Remarks at the International Business Council in Chicago
Almost two months ago, in accepting the Presidential nomination of my party, I spoke of the historically unique crisis facing the United States. At that time I said:
"Never before in our history have Americans been called upon to face three grave threats to our very existence, any one of which could destroy us. We face a disintegrating economy, a weakened defense and an energy policy based on the sharing of scarcity."
Now since I first spoke those words, no action has been taken by President Carter to change this grave, unprecedented situation. In fact, during the last few months the overall economic situation in the United States has deteriorated markedly. The cumulative effect of the economic policies the Carter Administration has followed over the last three and one-half years has damaged our economy much more than virtually anyone could have foreseen. Interest rates and inflation have become unconscionably high. Almost two million Americans have lost their jobs this year alone. And the tax burden continues to steadily increase.
In effect, Mr. Carter's economic failures are an assault on the hopes and dreams of millions of American families. They are essentially an unprecedented failure of Presidential leadership that strikes at the very heart of every American family, every factory, every farm, every community.
Make no mistake about it: what Mr. Carter has done to the American economy is not merely a matter of lines and graphs on a chart. Individuals and families are being hurt and hurt badly. Factories are empty; unemployment lines are full.
"Price of Carter's Inflation"
Every American family has felt what the Carter inflation means to hopes for a better life. Every visit to the supermarket reminds us of what Mr. Carter's policies have done. We pay the price of Carter's inflation every time we buy food or clothing or other essentials.
We are dealing with an unprecedented crisis that takes away not only wages and savings, but hopes and dreams. And what is his response to this tragedy? Words. And more words. Two weeks ago, he gave us his latest in a series of economic policy shifts. This one is the fifth "new economic program" in the last three and one-half years. It contains rhetoric that Mr. Carter apparently hopes will lead us to believe he has finally discovered free enterprise.
Hearing him and members of his Administration use the language of free enterprise reminds me of one of the stories of Mark Twain. He had a habit of using very foul language, which distressed his wife to no end. She decided on a form of shock treatment to cure him of his habit. One day he came home, and she stood in front of him and recited every word of the salty language she had ever heard him use. He listened patiently and when she was finished, said: "My dear, you have the words all right, you just don't have the tune."
I'd like to speak to you today about a new concept of leadership, one that has both the words and the music. One based on faith in the American people, confidence in the American economy, and a firm commitment to see to it that the Federal Government is once more responsive to the people.
That concept is rooted in a strategy for growth, a program that sees the American economic system as it is - a huge, complex, dynamic system which demands not piecemeal Federal packages, or pious hopes wrapped in soothing words, but the hard work and concerted programs necessary for real growth.
Problem With Economy
We must first recognize that the problem with the U.S. economy is swollen, inefficient government, needless regulation, too much taxation, too much printing-press money. We don't need any more doses of Carter's eight-or 10-point programs to "fix" or fine tune the economy. For three and one-half years these ill-thought-out initiatives have constantly sapped the healthy vitality of the most productive economic system the world has ever known.
Our country is in a downward cycle of progressive economic deterioration that must be broken if the economy is to recover and move into a vigorous growth cycle in the 1980's.
We must move boldly, decisively and quickly to control the runaway growth of Federal spending, to remove the tax disincentives that are throttling the economy, and to reform the regulatory web that is smothering it.
We must have and I am proposing a new strategy for the 1980's. Only a series of well-planned economic actions, taken so that they complement and reinforce one another, can move our economy forward again.
We must keep the rate of growth of government spending at reasonable and prudent levels. We must reduce personal income tax rates and accelerate and simplify depreciation schedules in an orderly, systematic way to remove disincentives to work, savings, investment and productivity.
We must review regulations that affect the economy and change them to encourage economic growth. We must establish a stable, sound and predictable monetary policy. And we must restore confidence by following a consistent national economic policy that does not change from month to month. I am asked: 'Can we do it all at once?' My answer is: 'We must.' I am asked: 'Can we do it immediately?' Well, my answer is: 'No, it took Mr. Carter three and one-half years of hard work to get us into this economic mess. It will take time to get us out.'
I am asked: 'Is it easy?' Again, my answer is: 'No. It is going to require the most dedicated and concerted peacetime action ever taken by the American people for their country.'
But we can do it, we must do it, and I intend that we will do it.
Balancing the Budget
We must balance the budget, reduce tax rates and restore our defenses. These are the challenges. Mr. Carter says he can't meet these challenges; that he can't do it. I believe him. He can't. But, I refuse to accept his defeatist and pessimistic view of America. I know we can do these things, and I know we will.
But don't just take my word for it. I have discussed this with any number of distinguished economists and businessmen, including such men as George Shultz, William Simon, Alan Greenspan, Charls Walker and James Lynn. The strategy is based on solid economic principles and basic experience in both government and the marketplace. It has worked before and will work again.
Let us look at how we can meet this challenge. One of the most critical elements of my economic program is the control of government spending. Waste, extravagance, abuse and outright fraud in Federal agencies and programs must be stopped. The billions of the taxpayers' dollars that are wasted every year throughout hundreds of Federal programs, and it will take a major, sustained effort over time to effectively counter this.
Federal spending is now projected to increase to over $900 billion a year by fiscal year 1985. But, through a comprehensive assault on waste and inefficiency, I am confident that we can squeeze and trim 2 percent out of the budget in fiscal year 1981, and that we will be able to increase this gradually to 7 percent of what otherwise would have been spent in fiscal year 1985.
Now this is based on projections that have been made by groups in the government. Actually, I believe we can do even better. My goal will be to bring about spending reductions of 10 percent by fiscal year 1984.
Crucial to my strategy of spending control will be the appointment to top government positions of men and women who share my economic philosophy. We will have an administration in which the word from the top isn't lost or hidden in the bureaucracy. That voice will be heard because it is a voice that has too long been absent from Washington - it is the voice of the people.
Citizen's Task Force
I will also establish a citizen's task force, as I did in California, to rigorously examine every department and agency. There is no better way to bring about effective government than to have its operations scrutinized by citizens dedicated to that principle.
GET FIRST ADD
I already have as part of my advisory staff a Spending Control Task Force, headed by my good friend and former director of the Office of Management and Budget, Caspar Weinberger, that will report on additional ways and techniques to search out and eliminate waste, extravagance, fraud and abuse in Federal programs.
This strategy for growth does not require altering or taking back necessary entitlements already granted to the American people. The integrity of the Social Security System will be defended by my administration and its benefits will once again be made meaningful.
This strategy does require restraining the Congressional desire to "add-on" to every old program and to create new programs funded by deficits.
This strategy does require that the way Federal programs are administered will be changed so that we can benefit from the savings that will come about when, in some instances, administrative authority can be moved back to the states.
The second major element of my economic program is a tax rate reduction plan. This plan calls for an across-the-board, three-year reduction in personal income tax rates - 10 percent in 1981, 10 percent in 1982 and 10 percent in 1983. My goal is to implement three reductions in a systematic and planned manner.
More than any single thing, high rates of taxation destroy incentive to earn, to save, to invest. And they cripple productivity, lead to deficit financing and inflation, and create unemployment.
We can go a long way toward restoring the economic health of this country by establishing reasonable, fair levels of taxation. But even the extended tax rate cuts which I am recommending still leave too high a tax burden on the American people. In the second half of the decade ahead we are going to need, and we must have, additional tax rate reductions.
Jimmy Carter says it can't be done. In fact, he says it shouldn't be done. He favors the current crushing tax burden because it fits into his philosophy of government as the dominating force in American economic life.
Projections on Taxes
Official projections of the Congressional Budget Office show that by fiscal year 1985, if the current rates of taxation are still in effect, Federal tax revenues will rise to over $1 trillion a year.
Surely Jimmy Carter isn't telling us that the American people can't find better things to do with all that money than see it spent by the Federal Government.
Assuming a continuation of current policies in government, Congressional projections show a huge and growing potential surplus by 1985. These surpluses can be used in two basic ways: one, to fund additional government programs, or, two, to reduce tax rates.
That choice should be up to the American people. The most insidious tax increase is the one we must pay when inflation pushes us into higher tax brackets. As long as inflation is with us, taxes should be based on real income. Federal personal income taxes should be based on real income. Federal personal income taxes should be indexed to compensate for inflation, once tax rates have been reduced.
We also need faster, less complex depreciation schedules for business. Outdated depreciation schedules now prevent many industries, especially steel and auto, from modernizing their plants. And faster depreciation would allow these companies to generate more capital internally, permitting them to make the investment necessary to create new jobs, and to become more competitive in world markets.
Another vital part of this strategy concerns government regulation. The subject is so important and so complex that it deserves a speech in itself - and I plan to make one soon. For the moment, however, let me say this:
Government regulation, like fire, makes a good servant but a bad master. No one can argue with the intent of this regulation - to improve health and safety and to give us cleaner air and water - but too often regulations work against rather than for the interests of the people. When the real take-home pay of the average American worker is declining steadily, and 8 million Americans are out of work, we must carefully re-examine our regulatory structure to assess to what degree regulations have contributed to this situation. In my administration there should and will be a thorough and systematic review of the thousands of Federal regulations that affect the economy.
Sound Monetary Policy
Along with spending control, tax reform and deregulation, a sound, stable and predictable monetary policy is essential to restoring economic health. The Federal Reserve Board is, and should remain, independent of the Executive Branch of government. But the President must nominate those who serve on the Federal Reserve Board. My appointees will share my commitment to restoring the value and stability of the American dollar.
A fundamental part of my strategy for economic growth is the restoration of confidence. If our business community is going to invest and build and create new, well-paying jobs, they must have a future free from arbitrary government action. They must have confidence that the economic "rules-of-the-game" won't be changed suddenly or capriciously.
In my administration, a national economic policy will be established, and we will begin to implement it, within the first 90 days.
Thus, I envision a strategy encompassing many elements - none of which can do the job alone, but all of which together can get it done. This strategy depends for its success more than anything else on the will of the people to regain control of their government.
It depends on the capacity of the American people for work, their willingness to do the job, their energy and their imagination. This strategy of economic growth includes the growth that will come from the cooperation of business and labor based on their knowledge that government policy is directed toward jobs, toward opportunity, toward growth.
We are not talking here about some static, lifeless econometric model - we are talking about the greatest productive economy in human history, an economy that is historically revitalized not by government but by people free of government interference, needless regulations, crippling inflation, high taxes and unemployment.
Does Mr. Carter really believe that the American people are not capable of rebuilding our economy? If he does, that is even one more reason - along with his record - that he should not be President.
When such a strategy is put into practice, our national defense needs can be met because the productive capacity of the American people will provide the revenues needed to do what must be done.
Vision Is Required
All of this demands a vision. It demands looking at government and the economy as they exist and not as words on paper, but as institutions guided by our will and knowledge toward growth, restraint and effective action.
When Mr. Carter first took office, he had sufficient budget flexibility to achieve these goals. But he threw away the opportunity to generate new economic growth and to strengthen national security. Now the damage done to the economy by his misguided policies will make the achievement of these crucial objectives far more difficult.
Nevertheless, this nation cannot afford to back away from any of these goals. We cannot allow tax burdens to continue to rise inordinately, inflation to take a stronger hold, or allow our defenses to deteriorate further - without severe consequences.
This task is going to be difficult but our goals are optimistic - as they should be. Success is going to take time, as well as work. There is only one phrase to describe the last three years and eight months. It has been an American tragedy. It isn't only that Mr. Carter has increased Federal spending by 58 percent in four years, or that taxes in his 1981 budget are double what they were in 1976, the equivalent of a tax increase on an average family of four of more than $5,000.
The tragedy lies as much in what Mr. Carter has failed to do as in what he has done. He has failed to lead. Mr. Carter had a chance to govern effectively. He had a sound economic base with an inflation rate of 4.8 percent when he took office.
But he has failed. His failure was rooted in his view of government, in his view of the American people. Yet he wants this dismal view to prevail for four more years. The time has come for the American people to reclaim their dream. Things don't have to be this way. We can change them. We must change them. Mr. Carter's American tragedy must and can be transcended by the spirit of the American people, working together.
Let's get America working again. The time is now.
Ronald Reagan, Remarks at the International Business Council in Chicago Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/285590