Remarks and a Question-and-Answer Session at the National Press Club on the Nation's Economy
THE PRESIDENT. It was indeed a good omen when, back in 1974, I came here and made a speech and then later became President of the United States. I hope the same thing doesn't happen to Jerry Falwell. [Laughter] He has a place in the pulpit is the reason—separation of church and state. [Laughter]
I consider this to be a very important message, because 3 weeks from now the American people face a critical choice, a choice with historic consequences for America and indeed the entire world. I want the American people to focus hard on those consequences of the election between now and election day. I want every voter to get answers to the important questions about each candidate—three important questions: How does he intend to build a stronger economy; how does he intend to ensure a more peaceful world; and how does he intend to create a more just society here at home?
I'm taking up these questions in a series of nationwide radio broadcasts. I offered a broad answer to the first question on Sunday. I described the kind of economic future our country must build, and this afternoon I want to give a more extensive report, a more thoughtful report perhaps, on the same subject.
First, I want to describe what is happening to our economy right now.
As you know, we and other nations around the world have recently been shocked by OPEC oil prices, which more than doubled in just 12 months. This has been a very difficult and painful period of high inflation and unemployment, particularly painful to some Americans who have, in their own families, suffered most.
Fortunately, our Nation has been able to withstand this blow. The economic outlook has now brightened. We see the beginnings of recovery. We see a reduction in inflation, an increase in the number of jobs, a decline in the unemployment rate. I'm confident about our future, not simply because the immediate outlook is improving but because, at long last, our country is coming to grips with some of its chronic, underlying economic challenges.
America's great economic strength is founded on economic freedom. Every day millions of economic decisions are made in factories, in automobile showrooms, in banks, and in brokerage houses, on farms and around kitchen tables, where family budgets are prepared. These millions of choices are not made by official command, but according to private needs and private, individual judgments.
Nevertheless, the economic impact of government is profound. Government collects taxes; it enacts laws; it issues regulations; it borrows and lends money. Government policies can limit economic opportunities or expand them. If we choose the right policies for the future, we can encourage abundance, opportunity, and stable prices. If we choose the wrong policies for the future, we can accelerate inflation, jeopardize savings and jobs, and discourage investments in the future. No President and no Congress has never intentionally chosen to be wrong in shaping economic policies for our country, but there have been occasions when the effect of their policies was to worsen the already negative trends that existed in our economy.
In the past 15 years we've had several major inflationary episodes. Each ended in a recession. Each time we were left with a higher underying level of inflation than we had before.
The first of these episodes occurred during the military buildup for the war in Vietnam. We needed to raise adequate revenues during that period when Government expenditures both for defense and for new social programs were rising. But this failure to do so left a persisting inflationary hangover. Our underlying inflation rate rose from 1 percent in the first half of the 1960's to over 4 percent at the beginning of the 1970's.
Several years later, in 1972, there was a worldwide grain shortage. Food prices went up sharply. Once again fiscal excesses added to the inflationary pressures. In 1973 came the Arab oil embargo and a tremendous increase in OPEC petroleum prices. Soon afterwards, our economy suffered the worst recession in 40 years. Once again the underlying inflation rate failed to drop. Once again it was ratcheted upward, now to 7 percent.
Again, in 1979, the OPEC countries imposed another huge increase in oil prices on the world economy. Again the underlying inflation rate was ratcheted upwards, this time to about 9 percent.
We've learned by hard experience the strength of the inflationary forces in our economy and how firmly we must resist the temptation to overstimulate the economy. That is why it is so important to resist the massive, across-the-board tax cuts of the Reagan-Kemp-Roth proposal; why we need targeted tax cuts that encourage economic growth, but at the same time hold down inflation. Creating jobs and controlling inflation must go together. Right now, just as we are beginning to bring inflation down, is exactly the wrong time for election-year proposals that would drive prices up again.
We have therefore learned what has caused our current inflation: the failure to raise adequate revenues at a time of greatly increased public spending, like in the Vietnam war; natural events, such as grain shortages in the early 1970's; overstimulation of the economy, sometimes for political purposes; the staggering increases in imported oil prices; and the long decline in our productivity growth in the United States. To overcome inflation, we need to attack its causes directly and at their roots.
First, we need to pursue prudent overall fiscal policies. We've made substantial progress in controlling the budget. The rate of real growth in Government spending is half what it was when I took office, and the budget deficit has been reduced by more than half as a percentage of the gross national product.
We can exercise real fiscal restraint and still maintain a compassionate and a progressive society. We need to eliminate waste. We need to target Government programs to areas and citizens who are most in need. We cannot assume that all boats rise with the tide. We need to attract and encourage private investment to join with government in achieving our various economic and social goals.
This brings me to one of the central issues of the campaign: Do we want policies that encourage growth without driving up inflation, through needed investments in new plant and new equipment, or do we want to place our emphasis on immediate consumption, through a quick, regressive, across-the-board tax cut?
On August the 28th I proposed a major program to revitalize America's industry. The major part of my proposed tax reductions will go to encourage investment and to create new jobs—an investment in our country's economic future.
In contrast, this is what Governor Reagan has proposed: first, a large, across-the-board tax cut plus a liberalization of business depreciation allowance that by 1983 would cost some $110 billion; second, a removal of the so-called work-test under the social security program, costing another 6 or 7 billion dollars annually; third, a sharp increase in Government subsidies for the merchant marine; fourth, a system of tuition tax credits for those attending private schools, which at even a modest level would add 3 to 5 billion dollars to the budget; next, an increase in military spending beyond the substantial increases that we've already planned, which would cost more than $20 billion extra a year; and also, a substantial repeal of the windfall profits tax that would give at least $10 billion in lost Federal revenues back to the oil companies in 1983.
These, Governor Reagan's tax and spending proposals, would add $130 billion at least to the 1983 budget deficit. In recent weeks Governor Reagan has been saying that he can avoid the highly inflationary consequences of these tax and spending programs by cutting other parts of the budget sufficiently to prevent a deficit. By cutting this, by doing what he proposes, he's promised to protect social security and other entitlement programs. But all the rest of the Federal Government—and listen to this—out of which the $130 billion in cuts would have to come, will amount to only $150 billion in 1983. He has not specified, of course, which programs would be cut. I call upon him to do so, for it's clear that the only way he could balance the budget under his program is to eliminate almost all of the Federal Government except for defense and entitlement programs.
On the other hand, it may be that Governor Reagan thought he had the answer to this difficult budgetary problem early this year when he said, and I quote: "We could use the increased resources the Federal Government would get from this tax decrease to rebuild our defense capabilities." I'd like to repeat that. "We could use the increased resources from the Federal Government which it would get from this tax decrease to rebuild our defense capabilities."
As I said earlier, I'll leave the assessment of the Reagan-Kemp-Roth proposal to the good sense and judgment of the American people.
I propose that we reject quick, inflationary tax cuts that pile up Federal deficits and erode the value of the money of our country. I propose instead that we rely on the same values and the same common sense that built our country in the first place. I propose that we encourage capital investment in new plant and equipment, the investments we need to increase worker productivity. If living standards are to rise, productivity must grow. There's no way around this. It's an economic fact of life.
During the 1950's and 1960's, productivity grew at an average of about 3 percent per year. During the 1970's, productivity growth began to slow down, and today it is hardly growing at all. There are many theories for this decline in productivity growth, but there is one sure prescription for it: providing American workers with a growing stock of modern plant and equipment.
Our workers can continue to be the most productive in the world if given the proper tools. To do that, government must encourage investment. We must make sure that American research and development does not lag behind. We must provide the kind of tax incentives that will help to modernize the Nation's industries.
I've listed two elements in the administration's economic program: fiscal prudence and encouraging productivity. A third, the most important of all, concerns energy.
During the 1970's, the price of oil rose by more than 10-fold. We will pay about $85 billion to import oil this year, 30 times what we paid just 10 years ago. Only in the last 2 years have we really launched the right kind of energy programs, with new legislation passed by Congress, to stimulate new production of oil, coal, and natural gas, to encourage conservation in homes and in businesses, to develop synthetic fuels from our coal and oil shale resources, to make nuclear energy production safer and more reliable, and to tap the power of the Sun.
As a result of these and other energy measures, we've cut our foreign oil consumption by 2 million barrels per day, almost 25 percent, since I took office. No other country can match that record. We have loosened but not yet broken the grip of foreign oil dependency. Those who ignore this challenge, those who discount conservation, those who believe we can leave the energy challenge to the oil companies alone have failed to grasp what may well be the central challenge of our time.
The fourth element of our economic policy is aimed at putting people back to work and creating jobs for the millions of men and women who will be entering the work force in the 1980's. To accomplish our goal of full employment, we need to do several things.
We need to insist, first of all, on fair rules of trade with other nations in every product. Our program to help the American steel industry will help to achieve this is kind of fairness. We're awaiting a decision from the International Trade Commission to determine if action should be taken with regard to Japanese automobiles. We must not embark on the kind of trade war that wrecked the world economy of the 1930's.
The way to full employment does not lie in escalating an already persistent inflation. It lies in the right kind of tax incentives. It lies in measures that bring about investment in modern plant and equipment. It lies in controlling inflation, so that industry can plan for the future with confidence and so that interest rates can be brought down within the reach of homebuyers and consumers. It lies in stimulating competition, deregulating the airlines, the railroads, the financial institutions, energy, the truck lines, and communication industries, just as we have done.
Creating jobs is what my economic revitalization program is all about. I have proposed that in areas suffering high unemployment and a declining industrial base, an additional tax credit be allowed for qualifying investments; also, that depreciation schedules be simplified and depreciation rates accelerated; and that investment tax credits be made partially refundable, which will help new companies and those hit by cyclical downturns whose profits are not high enough to pay high rates of taxation.
I've also recognized that economic change sometimes requires difficult adjustment. I have proposed tax incentives and the establishment of an industrial development authority to channel public and private resources to help industries and communities adjust to inevitable economic change.
All these proposals have one thing in common: They put people to work in real jobs without triggering higher prices. Inflation is beginning to decline. We need to maintain that trend. To make further progress, we will consult with business, labor, and other groups about how to improve our voluntary wage and price policies. We also need to work together to design future tax reductions that help to moderate the wage and price spiral.
Government can help to build an exciting and healthy economic future for our country, but if we are to succeed, it cannot be because of government alone or business alone or labor alone. It must be because government, business, labor, and the public work together.
Our programs to meet the energy challenge and to modernize American industry can set the stage for American economic renaissance. If we follow through with these steps, we can have a future of modern plants, a future where American coal and shale and farm products fuel American cars and trucks, a future where modern railbeds and ports make American coal a powerful rival of OPEC oil, a future of full employment of American men and women, working to modernize American industry and to create whole new American industries.
I believe that if the American people understand the nature of their choice in this absolutely crucial campaign issue and the consequences of the choice they will make, they will choose the right course for the economic future of this country. Americans proved that by facing up to the reality of our energy problem and reversing several decades of increasing dependence on foreign oil. That achievement gives us a foundation now on which to realize the hopes and dreams and expectations which I've just outlined to you.
If we fight for economic progress as hard as we've been fighting for America's energy security, then I am confident that we can build a future of full employment, stable prices, rising exports, a more modern, competitive industry, and a stronger, more prosperous, and a more productive America. That is my goal. It's a goal that I intend to achieve.
Thank you very much.
MR. VON BERGEN. Thank you. We'll have a few questions.
The first question: You have complained that interest rates are too high. Do you think the Federal Reserve should intervene in the market and drive down interest rates?
THE PRESIDENT. No, I don't. I think we have a proper balance now between the private sector—the financial community and the economic and commercial community—on the one hand; the Federal Reserve Board, which is independent, on the second hand; the Congress, independently from me; and I, as Executive of our country.
I make proposals, make decisions on regulations, change priorities in the budget, emphasize certain aspects of American life to the public through my statements and actions. The Congress makes decisions on budget levels and passes legislation concerning tax programs. The Federal Reserve observes all these matters and makes their decisions. The financial community reacts. I think it's a good, sound system.
I do, however, believe that recently the financial institutions, the banks have overreacted, and I believe that at this time the interest rates are too high compared with the economic circumstances that prevail. It's my own judgment; I believe it's sound. And I hope that the sound of my voice in the financial institutions will prevail, and the interest rates will come down where they ought to be. But I don't want to intercede artificially, as a President or through an administration, to directly affect interest rates.
MR. VON BERGEN. Mr. President, along economic lines, a lot of people think grocery prices are too high, but farmers feel their returns for their products are too low. What do you think, and what does Mrs. Carter think? [Laughter]
THE PRESIDENT. My wife's enough of a politician to realize that there are two sides to this very important issue. [Laughter]
I inherited, when I came into office, a time of economic deprivation and uncertainty among farmers, with an excessive intrusion of the Federal Government into their affairs and a rapid, changing cycle of supply and demand and therefore wild rises, quite often, in farm or agricultural prices after the grain or other products had left the farmer.
We approached this in several ways, the most important aspect of which was to build up substantial storage of farm products on the farms. We encouraged farmers to keep their products under their own control. We arranged Government programs to assist them and put literally hundreds of millions of dollars on loans, which the farmers are repaying on a timely basis, to build storage for them to hold their grain.
This means that there's a much more stable supply of grain now. If we have an excess harvest, above the average or expected level, then that grain goes into the farmer-held reserve. If we have a shortage in our country or worldwide basis, then the farmers can take grain out of their reserve, at a carefully prescribed price, in advance and market it to keep our country sound and the world supply sound. I think this has done a good job in stabilizing prices.
We have had reasonable gross income for farmers and reasonable net income for farmers. At the same time, since I've been in office, both gross and net income for farmers has increased more than in any administration in history. One of the reasons for this has not been an excessive burden on the American consumer, who still get food at a lower level, compared to their other income and compared to other people, than anybody on Earth, but because we have escalated so greatly the exporting of American agricultural products.
We set a world's record on exports of our agricultural products in 1977. We broke that record in '78. We broke it again in '79. And this year, in spite of the interruption of some of our sales to the Soviet Union, we've had the greatest increase in history, increasing exports by $8 billion this year alone, up to a level of $40 billion for American-exported agricultural products. You might be interested in knowing that this year we'll sell Mexico 10 million tons of American grain.
I tried the best I could to stabilize American farm prices, in spite of the interruption of sale of some grain to the Soviet Union, and at the same time to open up in the rest of the world more permanent customers for American agricultural products. In the long historic perspective, our biggest single strategic asset of a peaceful nature is the productivity of our land. It's much more important on a historical scale than OPEC oil, for instance.
And so, I believe we've got a very sound farm economy now, stable prices compared to what they were, good bargains for American consumers. And I would guess that in the future these prices would increase only at very moderate rates, compatible with market pressures that are much less fluctuating than they were before.
MR. VON BERGEN. Mr. President, in criticizing Governor Reagan you have used outdated statements he has since repudiated, like his 1966 comments about making social security voluntary. Is this fair campaigning, since just in the past 4 years you have changed your position on a number of major issues, like your 1976 campaign pledge to cut defense spending, your former opposition to decontrol of oil prices, and your one-time opposition to any form of national health insurance?
THE PRESIDENT. When we quote Governor Reagan on these matters of interest to the American people, we always make a point to give to the news media the time and the place of the statement which he has made.
Recently, in the last few days, I understand, he has said that he has not changed his positions, that his positions are consistent with what they've been for the last 20 years. Sometimes they are in conflict, but I think the basic underlying philosophy is there.
When he says, for instance, that the minimum wage has caused more damage than anything since the Great Depression, that's an expression of a philosophy about working people that's still pervasive, I think, in his own mind and also in the platform of his party. When he says that unemployment compensation is a prepaid vacation for freeloaders, to me that's a statement that still prevails, although he may have said it a while ago.
When he took on his role as the nationwide opponent or spokesman against Medicare and traveled this country speaking against Medicare, he said that this would lead to the Government's intrusion into private affairs, so that Government would later tell a young man or woman where they could go to work or where a family could live. Recently he repeated a similar statement, even this year.
And his most disturbing statement was one recently made about withdrawing SALT II treaty from the Senate, speculating on the advisability of a so-called nuclear arms race to induce the Soviets to be more forthcoming in SALT negotiations, and saying that he was, in effect, playing a card against the Soviet Union. This kind of talk, to me—made quite recently, within the last couple of weeks-is extremely dangerous.
And the repeated nature of some of his statements when he was either a candidate for President or had the hopes of being a President—the pattern is still there.
For instance, all of us who serve in the Oval Office recognize the sensitivity of the decisions we make, the dealing with potential crises which might, if mishandled, become real crises and affect the life of everyone in this Nation and perhaps the world. My predecessors in office, Republican and Democrat, and I deal constantly with a series of trouble spots in the world, and we try to manage those potential problems in a diplomatic way, without the use of military force.
Repeatedly, there's a pattern of Governor Reagan's calling for the injection of military forces by the United States into those trouble spots in the world—in Ecuador, Cuba, in Cyprus, Pakistan, North Korea, the Middle East, Angola, Rhodesia, just to name a few. This kind of inclination, to me, although some of those statements were made recently, some of them longer ago—the pattern is what causes me concern.
So, we are trying to be extremely accurate in quoting Governor Reagan precisely and also putting the right tone and not misinterpreting what he says and giving the dates without misleading the American people about the timeliness of them.
MR. VON BERGEN. Thank you. Mr. President, before asking you one final question, I would like to present you with a National Press Club certificate of appreciation for being here and also a Press Club jacket, which we hope you will wear. [Laughter]
THE PRESIDENT. Very good.
MR. VON BERGEN. The final question: Mr. President, your opponents expect from you an October surprise, a political trick-or-treat. To put their minds to rest, will you tell us what the surprise is, or do we have to wait? [Laughter]
THE PRESIDENT. First of all, let me say that I'll treasure this certificate the rest of my life. [Laughter] Thank you very much.
It's not possible for a President to contrive a significant surprise. We deal in the Oval Office with questions of profound importance and difficulty. We try without delay to solve any problems that arise. 1 think every President who's served there has tried to do the best he could to meet the needs of our country.
It would be very pleasant for me if we could come up with a zero inflation rate or a zero unemployment rate or a boon to our economy that was significant or if the Japanese would say they would never ship any more cars to our country unless they were given away free, or something like that— [laughter] —but you know, that's the kind of hopes that always exist.
I think it would be a bad thing if I tried to delay good news or to conceal bad news to create some sort of surprise just to orient the election. So, you need not expect any such surprise between now and November. If it's a surprise to you, I guarantee you it will also be a surprise to the President. [Laughter]
Thank you. I've enjoyed being with you.
Note: The President spoke at 1:05 p.m. in the National Press Club ballroom.
Drew Von Bergen of United Press International, president of the National Press Club, read the questions submitted earlier by members of the press.
Jimmy Carter, Remarks and a Question-and-Answer Session at the National Press Club on the Nation's Economy Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/251075