Interview With the President Question-and-Answer Session With Reporters From Pennsylvania.

INFLATION AND INTEREST RATES

Q. I have a couple questions from a man on our staff who specializes in the economy, and I must apologize—you know how these economic types are—they are long questions.

At the press conference on Thursday, you said that soaring inflation and extremely high interest rates were brought about almost entirely by worldwide escalating oil prices. The overwhelming majority of private sector economists and many government economists have said the OPEC increases are simply a smokescreen and that the administration is doing nothing to improve America's lagging productivity, which is commonly held to be the major cause of soaring inflation.

Excluding energy, food, and housing costs, inflation is still running at about 9 percent, which Federal Reserve Board people say is entirely too high. What is your opinion?

THE. PRESIDENT. I agree there is a lot of difference between a 8- or 9-percent level and the 18 percent that we have experienced.

The energy inflation rate at this point, even after OPEC price increases have not been very high the last few months, is still running 90 percent per year. And it is obvious that energy has an impact on the economy that is far greater than just the price of oil or its direct products like gasoline, because petroleum products permeate the entire economic structure of our Nation. They contribute to higher fuel costs, high transportation costs, higher production costs for any product that uses petroleum as a basic raw material.

My own Chairman of the Economic Advisers says that mortgage interest rates and energy comprise about 8 or 9 percent of the total inflation rate that we are experiencing now. And he also states that if we can hold OPEC price increases in 1980 down to a 20-percent increase, which is still a substantial increase, and cut mortgage interest rates 2 percent, that we are likely to have an 8- to 10-percent reduction in the inflation rate later on in the summer.

So, there is no doubt that other factors are involved and that we do have an underlying inflation rate of around 8 or 9 percent, which is too high. But at least that is not a devastating inflation rate as contrasted with the 18 percent that we presently experience and the 19 percent interest rate.

I noticed that mortgage interest rates dropped a half percent this week in the Washington area and, as you know, the prime bank rate yesterday dropped from 20 percent down to 19 1/2. This is a good trend in the right direction. We hope it will be maintained, but that is no guarantee that it will.

THREE MILE ISLAND

Q. Up around our way, Three Mile Island is a formidable piece of our lives every day, as you well know. Are you willing to cut through the redtape which exists—Nuclear Regulatory Commission, the Department of Energy—making available to us people like Harold Denton, whom you made available before? You know how the Oak Ridge and Argonne laboratories, which are under the DOE, sort of have been creating an interdepartmental task force to let us clean up this mess and get back to normal living again.

THE PRESIDENT. Yes. As you know, since the Three Mile Island accident occurred, I have been quite active in trying to do everything possible to understand the subject and also to act where necessary. I went into the Three Mile Island area and into the control room itself immediately after the accident to learn and to demonstrate that there was no immediate threat to the people who lived there when there was deep concern among the people, understandably.

Following that, I appointed the Kemeny Commission to look into all aspects of the Three Mile Island accident, and also nuclear power generation throughout the country, and they made more than 40 recommendations to me that I have begun to implement. Part of that implementation is to reorganize the Nuclear Regulatory Commission so that it can be more effective in the future, and that reorganization plan is now before the Congress. They will act within the next few weeks, and my belief is that they will act affirmatively on my recommendations.

We have put, as the paramount issue above everything else, the safety and the health of the people in the area and, along with that, of course, a commitment to tell them the truth—not to let there be any misleading statements made by any, either Federal or private, entity.

The Environmental Protection Agency is representing me in making sure that any action taken is safe and well-advised. The Nuclear Regulatory Commission itself, as you know, is an independent agency over which I do not have direct control. But I think that what we have learned from the Three Mile Island accident will not only help people in Pennsylvania be more safe in the future, but I don't have any doubt that it will affect not only our own Nation, in every State, but the world has learned that nuclear power must be made safer in its design, the building, the operation, and the maintenance and the supervision of all nuclear powerplants.

I think we have moved effectively so far, and I can tell you and the people who live in your area that we will continue to, under my direct observation and under my control, as much as the law will permit.

Q. Well, our problem right now, sir, is almost more acute than it was at the time you visited the plant. The venting of the krypton-80 gas has become a major issue. Mr. Denton, whom you so kindly sent up then, is about the only calming force—we call him a combination of Sam Ervin and Catfish Hunter.

THE PRESIDENT. Well, he was my immediate adviser in the immediate aftermath of the accident, and now he is representing, still, the Nuclear Regulatory Commission. And the Environmental Protection Agency, Doug Costle, represents me officially and legally in making sure that any action is the safest and the surest to protect all those around that area.

Q. There would be no objection if they had to call in the Energy people?

THE PRESIDENT. No objection at all. Any people that are involved directly or indirectly are being coordinated now much more effectively than in the past.

IRAN: HISTORICAL PARALLELS, THE SAFETY OF THE HOSTAGES, AND THE NATIONAL HONOR

Q. Mr. President, turning for a minute to Iran, I just wondered, as you assess what to do in Iran, do you draw upon any kind of historical parallels between either the Pueblo incident or the Mayaguez, and in light of the increasing calls for action on the part of your Republican opponent, is there going to be a point where the lives of the hostages might become less important than national honor?

THE PRESIDENT. I have studied all the previous occurrences in my lifetime where American hostages have been taken in Mongolia, when President Truman was in office, and the Mayaguez incident under President Ford, and the Pueblo incident under President Johnson—to learn how they reacted and what the degree of success was, and also the legalities involved in dealing with countries that either directly or indirectly participated in the holding of hostages.

Until recently, the Government professed not to play a responsible role in the holding of the American hostages, that it was being done by—they call them students, I call them terrorists—who were not controlled by the Government. But in the more recent weeks, the terrorists themselves had announced they would turn over the hostages to the Revolutionary Council if it so demanded. At one time, the President and also the Chairman of the Revolutionary Council, Bani-Sadr, did announce early one morning, our time, that the hostages would be transferred to the Government control and that the militants and the Ayatollah Khomeini had agreed. Then two members of the Revolutionary Council decided to change their position, and the entire effort fell through, contrary to what we had expected. This puts the Government directly involved in condoning and supporting the holding of the hostages, since they have refused to accept the hostages when the militants offered to turn them over.

The other part of your question about the relationship between our national interests, the national honor on the one hand, and the hostages' lives on the other has never been separated in my mind. The two are directly interrelated. If I should do anything to lessen the importance paid by us to the hostages' lives and safety and freedom, it would obviously be a reflection on our own Nation's principles, that we value a human life, we value human freedom, that we are a country with compassion, and that we are not callous about the value of the lives of those 53 hostages.

So, I have never tried to separate what was best for the hostages on the one hand, from what is best for our country on the other, and I don't intend to.

IRAN; AMERICAN MILITARY OPTIONS

Q. What are the military options in Iran, other than a blockade, and are we close to war?

THE PRESIDENT. No, we are not close to war. Ever since November the 20th, we have announced that we reserve the right to take whatever actions are available to us under international law. We are the subject, as a nation, through our Embassy, of invasion of American territory—the Embassy compound is American territory American nationals, citizens, have been captured by international terrorists. So, under international law, we have the right to act as we choose to redress those grievances, just as though our continental United States was invaded.

I have so far been extremely patient, and I have been pleased and somewhat surprised at the patience of the American people because they know that the hostages' lives are at stake.

Our assessments of possible military action ought not to be discussed directly and individually by me and specifically by me, but I think the statements that we have made ever since November have been that we would reserve the right, for instance, to interrupt commerce going to and from Iran. I think that is as far as I would like to go at this point.

IRAN: TIMING FOR RELEASE OF THE HOSTAGES

Q. How did you find out that the hostages might be held until after the November elections, the story we are reading in today's paper?

THE PRESIDENT. We have had reports from other nations, diplomats, that in their conversations with Khomeini's closest advisers, he has stated that this was one of his objectives. And it now appears that the Iranian parliament may not even be having elections until maybe a month from now, the middle of May or even later. Following that, the parliament would have to be organized for the first time in Iran's history, and some of the clerics who are likely to control the Majles, as it is called, have stated that they would be in no hurry to consider the subject of the American hostages.

What we are trying to do is to expedite this process in every possible way, through our own restraint or sanctions against Iran and through the actions that our allies might take .as well. There will be decisions made among other countries, important trade partners of Iran and friends of ours, within the next week or 10 days, and I think if Iran sees that they are not only suffering from a breach with us, but face the prospect of being further and further isolated in the world from the other civilized nations, that this would be an additional factor that might induce them to act more quickly.

IRAN: THE HOSTAGE SITUATION AND THE CAMPAIGN

Q. Mr. President, in view of this report that the Ayatollah does intend to keep them captive until November, would this free you up for a bit of campaigning, let's say, before June 3d—California, Ohio, New Jersey? Also, would it free you or would you consider yourself able to leave the area for, say, an economic speech in a place like Detroit?

THE PRESIDENT. I've never foreclosed the option at all of moving around the United States to carry out the duties of my office. I have refrained, and will for the foreseeable future, from carrying out—just assuming that the situation is normal.—

Q. Yes.

THE PRESIDENT.—and as a partisan candidate.

Q. That's why I separated the two.

THE PRESIDENT. I know. Well, I have refrained from the latter. I have not foreclosed the option on the former for two reasons. One is that there's an extraordinary circumstance of very serious crises that afflict our Nation now—the Iranian crisis, which we've just covered, the Soviet invasion of Afghanistan, the necessity for me to act as a world leader and coordinating, as best I can, America's relation with all other nations throughout the world who want to help us, in varying degrees of importance, the very high inflation rates and interest rates which are impacting adversely on our economy, the dealing with Congress on matters of supreme importance, like energy. These kinds of things, collectively, do require my presence here in the White House more than they have any time before in my Presidency, or maybe even in a few preceding Presidencies, at least.

The other facet of the question is I am the only spokesman for our country, as its elected President, and it's important to me and to the hostages to have America continue to focus our attention on the plight of those hostages and convince the rest of the world that for us, at least, this is just as much a crisis as it was the first week they were captured. If I should resume business as usual, I don't think there's any doubt that the press and the American public and our European allies .and others whom we are trying to get the support of, would assume that this is not really a very important matter anymore, that we are willing to accept the status quo and continued incarceration of the hostages. So, I want to keep this a major issue in the consciousness of American people. If I assumed the role of a routine political candidate, then I think that would be deleterious to that goal.

I might say that I recognize that, certainly at this point and for the last month or 6 weeks, it's been very harmful to me politically not to have been out campaigning in New York and Connecticut and Pennsylvania, obviously, and other States. I like to campaign. I would love to get away from here and shake hands and have townhall meetings and go into coal mines and just areas where people have an intense interest in politics. This would be very helpful to me.

All of the political analysts, I presume almost all the news media, believe that this is a harmful thing now. It may have been that in January or February it was helpful to be the focus of the Government on the crisis. But I think lately, it's obvious that I'm losing votes and losing delegates that I could have gotten otherwise if I was an active candidate. But in my judgment, my duties require me to be here now, and I do not want to lessen the attention given to the hostages.

U.S. RESPONSE TO THE SOVIET INVASION OF AFGHANISTAN

Q. Mr. President, on Afghanistan, can we look for more American cutoffs of sales of goods and technology to Russia in addition to boycotting the Olympics?

THE PRESIDENT. Yes. As you know, we've cut back 17 million tons of grain that the Soviets very badly needed, and we believe that they will only be able to replace maybe 5 or 6 million tons of that, which will leave them 10 or 12 million tons short. This will mean that the Soviets will be severely restrained on their production of all meat products. This grain was primarily to be used as feed for livestock.

We have refused to let the Soviets fish in American waters, and they have a very heavy fishery commitment in the past. We have stopped the sale of all major products to the Soviet Union, like the construction of major plants, and any high technology equipment is forbidden to be sold to the Soviet Union much more strictly than it was in the past.

In addition, we require an individual item approval now on equipment going, for instance, to the Soviet energy producing industry. And I think the greatest psychological blow to the Soviet Union will be an effective Olympics boycott. It is going to be—the Soviet people don't even know, through their Government, that 104 nations condemned the Soviets' invasion of Afghanistan and called for their withdrawal from Afghanistan. The Soviet people do not know that the world is expressing extreme displeasure against the Soviets' invasion and occupation of Afghanistan. It's going to be very difficult for the Soviets to explain the Olympic boycott, particularly if we are joined by other nations like Germany, France, Japan, China, and Canada.

They may explain away an American absence from the boycott—I mean from the Olympics—as an expression of displeasure or a military action to eliminate detente and return to the cold war, but they cannot explain if 10, 20, 30, 50 nations join in the boycott. And so, I think that this combination of steps that we have taken has impressed the Soviet Union with the seriousness of their action.

The other point is that the Soviets have also grossly underestimated the commitment and fighting capability of the Afghan freedom-fighters. The Soviets had anticipated a quick mop-up of any military opposition to their invasion, the establishment of a puppet government, and then, perhaps, a major withdrawal of Soviet troops in just a few weeks. That has not happened. As a matter of fact, the Soviets are at this moment still building up their military troops in Afghanistan and have conducted their operation with a gross violation of human rights, including some very horrible atrocities.

So, the total combination of this effort is to convince the Soviets that they cannot invade another country with impunity, that the adverse consequences of this invasion are very serious.

INFLATION AND PRODUCTIVITY

Q. Mr. President, what has your administration actually done to get at the real cause of inflation, which many economists believe is lagging productivity?

THE PRESIDENT. It's good to remember that the increase in productivity of our country has not continued, but the productivity of the American workers is still the highest in the world. This is a fact which is very seldom mentioned. We would like to see the rate of productivity continue to increase and for our economy to continue to grow.

Ever since I've been in office, the American economy has always surprised us by its strength. And even though in November, December, January, February, almost all economists were predicting an immediate and quite severe recession, the figures, even in the last day or two, on the gross national product of our country indicate that the economy is still growing and not shrinking, as is the case in a recession for two succeeding quarters.

But we do have indications now that are fairly certain that we are entering a recessionary period. We want to make sure that this recession, when and if it comes, will be mild and will be brief. What preys on my mind constantly is the adverse effect, the damage, to individual American people and their families by the consequences of inflation and the consequences of recession.

The actions that I have taken with the full cooperation of the Congress to control inflation is already beginning to have some effect. And I need not repeat what I said earlier about the prospects for good news in the summertime if those two provisions are met.

There are two or three industries that are being severely hurt. One is, of course, the homebuilding industry, and we have taken actions to correct that. The second one is the automobile industry, and they're going through a phase of shifting from gas-guzzlers to more efficient automobiles in our country. We're doing everything we can to help with that change. The farmers are facing very high costs and also very high interest rates.

INFLATION AND AGRICULTURE

Q. Won't that fuel inflation again with farmers having the costs that they have now? Doesn't that have to work its way through the economic cycle the next year? Aren't we going to face enormous food price increases next year as a result of what's happening right now?

THE PRESIDENT. No, I don't believe so.

Q. With the enormous interest rates that farmers have to pay to buy seed?

THE PRESIDENT. No, I don't think so. What we've done since I've been in office, working very closely with the farmers, is to increase enormously both exports of American agricultural products and also the storage of large quantities of American grain on the farm. We have a very good reserve supply of grain on the American farms at this time, and our exports this year, even including the effect of the Soviet embargo, will be extremely high compared to any previous year. We'll set an alltime world's record for exports.

We anticipate, before this year is over, a substantial reduction in the inflation rate. And the present grain and livestock prices, in spite of very high inflation rates in recent months, are very low. As a matter of fact, we suspect that the farmers had it too low.

Q. When you say it's a substantial reduction, can you give us a number? Can you say x percent?

THE PRESIDENT. I've already given you a number, that if—I will repeat myself-I think if you look at the transcript of the answer to the first question, you will see that I was talking about an 8 percent or more reduction, if these two things are carried out. I'll be glad to repeat it if you want me to.

DEMOCRATIC PARTY PRINCIPLES

Q. Mr. President, I have a political question and a political followup, if I may. For the first time in your life and our generation, people are saying that the Democratic Party is not qualified to manage the fiscal affairs of this country. They used to say that about Presidents Harding, Coolidge, and Hoover, and they, of course, elected Franklin Roosevelt.

But I was interested—I'd like to get your views on the subject. I assume you disagree, of course, and I'd like to get your views on it. This week in Harrisburg, Senator Kennedy said that you are trying to out-Republican the Republican Party and that if the Democratic Convention in New York follows your lead and nominates you, the people will buy the real thing instead of a carbon copy. What he is saying, without saying it in so many words that you would lose to Governor Reagan; he could beat Governor Reagan. Would you address yourself to that—assuming that Governor Reagan is the Republican nominee?

THE PRESIDENT. Apparently, so far, the American Democrats disagree with what Kennedy has said. Looking at the delegate total makes that obvious. I'm not predicting what's going to happen in the future. What has fueled inflation, among other things, is excessive government spending and enormous deficits. When I ran for President in '76, the deficit was $66 billion, about 4 1/2 percent of our GNP. We're cutting it down now to a balanced budget in '81, and even the '80 budget as originally proposed was about one-half of 1 percent of the GNP.

Senator Kennedy is well known to be the biggest spender in the Senate, possibly the biggest in the history of the Senate, and that directly fuels inflation. If all of his proposals had been carried out since he's been [in] the Senate—and I'm thankful that they haven't—the deficit would be enormous, and the inflation would have been extremely high, even without an OPEC price increase, possibly. So, it's good for the American people to remember that those who advocate enormous Federal programs to meet the desires of every audience would directly fuel inflation to a catastrophic degree.

Also, the steps you take to control inflation are important. The only reduction that I know of in Federal spending that the Senator has advocated is a major cut in defense at the very time, in my judgment, when we do not need to weaken our country's defense. As far as the opinion of Americans concerning the Democratic Party and the Republican Party, on the other hand, I think that's a decision that would be made favorably to the Democrats in November.

We have inherited a very serious problem economically. Three years ago, when I came into office, the steel industry was on its knees. It's been greatly improved in productivity, utilization of plant capacity, of reductions in foreign imports. It still has problems, but they're working with the industry direct to correct them.

We've put 9 million new jobs among the American people, I think 431,000 new jobs in Pennsylvania alone in the last 3 years. We've averaged home construction almost 2 million homes, units, built per year. And this is the kind of Democratic economic policy that's given us a continued strong economy, in spite of enormous inflation brought about by OPEC price increases.

The final thing I'd like to say is that you've got to have some way to meet international and domestic challenges without equivocation and without misleading the American people. There are no easy answers; there are no magic solutions. There are economic problems that pervade the entire world. We have some candidates who are advocating simplistic solutions. Senator Kennedy, for instance, says all you've got to do is have gasoline rationing and all of our energy problems would go away. Well, he's advocating as a goal, 11 gallons of gasoline per automobile. And people that have to travel to and from work need to stop and think, what will that mean to their livelihood? The working people will be the ones to suffer, particularly those in the suburban and rural areas that have to drive.

He's advocating wage and price controls. No other responsible person in Congress will back this ridiculous proposal. Wage and price controls, even according to Senator Kennedy, would not include imported oil energy prices, it would not include interest rates, it would not include the price of food. The basic necessities of life would not have their prices controlled, even under Senator Kennedy's proposal. What would be controlled is the same thing that's always been controlled very rigidly, and that's wages. So, the average family, working family particularly, would have its wages frozen without any possibility of having prices of the things that it has to buy controlled at the same time.

So, the misleading statements that are made during .a political campaign, most of them don't work on a permanent basis. There may be some transient, temporary benefit derived from a particular audience that hears its hopes answered magically by some sort of response from a candidate, but in the cold analysis of what has got to be done, there is no painless solution, there is no quick solution, there is no magic solution, there's no law you can pass to eliminate inflation. And I believe the American people's judgment is so sound that they will penetrate the false claims, misleading claims, and get to the truth of the matter.

I would just like to say finally, in answer to this question, that the people have been extraordinarily sound and patient and wise in dealing with the Soviet Union, in dealing with the Iranian problem, in dealing with inflation, in dealing with high interest rates. It's unbelievable almost, looking back on political history, that an incumbent President could have done as well as I have, particularly not out campaigning. But I think the American people see that we're in it together. It takes a team effort to correct it, and there's no doubt in my mind that a majority of the American people will support a Democratic nominee in November.

SENATOR EDWARD M. KENNEDY

Q. Would you like to make big people of us by telling us that Senator Kennedy is putting self above country?

THE PRESIDENT. No, I wouldn't want to say that, because I think he's just as patriotic as I am. But it doesn't help under difficult times like this—you know, when I had to decide just before the Iowa caucus to impose a grain embargo, it was obviously not a good thing to do for Iowa farmers to lose 17 million tons of sales. My Democratic opponent was against grain embargo. We have— ,I don't know what his position is on the Olympics boycott, he's been on both sides of this issue. When we decided to advocate registration for the draft, even to register young men for the draft, he's opposed to that.

There has to be some firmness in our Nation's commitment in standing up for our own principles, our own rights, and there has to be some requirement that the leader of our country take action and make decisions even if they're unpopular temporarily. But I believe the soundness of the American people and their judgment will prevail.