Economic Renewal Program Remarks Announcing the Program.

I'm very delighted to have the Speaker here and distinguished Members of the House and Senate, the Governor of New York, Governor of New Jersey, and others who represent State and local government, members of my Cabinet, and distinguished Americans who've come here representing business and labor, the professions, other elements of life of the greatest nation on Earth.

This is a time of economic testing for our Nation. Inflation has fallen sharply. The recession is near bottom, and we'll recover.

This is no time for an excessive stimulus program, nor is it a time for inflationary tax reductions. We must be responsible, and we must make careful investments in American productivity. We can build in a progressive way a future which America will see that will be creative and will grow more vigorously in this next decade than perhaps any other time since our first industrial revolution over a hundred years ago.

According to a well-known proverb, a journey of a thousand miles begins with one step. We began before now, but each step is important, and the steps that I describe this afternoon will continue that journey toward a more productive and more competitive and a more prosperous American economy. The new steps will put people back to work, reduce taxes, increase public and private investment in the future, and constrain inflation all at the same time. But such progress will be possible only if we regard the past not as a refuge within which we can hide, but a treasury of lessons from which we can learn.

I'd like to consider for a moment a few of those lessons: First, we cannot treat the symptoms of inflation and ignore the underlying causes. Second, inflation and recession augment one another. Third, the longer we ignore our decline in productivity, the more likely we Americans are to live with hard times. The fourth lesson, and it may be the most important of all, is that if a solution is politically attractive it's often economically wrong.

Now, in the heat of an election year, is not the time to seek votes with ill-considered tax cuts that would simply steal back in inflation in the future the few dollars that the average American taxpayer might get. America needs to build muscle, not fat, and I will not accept a preelection bill to cut taxes.

All of us know, who've served in government or in other areas of American life, that there are no simple or easy solutions to serious problems that build up over a long period of time. But there are responsible ways to create productive jobs, and there are responsible ways to restore our technological and competitive lead over all other nations on Earth, and there are responsible ways to strengthen our economy enough to guarantee opportunity and security for every American citizen.

The fundamental challenge to our economy in the 1980's is a difficult combination but one which this program addresses successfully: full employment, stable prices, and real growth, with jobs that attack our declining productivity and our energy dependence, the major causes of inflation and of the recession in the first place. The detailed program which will be explained to all of you after my speech sets forth measures which I will ask the Congress to enact next year.

There are four major goals which I'd like to discuss briefly. First, increase private and public investment to revitalize America's economy. Second, create a forward-looking partnership between government and the private sector to deal with national problems which can only be solved through that cooperation. Third, to help people and communities overcome the effects of industrial dislocations. And fourth, to help to offset the rising individual tax burdens in ways which do not rekindle inflation.

These new proposals will add almost a half-million jobs in the coming year and a total of 1 million jobs by the end of 1982. These are in addition to those that will result from normal recovery and also in addition to the jobs that will result from the new programs already in effect or already on the Hill in existing proposals. We expect to add with these new proposals 2-percent growth to the gross national product of our Nation, increase real investment by 10 percent, and help to hold down inflation at the same time.

We must now build on the progress that we've made already in many vital areas. In the last 3 1/2 years we have added more than 8 million new jobs for workers to America's job rolls. This is more than any other similar period in our Nation or the world's history, in peacetime or in war. Exports have grown substantially. Balance-of-trade figures are very encouraging, and with the 1981 budget we will have cut in half the real annual growth in Federal spending.

We are reducing the anticompetitive regulation of the airlines, trucking, rail, banking, and the communications industries. This is the most fundamental restructuring of the interrelationship between government and the private sector that's taken place since the days of Franklin D. Roosevelt's New Deal.

Above all, after vigorous and painful debate and political decisions, we've put in place now a national energy policy that has already helped to reduce oil imports by 20 percent and has encouraged more drilling to discover new oil and new gas than at any time in the last quarter of a century. And the program, as you well know, has only recently been passed by Congress and is not even yet fully implemented. But we must not just be proud of what has been done. We must continue to build. Our task is nothing less than to revitalize America's economy.

Increasing productivity is the foremost economic challenge of the 1980's. From management we need innovation and more long-range planning. From labor we must have more participation in making the basic decisions, dedicated work, and the skills to take advantage of the most modern tools and technology. From government we must have sound judgment and political courage. And from all Americans there must be a commitment, deep commitment, and also the use of common sense.

We will meet the challenge of a more productive America as if our economic life depended on it—because it does—and this is how we're going to do it. How will we increase private and public investment to revitalize America's economy? The first important step we can take to revitalize America's economy is to provide incentives for greater private investment.

We need a major increase in depreciation allowances to promote investment in modern plants and equipment, and we need dramatic simplification of the tax code so that not only large businesses but also small businesses of our country can benefit.

The investment tax credit, which has been hailed as a bonanza by some, is now of no help to new firms or to distressed industries, because they have no earnings and therefore they pay no taxes and investment tax credits do not help them. Therefore, part of the investment tax credit must be refundable. This is a profound change in concept in American tax policy and will help immediately the small businesses and the new industries, an important source of both technological progress and employment, as you well know, and will also be of special help to those industries which are in distress, such as those which now produce steel and automobiles.

We'll also, of course, implement many of the recommendations that were made earlier this year by the White House Conference on Small Business. To complement the benefits derived from tax changes for the private sector, we must also expand public investment, especially in crucial areas like energy, technology, transportation, and exports. I'd like to comment on each one of those briefly.

Our energy program already approved for the 1980's, what we've already got planned and committed, is the most massive peacetime undertaking in American history. Its impact will be immense, perhaps greater than any of us at the present time can even envision, ranging from hundreds of thousands who will work in synthetic fuel plants to the millions of individuals who are weatherizing their homes, using solar power, or building our new and fuel-efficient automobiles.

Since I took office we've enacted tax credits and have more than doubled direct spending in order to stimulate energy production and conservation. In addition, we'll create a vast new synthetic fuels industry, and we are seeking new authority to convert utilities from oil to coal and other sources of energy. We need to add substantially more funds for work on energy conservation projects that will help us to fight inflation and to achieve energy security.

Energy, of course, is important. The second thing is technology. Technological advance has provided much of the productive growth of the United States in this last century. We can create literally millions of jobs with new technology in the years ahead. In addition to tax incentives for investment in the latest technology, I favor substantial real growth in Federal support of basic research, and particularly in the great research centers of our colleges and universities.

Mark Twain once defined an American as a person who does things because they haven't been done before. The exciting possibilities for Americans in the 1980's range from lasers for surgery to superalloys that never rust, from exotic energy technologies to microchips that can make computers as common as radios and as compact as wristwatches. These kinds of advances in technology and in science can well exceed anything that we have seen in this century so far.

The next item is transportation, which is vital to our country. The difference between a healthy transportation network and a broken down highway or a dying railroad is the difference between jobs and joblessness for tens of thousands of Americans, and it's between strength and weakness for our entire Nation. My proposals for major improvements in mass transit, air transportation, and railroad assistance programs are already pending before the Congress. These should be enacted and should be funded without delay, and I'll propose a further significant increase for surface transportation programs. There is simply no more essential investment or element in America's future than a viable, modern, efficient transportation system.

The last item I'd like to mention from the public sector is exports. Americans don't live and breathe exports like some of our European allies and others do. When I took office, exports accounted for 6 1/2 percent of our gross national product. Now, that figure has jumped to 9 percent. This increase has been an essential source of American jobs. One out of every seven jobs in our country now is directly related to producing goods for exports. One out of every three acres of land cultivated in the United States produces food and fibre for exports. Thirty percent of all industrial profits are derived from exports. And we have a great potential for even more growth in jobs and exports in our vast reserves of coal.

We must begin immediately to upgrade our transportation and our port facilities for coal exports. I think you all read the article in the paper Sunday that showed that ships now stand off Norfolk and Hampton Roads and wait 20 or 30 days before they can come there and load their valuable cargo of American coal which is so crucial as a replacement for OPEC oil. Through tax modifications and through a new concept of export trading companies we'll even further expand American exports of both goods and services. This investment in America is important.

The second question is: How can we create a forward-looking partnership between government and the private sector to deal with those kinds of national problems which require that cooperation? To help us revitalize American industry, business, labor, and the government must form a new and a vital partnership. We're all in this together, and the sooner we start acting like it, the better off our Nation will be.

In some areas, such as national security, as you all know, government must play the dominant role. But where government is involved in the economic sphere it will function best not as a boss, but to assist or to cooperate with business and labor only as it's necessary. This can be done. We are cooperating properly now in dealing with coal, steel, and the automobile industries, as well as in many aspects, particularly the new ones, involving our energy program.

The time has now come to extend this experience in cooperation. And this again will be a major change in economic policy for our country. I will establish an Economic Revitalization Board composed of some of the best leaders from American labor, industry, and the public. Cochairmen of this Board will be Irving Shapiro, the chief executive officer of du Pont, and Lane Kirkland, the president of AFLCIO.

This will be a small group of distinguished Americans, and I'll ask that Board to develop specific recommendations for me, for the Congress, and for the public for an industrial development authority to mobilize both public and private resources, including capital from private markets and from pension funds, to help revitalize American industry in areas most affected by economic dislocations or by industrial bottlenecks. This Board will also consider' the integration of industrial development activities now carried out in all the various government agencies, and—this is particularly important-they will address the long-range problems of balancing regulatory costs against the benefits of regulation.

Any project receiving financial assistance must meet tough standards of economic viability. Only a commitment that promotes progress and not obsolescence will be truly in the interests of business, labor, and the American people.

The third question to answer is: How can we help people and communities overcome the effects of industrial dislocations? As we work together on the problems and the intricate issues of economic renewal, we must never forget that we're talking about real people in real places.

Change is inevitable if we are to grow. But as we cope with change, it's my responsibility as President to safeguard communities which are a vital part of our national life and the individual lives of the men, women, and children who are America. That's the whole thrust of one of the most important programs of my Presidency with which almost all of you have helped, that is, economic development in distressed areas. A community cannot exist where there is no work.

We can be proud that direct support of our economic development has increased by over 70 percent just in the last 3 years. We've instituted effective urban and rural programs to stimulate private investment in distressed areas. Funding for programs to promote small business has more than doubled. The Congress now has before it my proposals for substantial increases in economic development financing. But we must do more.

I'll propose a large additional annual increase in funding for economic development for 1981 and for 1982 to create permanent jobs, productive jobs in industries and in regions which are hard hit by industrial change. We also need a special targeted investment tax credit to provide strong incentives for American businesses to invest and to create jobs in those areas which are threatened by economic decline.

These kinds of measures stimulate business, but it cannot help a community when it's already in financial distress. When a community cannot maintain police, fire, education, sanitation services, it loses both its old industry, and it cannot hope to get new industry. In order to help communities like this maintain the services necessary to promote development, I'll propose countercyclical revenue-sharing at a level of $1 billion in 1981.

I'd like to point out that my major domestic program which was new this year is a jobs and training program to help young Americans look forward to a future of hope, not to a life of waste. This is the one action we can take now that will make a difference in the lives of a whole generation of Americans.

I'm also asking the Congress to provide 13 additional weeks of unemployment compensation for eligible workers in high unemployment States. That, by the way, is the only specific recommendation that I intend to send to the Congress at the present time. The other proposals will be made to the Congress for action in the coming year.

And the final question I'd like to answer is: How will we offset the rising individual tax burdens in ways that do not rekindle inflation?

Tax burdens are now scheduled to rise in ways that both increase inflation and slow down our economic recovery. Therefore, I'll ask Congress for three measures next year to deal with this problem in addition to those tax measures designed to stimulate industry.

To help offset the social security tax increases scheduled to take effect in 1981, a social security tax credit for employers and for workers. In addition, the earned income tax credit for working families, those who have income but who have a low income, this to be expanded. And a special tax deduction to counter the inequity that presently exists when a husband and wife both work and who typically have to pay more taxes than two single individuals making the same amount.

All of these policies that I've described to you can be carried out within a responsible budget, so that we can simultaneously promote economic recovery and reduce the pressures of inflation.

To make still further progress we'll consult with business, with labor and other groups about how to improve our voluntary wage and price policies. Because inflation is such a stubborn problem we must design future tax reductions, earned by continued control of Federal spending, in ways that contribute to moderating wage and price increases. For any nation's economy the severe problems come in times of great change. For our Nation this is one of those times. If we keep firmly to our path and attack our problems with courage and responsibility, the result will be an exciting future for our economy and for our Nation.

Let us not forget that this country of ours still has the most productive workforce on Earth. Our standard of living is the highest in the world. Our industrial base is the strongest in world history. We have the greatest human and physical resources of any nation that exists, but we cannot continue to draw them down forever. We must renew those human and natural resources, and we will. That's the basis of the proposal that I'm outlining this afternoon.

Let's don't forget the breadth of what we are discussing. We are embarking on a course to build a major synthetic fuels industry, to double our production and to expand our exports of American coal, to retool our automobile industry in order to produce more fuel-efficient cars and to meet any competition from overseas, to modernize our basic industries like steel, to make our houses and our buildings and our factories more energy efficient, to shift our electric power production from dependence on oil to the use of coal and other fuels, to create a whole new industry, to produce solar and other renewable energy systems, to rebuild our cities and our towns, to continue progress toward a cleaner and a healthier and a safer environment, to expand and to modernize our entire public transportation system, to provide our workforce with skills and jobs to meet a rapidly changing, technological world, to ease the burdens of change and the fear of the future, and to continue to build the homes and produce the goods and the services needed by a growing America.

Our difficult struggle toward economic renewal will be waged in many ways, but we are united in our purpose. We'll put Americans to work fighting the major long-term causes of inflation itself, our declining productivity and our excessive dependence on foreign oil. We'll fight for full employment, at the same time stable prices, at the same time healthy growth. We'll overcome the problems of today together by building for a better future, a better life, for everyone who lives in America.

Thank you very much.