Remarks to Congressional Leaders During a White House Briefing on the Fiscal Year 1986 Budget

Well, thank you very much and good morning and welcome to the White House. And thank you for all joining us.

In a moment, you're going to hear from Treasury Secretary Baker and OMB Director Stockman. And by the way, Jim, this will be the first chance I'll have had to introduce you by your new title. Congratulations, Mr. Secretary.

But Jim and Dave will fill you in on the specifics. But before they do, permit me to give you a brief overview.

I think we can all agree that our number one priority is a growing and vibrant economy which creates jobs and offers increasing opportunity for all Americans. We've seen the remarkable potential for growth in our economy, that had for too long been held down by the heavy hand of government-by high taxation, excessive Federal spending, and overregulation.

It's time to follow through with the policies that have brought us success. We must now build on our accomplishments to secure a more permanent and far-reaching prosperity, and that means we must work together to continue to liberate the creative energies of our nation by cutting the tax rates still further, while making our tax system fairer and simpler and less susceptible to abuse.

And it also means that we can't wait a moment longer to get our Federal budget under control. If we lose the budget battle, if we allow all the lessons of all the decades of unchecked government spending to go unheeded, then, I believe, we'll consign ourselves and our children to the tyranny of a government that respects no boundaries and knows no limits. But if we win, we'll show ourselves and the world that in America the Government is still the servant of the people, not their master.

And, thus, the budget that I'm sending to the Congress this year is $974 billion, including debt service costs—only about 11/2 percent higher than the fiscal year '85 level. The fiscal year '86 budget calls for an absolute freeze on overall government program spending. However, some programs cannot be frozen, so we must find savings in other areas. First, I'm proposing structural reforms and other economies in a wide range of programs, from entitlements to government lending. And second, there are a number of areas of discretionary spending, such as Federal overhead costs, where I'm confident the Government can get by on less next year. And the third, we're requesting cancellation of a long list of programs that, I believe, the taxpayers should not be subsidizing. I'm confident that many of these activities currently being subsidized could be efficiently provided in the private sector, without government assistance.

The defense of our nation is the one budget item which cannot be dictated solely by domestic considerations. Despite severe constraints on our budget, we must respond to the unprecedented military buildup of the Soviet Union, the largest military buildup in world history. And, unfortunately, we've had to start from a weakened position, brought on by long years of neglect and underfunding, and we still have a ways to go.

Ultimately, our security and our hopes for success at the arms reduction talks hinge on the determination that we show here, to continue our program to rebuild and refortify our defenses. In all my years in public office, both as Governor of California and now as President, I don't think I've ever submitted a budget that wasn't controversial, and I'm sure this one will be no exception . Nevertheless, I believe it's possible that working together, in a spirit of compromise and cooperation, we can bring our budget under control without damaging our economy or endangering our national security.

As we lighten government's burden on our private sector through budget control, we should remember that no amount of cutting and no paring will help if we, at the same time, add to the burden by raising taxes. All we should be doing is shifting the load from one saddlebag to another.

Raising taxes would be an admission of failure. It would announce to the country that we didn't have the political will and courage to do what we know is right to get our economic house in order. We've come to recognize an essential truth about our economy: that incentives are the key that unlocks prosperity.

When the Government takes away incentives to work and save, the economy goes fiat—millions are thrown out of work and government revenues plunge. But when we restore incentives, as we did with our cuts in personal income tax rates, the economy comes back to life and government revenues rise.

It's no accident that during fiscal year 1984, the first full year that all three installments of our income tax cuts were in place, Federal revenues actually rose 7 percent in real terms. So, we already have dramatic revenue increases, and the last thing we want to do is derail this impressive engine of economic growth.

Later during this session of the Congress, we'll be submitting to you our plan for tax reform. And I'm confident that, once again, lower rates and new incentives for the American people will keep us on the track of vigorous economic growth and, therefore, expand government revenues.

We have a truly exciting chance to change the course of our nation's history, to return our country to the optimism and prosperity that we knew two decades ago. There's a lot of hard work before you, the Members of the 99th Congress. But in taking the positive steps necessary to keep the economy on the road to progress on the all-important issues of budget control and tax reform, you have the overwhelming support of the American people, and that's all that really matters.

So, good luck. Thank you. God bless you. And I will turn the meeting over to those who are going to give you more detailed briefings on our budget.