaper. Since the village is governed by the law of averages, this must be a Republican paper. And, according to the Census Bureau, the majority of the reporters are Democrats!

The average family man in Random Village is most aware of the Federal Government around tax time. The proposed tax cut would reduce his Federal taxes by about 20 percent, and the whole community would benefit from this stimulation. If his son wants to look for a job after graduation from school, he finds that his chances are increasingly slim--that unemployment in his age group is twice as high as unemployment among adults. And yet there is, at this time, no Youth Employment Corps to help some of these young men start their lives fruitfully.

If his wife wants to take their vacation by visiting a national park, she knows it will be nearly six times as crowded as it was when she was young. Nearly half the people in Random Village will go swimming this summer--but every year they find more and more of their favorite seashore areas reserved for commercial use only. Only 6 percent of the Atlantic Coast and the Gulf Coast are now publicly owned. They want to hike in the wilderness, but the wilderness is fast disappearing.

Twenty-four of the 100 residents in Random Village are school-age children. A majority of the adults did not finish high school, but they all want their children to finish. In fact, most of them hope their children will go for a college degree, for today only the well educated man or woman is equipped to work in an age of technology or to be a good citizen in an age of complexity. Among the adults in Random Village those with higher educational achievements have a higher average salary as well as a lower rate of unemployment.

Yet of these 24 children, only 16 will graduate from high school, and only 9 will enter college. The other 7, most of whom are college material, will either find college too expensive--$1,500 a year in the local State university, or $2,200 a year in a private institution--or they will find that the college of their choice simply cannot take them. For our institutions of higher learning are caught in a financial squeeze. The postwar crop of babies is approaching college age. There will be twice as many college students in 1970 as there were in 1960. Without outside financial help, our colleges must either raise their rate of tuition or turn new students away.

The people in Random Village may be mythical--but they are also mortal. Only one resident of the 100 will die during this year. Two new babies will be welcomed this year. As a result, the average Random Village resident will call on a doctor five times this year, and on the dentist once or twice. Eleven out of the 100 will have to go to the hospital. And many will wonder once again why we do not have enough physicians, or enough dentists, or enough hospitals. There are no physicians and dentists in Random Village. In the metropolitan area of which it is a part, there are only 9 physicians to serve 10,000 people-15 years ago there were 10 physicians to serve the 10,000 people in that community. In another 10 years, assuming the present trend continues, there will be only 8 physicians to serve that 10,000 people.

This administration has proposed an expansion of our hospital and nursing home facilities, and an expansion of our medical and dental schools which will merely make possible the graduation of enough doctors and dentists and nurses to keep the present shortage from growing worse.

It is an unfortunate fact that, of the 100 people in Random Village, 10 will at some time need treatment for mental illness or behavior disorders. Three can be classed as mentally retarded. That kind of tragic affliction can strike any home in the village, rich or poor, black or white. But much of it could be prevented. In a Random Village in Sweden only one would be mentally retarded.

Much could be cured that will not be cured. At least 1 of these 10 patients may be locked up with hundreds, sometimes thousands, in huge, State custodial institutions in some other city, an unhealthy, unhelpful distance away from their own home and their own friends and their own doctor. This administration's proposals for mental health and mental retardation stress rehabilitation instead of isolation, prevention instead of detention, and comprehensive community centers instead of old-fashioned State asylums. The States and localities cannot afford to do this job without Federal financial assistance.

Nine of the 100 residents of Random Village are 65 years of age or older. In fact, one is over 80. Ninety percent of them will be hospitalized at least once after the age of 65. Compared to the other residents of the Village, they are much more likely to go to the hospital this year and they will need to stay there twice as long. Yet their income is only half as great; and only 5 out of the 9 have been able to buy private health insurance of any kind. And, therefore, we proposed it under Social Security.

Adoption of these new Federal programs would not affect the independence or the vitality of the people of Random Village, any more than the other Federal programs their representatives in Congress helped enact-the programs which are also part of the domestic budget, programs which must be continued.

We must continue our housing and urban renewal programs, for example--because one-fifth of the houses in Random Village are classed as "deteriorated" or "dilapidated."

We must continue our welfare programs-because 1 out of every 8 families in the Village has an income of less than $35 a week.

We must continue our job retraining programs--because roughly one-third of the unemployed in Random Village will be out of work for 15 weeks or more and simply cannot find openings for which they are suitable.

We must continue our efforts against racial discrimination--because the Negro families in Random Village are more than twice as likely to have poor housing; they are likely to earn half as much money; they have only two-thirds as much chance of finishing high school; and they are twice as likely to be unemployed--and neither inn justice nor crime nor disease nor slums can be confined to one group in the Village.

We must also continue our fight against water pollution--because 31 million Americans, including very possibly the people of Random Village, live in communities where untreated or inadequately treated sewage is being discharged into their rivers and streams.

In short, the Federal Government is not a remote bureaucracy. It must seek to meet those needs of the individual, the family, and the community which can best be met by the nationwide cooperation of all, and which cannot be met by State and local governments.

These needs must be met--and to take them out of the Federal budget will only cast them on State and local governments, whose expenditures, debt, and payrolls have all increased many times faster than those of the Federal Government. This figure here on this chart which shows a comparison, the orange line being State and local employment, compared to the Federal executive branch, indicates the tremendous rise in local and State employment rolls compared to the Federal Government. The fact of the matter is that it is many times as much and it should be borne in mind, particularly this figure which indicates that Federal employment since 1952 has varied very little while we have had an extraordinary rise in State employment.

The fact of the matter is, if it were not for Federal aid to hard-pressed State and local governments, the Federal cash budget today would be in balance. The Federal Government is the people, and the budget is a reflection of their needs. As the Nation grows larger, so does the budget, but nondefense budget expenditures are lower now in relation to our gross national product, roughly 7 percent, than they were 25 years ago.

This chart indicates the sharp drop after the end of the Second War. These are Federal payments as a percentage of our gross national product. This indicates that since 1953 the percentage of the Federal expenditures, the Federal payments, as a percentage of our budget, has been almost unchanged in a period of 10 years. In other words, while the Federal budget has gone up, the gross national product has risen in the same proportion and therefore we have had a level line for almost a decade.

There is another aspect to cutting the budget which goes beyond the merits of each individual item, and that is the way in which Federal expenditures, in much the same way as Federal taxes, help determine the level of activity in the entire American economy. This is not some theoretical abstraction but a hard historical fact. We all praise tax reduction because it "releases" money into the private sector--but so do Federal expenditures, through contracts, salaries, purchases, pensions, grants-in-aid, loans, and all the rest. To cut a dollar of expenditures for every dollar of taxes cut would be to remove with one hand the stimulus we give with the other.

Last year, for example, the rate of private inventory accumulation suddenly dropped from nearly $7 billion in the first quarter-a high level due partly to anticipation of a steel strike--to $1 billion in the third quarter. The American economy wavered under this shock, but it did not fall, and the important source of steady strength in the economy at that time was the increasing rate of public expenditures--Federal, State, and local. Had Federal purchases last year been kept on a plateau--as some have suggested for this year, and as was true in 1958--a recession would not, in my opinion, have been avoided, just as it was not avoided in 1958.

In 1958, due to an arbitrarily low debt ceiling limit, there was a stretch-out in governmental expenditures, particularly in the field of defense purchases. We therefore saw defense orders dropping from an annual rate of $23.6 billion down to $16.8 billion, and finally in the end of 1957 to $8.8 billion, which was of course a tremendous shock to the economy and had a marked deflationary impact. Federal purchases, which should have been rising during that period, also dropped--from $51.7 billion to $49.7 billion-and during that period unemployment rose from 4 percent to 7.3. I am not suggesting there were not also drops in the private economy, but if anyone will chart the economy from the summer of 1957 and the fall of 1957 into the winter of 1958 and the recession of 1958, it seems to me there is a very clear evidence that the tremendous drop in Federal purchases in the defense area particularly had a great effect upon the recession of 1958, which had such unfortunate results.

In that year a stretch-out of defense and other contracts, required in part, as I have said, by an unrealistic debt ceiling, caused the lay-off of many workers. Those who lost their jobs and those who were fearful of losing their jobs cut back on their personal spending; retailers trimmed their orders; their suppliers reduced their own payrolls; and so the downturn continued, affecting in the end the incomes which are the basis of most Federal taxes. Therefore, in 1958, as a result of this recession, instead of having a $500 million surplus which President Eisenhower estimated, because of the recession we had a $12.5 billion deficit, the highest in history.

Now what is it we should learn from this experience and also from the experience of 1960? Let us understand, then, that every dollar cut in Federal expenditures cuts even more from our gross national product. A cut of $5 billion now from the proposed Federal budget, as many have suggested, would cause one million fewer jobs by the end of the fiscal year. It would offset all the benefits which the tax cut could have brought by then. And if that lower level of expenditures were maintained thereafter, it would eventually cause not only a recession but an even greater budgetary loss which comes from a recession. I am not saying--let me make it clear to Mr. Royster and others-that Federal spending for the sake of spending is desirable in itself or that our efforts at economy should cease. On the contrary, the budget I submitted to the Congress already reflected cuts of $20 billion from the amounts first proposed.

Expenditures in this new budget, outside of defense, space, and interest, are actually reduced; Federal employment under this budget will not rise in the same proportion as the number of citizens to be served; and every agency in the Government is going to be required to live within its ceiling. Federal spending is not an end in itself. It must be held to reasonable limits that are consistent with the needs of the economy as well as our country, and the risks of inflation as well as recession.

But I am saying that carefully screened and selected Federal expenditure programs can play a useful role, both singly and in combination; that to cut $5 billion to $10 billion, unless the private economy is booming, unless there is a good deal more bounce in the economy that we now have, or unless we are able, by other means, to fill the gap, a cut of $5 billion to $10 billion from the proposed budget would harm both the Nation and the typical neighborhood in it; and that the right way to a balanced budget is to seek first a balanced economy. The tax cuts I have proposed, and the level of expenditures I have proposed, have been carefully fitted together with this objective in mind. And we cannot look at the history of the last 5 years without realizing, regardless of our political views, how important it is that the United States avoid periodic recessions.

So to move from a recession in '58 to a recession in '60 brings not only a sharp increase in unemployment, brings not only massive budget deficits, brings not only an increase in the outflow of gold and dollars. The fall of 1960 saw the greatest outflow of dollars and gold in our history, which was tied directly to the coming recession in the fall and winter of 1961.

With all that experience behind us, it seems to me that we should study with the greatest possible care the role of private taxes in our economy, the role of local, State, and national expenditures, in order to make sure that we take no action out of prejudice or out of ancient views which can tip this economy from its present chances of rising into a downturn. There will be debate as to detail. There will be differences of dimensions and degree, but I think we should get on with the main task of strengthening the American Nation, of opening a road on which all of us can travel to serve in the future as we have in the past, not only as an inspiration to the world but also as an example.

Thank you.

[A question and answer period followed.]

[1.] Lee Hills, President, American Society of Newspaper Editors: The largest number of questions today are on the subject of Cuba. There are a dozen or so asking, sir, if you would give us your views or whatever you have to say about Miro Cardona and his charges that you backed down on a promise for a second invasion, and the other things in his statement.

THE PRESIDENT. Why, I think the Department of State has already made a comment which represents the views of the Government. Dr. Cardona lives in Miami, which is the center, of course, of the exiles, the center of their hopes. I think that a good many Cubans feel that the only way that they can return to Cuba is by military action of the United States.

We, conscious of our obligations to our own people, our own security, our alliances, our responsibilities, as I said, as the chief defender of freedom all over the world, we have not determined that it is in our national interest or in the general interest of the hemisphere for us to launch an invasion. Naturally, that disappoints the exiles, but as the State Department statement said, the foreign policy of the United States, when so much depends upon us, must be made by the United States, and however much we may sympathize with their desire to be free, the United States cannot launch itself into a massive invasion of Cuba without considering the worldwide implications to other free countries and also its effect upon our own position.

Now, as to his charges, I don't think it is necessary to go through them. Quite obviously, nobody in the United States Government ever informed anyone in the Government or outside the Government, Dr. Cardona or anyone else, that we were going to launch, committed ourselves to launch, a military invasion with six divisions. We appreciate very much the fact that a good many Cubans have volunteered for the American Armed Forces. I think that they can be very valuable there. No one knows what the future is going to bring.

But I hope that Dr. Cardona and others will realize that this is not a struggle between the United States and the exiles. It is really a struggle against the Communist infiltration in this hemisphere, and while we may disagree as to what actions we should take to remove it, and while my obligations are somewhat different from Dr. Cardona's, I would hope that it would be possible for us to work together in the general interest. That is the object of this Government. We want to work with Dr. Cardona and all the other Cubans, but we must maintain the control of our policy here in the United States and here in Washington and will continue to do so.

Mr. Hills: I would like to read two others here, also on the question of Cuba. If Castro remains in power for another 5 years, will the United States continue in its refusal to deal with his government?

The second one is: Two years ago tomorrow, Mr. President, you stood here and told us Fidel Castro's days were numbered. You said, "Our restraint is not inexhaustible." You said we must not let "the inter-American doctrine of noninterference conceal or excuse a policy of nonaction."

Now, sir, Communist domination of Cuba is, if anything, more complete than a years ago and is stiffened by Russia. Many Americans believe our policy towards Cuba is indeed one of nonaction. What can you say to persuade them that this is not so? When, if ever, is our restraint going to come to an end?

THE PRESIDENT. Well, I hope our restraint or sense of responsibility will not ever come to an end.

Now, on the general question, since the last 2 years, the United States has taken a good many actions to contain the spread of communism in the hemisphere. A good many nations in the Alliance for Progress, through the Punta del Este Declaration, through the San Jose Declaration, a number of nations have broken off diplomatic relations. Only five continue them with Cuba.

The free world trade has dropped from $800 million to $80 million. The--efforts are being made since the San lose conference to work with other countries to control the movement of personnel in and out of Cuba.

It is quite obvious now to the hemisphere and, in fact, to the world that Castro is only a Soviet satellite. Every survey, every study, every meeting shows a sharp deterioration in the image that he once had as a great nationalist leader. And now he's generally regarded in the hemisphere as having sold out to the Communist movement and having now become a spearhead for the Soviet advance.

In addition, the United States maintains a constant surveillance. We have indicated that we would not permit any troops from Cuba to move off the island of Cuba in any offensive action against any neighboring country. We have indicated also that we would not accept a Hungary in Cuba, the use of Soviet troops against Cubans if there was any internal reaction against Castro. In many ways we have attempted to isolate Cuba and to indicate our determination to continue that policy until Cuba is free.

Now, after we have done all those steps, there are two additional policies which could be carried out. I think that when those talk about Cuba, we ought to say what we want to do. We shouldn't say, "Well, let's do something," or "How long is our restraint going to last?" I would think the two remaining policies are, one, a blockade which of course brings us once again to a confrontation with the Soviet Union, and the other is invasion of Cuba. In my judgment, it would be a mistake to carry out either one of those policies today.

I don't know what conditions are going to bring in the future. No one predicted with certainty what was going to happen last fall. I don't know what is going to happen anyplace in the world. Therefore, I think that we should maintain our strength and our determination, but I don't think that it would serve the interests of the United States or of our allies to carry out either an invasion or blockade under these present conditions.

The United States is responsible for the independence of dozens of countries stretching from South Korea to Berlin. It is responsible for the defense, really, of Western Europe. It is responsible for the major struggle against the Communists in our own hemisphere. For 6 percent of the world's population we carry tremendous burdens. I do not think we can indulge ourselves at this point, if that is the proper word, in concentrating all of our material strength in one section of the world, and be indifferent to its consequences elsewhere.

Now I don't know I don't accept the view that Mr. Castro is going to be in power in 5 years. I can't indicate the roads by which there will be a change, but I've seen enough--as we all have--enough change in the last 15 years to make me feel that time will see Cuba free again. And I think when that happens the record will show that the United States has played a significant role. But for the present, and for a great power which carries worldwide responsibilities, I think our present policy is the right one.

If the American people decide differently, then, of course, they have an obvious remedy. But for now we intend to follow this policy.

[2.] Mr. Hills: Mr. President, we have several questions here on another very sensitive area, maybe one more sensitive than Cuba. This is Laos. I will read just one of these: Does the deteriorating situation in Laos raise the possibility of U.S. intervention? Others touch on possible breach of the Geneva accord. What is the administration's view of this problem?

THE PRESIDENT. I would say the situation in Laos is most serious. Souvanna Phouma who, after all, was the neutralist candidate for Prime Minister, who had the support of the Communist bloc, has now called upon the Pathet Lao to cease their offensive actions in the Plaine des Jarres area and their attack on Kong Le, who is the neutralist commander.

The fact that these attacks continue raises the question of whether the Geneva accords are about to be destroyed, the accords which guaranteed an independent and neutral Laos. We will, I think, have a chance to see in the next few days whether we are going to have a destruction of that accord, whether the Soviet Union and the other signatories to the Geneva accord are going to meet their obligations.

I will say that I think it is a matter of the greatest concern to us now.

[3.] Mr. Hills: The second largest number of questions deal with things on economics, especially on steel, tax cuts, and so on. I would like to read three or four of these. One says: In view of your approval of selected price increases for steel, will you also endorse selected wage increases for the steel workers?

THE PRESIDENT. Well, I said that while I was against an across-the-board increase, that selected price increases up or down seem to me to be responsive to market situations. We have had selected price increases up; now it may be that we will have them down in the not too distant future.

As to the general effect, of course, it represents, really, about a 1 percent price increase for steel products which restores, really, the 1 percent that has been lost since 1959 in the price of steel. It is certainly our hope that this can be absorbed, particularly by the automobile companies, who are making very high profits. The amount in increase in cost to them, we hope, will not be substantial enough to affect their price.

What I am concerned about is not the actual effect, although that is important, but the psychological effect may cause a more general rise in prices which may, therefore, be reflected in additional wage demands. I believe that price stability, as I said in the statement, is the best thing for the steel industry, and wage stability is the best thing for the unions.

Now, I know that there are important editorial interests in this country who really don't feel that this is the President's business. They have never really defined what his business is, but it is not this. I take a somewhat different view of the business of the President in that if there is a wage demand, it has a number of effects upon the public interest. Quite obviously, if there is a steel strike he will be requested to invoke the Taft-Hartley, so the President of the United States must take that action and therefore the President of the United States is in it just to begin with. Then after there has been a cooling off period in the Taft-Hartley, and if a settlement has not been reached, the Taft-Hartley bill provides that the President shah then make a report to the Congress for future action. If we assume that it has been settled, it has an effect upon our competitive position.

The balance of payments in the world is of tremendous concern to the people of the United States. Our trade has to carry, and it has done this notably in every year except one, has to carry at least $1,700 million or $1,800 million expenditure or dollar loss for defense. This is even with the offsets of the Germans and Italians. It has to carry a $700 million foreign aid loss. It has to carry $1 billion of tourist expenditures. So that if we find our competitive position less satisfactory, if we find that our hopes that Europe's costs are going up faster than ours, which has been true in the last 2 years, and that therefore we would find ourselves in reasonable equilibrium in the not too distant future, then I would think that this would affect the public interest. And this would affect our ability to maintain troops overseas and all the rest.

So it does come down to being the business of the President of the United States.

The other point is that I find that when things go badly, it becomes our business. When the stock market goes down, letters are addressed to the White House. When it goes up, we get comparatively few letters of appreciation. But when you have high unemployment, it is because the President hasn't gotten the country moving again.

Now, we have a program, of the kind I described in my speech today, of a tax cut plus a level of expenditures which we believe can offer this country substantial assurance against a recession, and can meet, to a degree, but not completely, some of our problems of unemployment. We find that program heavily contested. We may not be successful. If we are unsuccessful and unemployment goes up and we have another recession, the President of the United States is to blame. So I think it is our business.

I know the steel industry, it seems to me, has acted with some restraint in this case, which I think is very useful. I am hopeful that other companies, particularly in the auto industry, will act with similar restraint, and that the union itself will guide its conduct in accordance with its long-range interest, which is the national interest.

Mr. Hills: There were several other related questions on this dealing with inflation, but here is one that might be rather interesting: Is what we are experiencing now, in view of these selected price increases, what you would call inflation? If not, what and how would you describe what we are experiencing?

THE PRESIDENT. I think that there has been general price stability since '58-'59. As I said in answer to the previous question, there has been a drop in the price of steel of about 1 percent, so while there is an upward movement in prices, nevertheless, looking at it historically, looking at it really from the point of our competition, it has been relatively mild in the last 5 years. This is not altogether good because a lot of it has come from excess plant capacity and a lot of it has come from the automation, which has helped produce unemployment, but in any case, there has been general price stability over the last 5 years.

We would hope that that would continue, and I think the prospects--as long as we have as high a rate of unemployment, as long as we have as high a rate of unused plant capacity, it is our judgment that there should not be a strong inflationary pressure. But if there was a raised price it would be artificial, and I doubt if it could survive the market competition. So that our feeling has been that inflation perhaps is not our primary problem; that the primary problem, perhaps, of the West is deflation, and therefore the combination of expenditures and tax cuts are devoted to that situation.

Now if we get again in this country, strong inflationary pressures, there are obvious monetary restraints that can be placed upon the economy as well as fiscal restraints, which in some ways might help our balance of payments and which in any case, I think, would prevent us from going into an abnormal period.

[4.] Mr. Hills: Here is a quick triple-header on tax cut: In view of the marked and welcome improvement in our economy's performance recently, do you still regard a substantial tax reduction in calendar 1963 as essential? Will you accept a modified tax reduction bill with minor tax reforms to take effect January 1964? Will you accept a ceiling on expenditures at the '63-'64 budget level in order to obtain a substantial tax reduction bill?

THE PRESIDENT. Well, in answer to the question, I would think that--I don't see anything in the economy that would make the tax bill unnecessary. We have provided for a gradual tax cut stretching over 3 fiscal years, and 18 months calendar years, and I still think that that is desirable. It really wasn't very long ago when everyone was predicting a recession in the fall of '62 or the winter of '63. Now we have gone a longer period, we had a recession in '58 and '60, and we have been able to move ahead in 1963. Part of that has been due to some of the reasons which I discussed today. Therefore, I think it would be a mistake not to have the tax cut and I think it would be a mistake to the economy to have the kind of wholesale cuts which would affect very vital programs and which would, also, I believe, have a deflationary effect on the economy. So I am strongly for the tax cut. And I think that the condition of the economy, as the tax cut will not be enacted, if we are successful, until late this summer or this fall, I think that we are fortunate not to have had a turndown this winter or spring, which would have meant that the program we recommended was inadequate.

Now we have a chance of having what I think is an adequate and responsible program tied in with an economy which is in reasonably good health at this time. Now, secondly, as to the kind of tax bill I would accept, the Ways and Means Committee is now working on the matter and I think it would be much better to see what they bring forth. The program that we sent up in our judgment was the best one. We have to see what the Ways and Means Committee brings out.

The last question is a ceiling on expenditures at the 1963-64 budget level. That is two budgets. If we are talking about the budget of this year, we have a $4.5 billion increase in the budget of this year over the budget of last year. A good percentage of that is due, as I have said, to two main items. One was an increase in the interest payments because we refinanced some old debt which, during World War II, was at a much lower rate of interest. That provided a $300 million increase. The second item, and the more important one, was the pay increase for the military, which added to about $1,500,000,000. They had not received a pay increase since possibly '58. Federal employees had received two pay increases, and I don't think we can depend upon them as we do--and we are fortunate to have the kind we do have--and not pay them decently.

And the third item is the space program, which is now under some attack. It seems to me that this indicates a certain restlessness. This program passed unanimously last year. Now suddenly we shouldn't carry out the space program, and then maybe 6 months from now, when there is some extraordinary action in space which threatens our position, everybody will say, "Why didn't we do more?" The fact is that I think while I would expect that this budget would be cut some, I am strongly against the wholesale budget cuts of the kind that have been talked about, $5, $10, and $15 billion. I can think of nothing more ruinous to the security of this country and our economy. And I think that those who advocate it were in many cases the architects of the fiscal and monetary policies which brought us into a recession in '58, a $12.5 billion deficit in '58, the largest outflow in the period of 3 years of gold and dollars amounting to nearly $12 billion, and a recession in 1960. We hope to do better.

[5.] Mr. Hills: Mr. President, will you attempt to cut off Federal aid to the State of Mississippi as proposed by your Civil Rights Commission?

THE PRESIDENT. I don't have the power to cut off the aid in a general way as was proposed by the Civil Rights Commission, and I think it would probably be unwise to give the President of the United States that kind of power because it could start in one State and for one reason or another it might be moved to another State which was not measuring up as the President would like to see it measure up in one way or another. I don't think that we should extend Federal programs in a way which encourages or really permits discrimination. That's very clear. But what was suggested was something else and that was a general wholesale cutoff of Federal expenditures, regardless of the purpose for which they were being spent, as a disciplinary action on the State of Mississippi. I think that that's another question, and I couldn't accept that view.

Now, on the other hand, I think it is important that the people of Mississippi, who are strongly in favor of States' rights, should realize that the Federal Government is putting twice as much money into Mississippi as it is taking out in taxes. Mississippi benefits probably more from the Federal Union, though the people of Mississippi may not agree with this, with the possible exception of New Mexico and Nevada which have large defense expenditures. But Mississippi has, for one reason or another-there is a good deal of money that has been spent there, and there has been a good deal of benefit. I hope that the people of Mississippi would recognize the assets that come with the Union as well as what they may feel would be the disadvantages of living up to the Constitution.

[6.] Mr. Hills: Mr. President, you have been very generous with your time and there will be the final question, although I have only started through the stack: Sometime ago you said you were reading more now but enjoying it less. Do you have any more current observation on American journalism or on your personal reading habits?

THE PRESIDENT. No. I do want to say that I am looking forward to all of you coming to the White House this afternoon between 6 and 7. Mr. Arthur Krock has warned of the temptations there and the seductions which take place in the press in the White House, but I want you to know that we expect that you will all emerge with your journalistic integrity and virtue unmarred!

You will naturally be courteous to the host on all occasions, but it is not necessary that your views be changed. [Laughter]

Thank you very much.