Remarks and a Question-and-Answer Session on the Program for Economic Recovery With Editors and Broadcasters From Midwestern States

The President. Ladies, gentlemen, welcome to the White House. It's a pleasure to have you here.

You know, it has been told to me that when President Grant was in the White House that King Kalakaua of the Sandwich Islands dined here at the White House, and the President was amazed, because a whole entourage of the King stood behind him and inspected every morsel of food that he ate. That hasn't happened here since Tip O'Neill had lunch here recently. [Laughter]

I'm not going to take too much time with a monolog here, because I think it would be far better for all of us to get to a dialog. But I think you've probably had some briefings and I would just like to tell you of our pride in some of the things that have been accomplished, particularly in inflation—the fact that for 6 months it's been running at 3.2. It started at 12.4, and last month when, for the first time in 17 years, it actually dropped below zero, and we had a decline in the prices.

The savings, personal savings—and this is one of the reasons why inflation is so important and why our economic program is so important—with the deficits that continue to run, although we're determined that we are going to bring them to that point where we end deficit spending in this country, and balance the budget. But in the meantime, part of our interest rate problem, as we all know, is government having to go into the capital market and compete with private industry, private borrowers for the Federal funds. Well, the savings rate rose from 4.9 percent to 5.7 percent in February and March, and we estimate that as our program goes forward, that probably by 1985, there will be a $260 billion capital pool, which is far in excess of what the government would need to borrow, and we'd have adequate capital for industrial expansion for home mortgages and so forth.

The unemployment which is the last symptom of recession to disappear, I'm sorry to say—because having lived through and sought my first job in the very depths of the Great Depression in 1932, I have a kind of a traumatic feeling anytime with regard to the unemployed. But I think it's interesting to note that even in the depths of this great recession, there are 332,000 more people working than there were when we took office. The total percentage—I think we're going to find that we have a problem over and beyond recession with regard to employment when we have finally resolved this recession. And perhaps it is the great influx of people of a working age moving into the job market, people who heretofore were not a part of that job market.

There are 57 percent of the working-age people of America who are presently employed in spite of the horrendous unemployment that we have. The all-time record for that figure is 59 percent, set just a few years ago, because those figures are far above what has been over the years the normal for the percentage of working-age people who are actually in the job market.

Now, I could talk about a lot of other things: the tuition tax credit and why we ought to have it, and the fact that our tax program is not designed for the rich—it's across the board and evenly administered. But I won't, because I think that you want to get to some questions. But before you do, I understand someone gave you some scores on last night's prime-time television show. I didn't know how to act, not being on the late, late show. [Laughter]

But as of 11 o'clock, before we came here this morning, the number of telephone calls, which exceeds anything we've ever received on any other appearance, are 82 percent in our favor. And, as of 11 o'clock this morning, the telegrams and mailgrams are 86 percent in our favor. So, I'll quit while I'm ahead. But—yes.

Public Support for the Program

Q. Mr. President, in contrast to that reaction, our newspaper did a survey this week of people living in our area, which is a heavily Republican area. And we found that there's been a slippage of about 30 percent in the favorable ratings on your treatment of the economy. I wonder how that would affect your political dealings with Congress in terms of the budget passing, if that's widespread.

The President. Well, I know that there'd been that kind of slippage, and I think in a recession of this kind, you have to expect it—the people who are having their personal troubles and all. Of course, sometimes it depends on how the question is asked also.

But no, I think that—I've just met with some Congressmen; that's why I was late getting over here today—we're going forward with a budget that we believe is necessary to get us on the path of reducing the deficits, and, at the same time, putting them on a reducing scale so that we can look ahead a few years to a balanced budget. And maybe that'11—I prefer the poll, recently taken, that said that 77 percent of the people want us to balance the budget by cutting spending; only 13 percent want us to balance it by raising taxes.

The Speaker of the House

Q. Mr. President, David Stockman¹ told us this morning in a special briefing that this extraordinary effort between yourself and Tip O'Neill had failed because of unbridgeable, philosophical differences, and left us with the impression, or at least this reporter, with the impression, that you and Tip O'Neill are not going to be talking very much in the next weeks ahead. How can the people of Detroit and the Midwest, who are in economic disaster, expect to get some kind of help from this part of the country if the Speaker of the House and the President have reached a point where they can't talk to one another?

¹ Director of the Office of Management and Budget.

The President. No. I have to tell you that Tip O'Neill says to me that, after 6 o'clock at night, we're friends. And so, I talk to him; I just set my clock ahead. [Laughter]

No, there is a great philosophical difference. I would have to say of the Speaker that he truly believes in the philosophy of over these past decades that government must be the answer, that government spending stimulates the economy and, therefore, you don't cut the budget. And somehow the deficit just seems to be invisible where he's concerned. He doesn't think that counts.

Q. Well, at this point is the President saying, "I've heard all I want to hear from the Speaker of the House. I've heard it all before"?

The President. Oh, no. And what I said last night on the air holds, and this is what I said to our Congressmen. And I'll be meeting with others—and of both parties in the next few days, the first of the week. No, we continue now to—the parameters have kind of been set as to where we differ. And as I said last night, I think I proved yesterday that I was—or the day before yesterday-that I was willing to make some concessions and try to find a common meeting ground. And our leadership has gone out in the House and the Senate to start on that process.

Budget Negotiations

Q. May I follow that up further? Sir, in that line, is what you had on the table just before the collapse of that meeting with the Speaker—is that where you start from? Is that still there?

The President. Well, I don't know, because you must remember that the group that had met did not include the leadership of either the House or the Senate. And it was a kind of a—it was a bipartisan group to see if they couldn't find some area of agreement-not negotiating in a sense of saying, "Well, okay, let's settle on this point." So, what we had was a worksheet in front of us the day before yesterday in how far one side had come and how far the other side had come. And that's where I finally, as I say, swallowed hard and said, "Well, okay, why don't we split the difference?" But even that was not acceptable.

So, what you're going to have now is the normal congressional committee process, and our Senators in the Senate Budget Committee will go to work now and work out what they believe is a presentable budget. I'm sure the same thing will be going on on the House side, where the other party dominates. And then all of us together will have to come together in working out what they feel they can get passed in their two Houses and what I'll sign, if it is passed.

Q. That may not be able to be done, Mr. President, because David Stockman was very belligerent this morning about Tip O'Neill. And he kept saying, "I want to be fair and objective," but then every other word was how terrible Tip O'Neill was in one framework or another. I mean, he didn't sound like he was, or you were, willing to negotiate.

The President. Well, I can understand that, because in the meeting that we had the Speaker was just—there was no give whatsoever, even suggestion or hint, of negotiating. And this is why the meeting ended with nothing accomplished. But he's got to—he has to deal with the various factions in his House among his own party.

Q. But is he going to get together with the Congress and form a program that is successful? Don't you need someone with a little more diplomatic sense than, at least, Stockman—

The President. Well, as I say, he has to be guided also. In other words, he is no more of a dictator than I am. He can't order the Democratic majority in the House to do something. They will meet in their committees, and they will come up with what they believe are reasonable solutions. And he'll have to cooperate with that.

The Nation's Economy

Q. Mr. President, quarter after quarter we have been looking for some kind of a significant upturn in the economy, and now most of the analysts agree that this latest deadlock is going to further depress the economy, or at least slow down its recovery, particularly in terms of interest rates coming down. Given the fact that some polls do show slippage in support for your economic policy, how much time do you think the administration has left to get the economy turned around?

The President. Well, I happen to believe that if we had been able to walk out and say, "We have arrived at a bipartisan agreement, and here's what's going to happen," I have a hunch that the interest rates would have almost instantly started down, because there is no other reason than psychological for the interest rates staying where they are. Interest rates are high when you have an inflation rate and the lender must get back in his interest that depreciating value of his money and then the return—the earnings on his money—on top of that.

When we started, 12.4 was the inflation rate. A lender had to get 12.4 percent in interest and then he was only breaking even—and then had to get an interest rate on top of that. Now the interest rates have come down about 20 percent since we started inflation down. They are holding where they are now only because of the fear in the marketplace that it won't be permanent, that more of the Congress will act as Tip O'Neill did—and that therefore inflation—they can look forward to inflation going up again. But we're determined that's not going to happen.

So, I believe that when we show the money market that we have agreed upon a budget—and that process is coming and is going forward now; started as of last night-when we show them that we actually are going to reduce the spending and perhaps enhance the revenues, as even I suggested myself, without affecting our basic tax program, which is aimed at providing incentive for expansion, I believe then there will be some confidence.

As a matter of fact, out there where all of you come from, there are many signs that the free marketplace is taking care of that. There are areas where bankers have gotten together and made money available for automobile loans at several points below the market interest rate to stimulate auto sales. And it has worked. There has been a sudden surge. As a matter of fact, General Motors has just called back 2,000 workers from layoff. But it's also happening in the real estate market.

We're seeing and—here, just looking at the local papers in the real estate section-housing developments, where the holders of those—the construction companies that own those housing rates are offering i percent down and interest rates about 4 or 5 percent below the market. And I think this is a beginning sign that they recognize that there's no excuse. By all rhyme and reason interest rates today should be below 10 percent on the basis of inflation.

But you've had your hand up.

U.K.-Argentine Dispute

Q. Mr. President, do you see any possibility of military involvement by the United States in the Falklands dispute?

The President. No, I don't see any possibility of that. And we're still hopeful that before action takes place, that there still may be a diplomatic settlement. We've gone as far as we can go in that regard. There's nothing more that we can propose. We stand ready—and both sides know it-to help if need be.

But I know that there's still discussion going on at the U.N. And I believe that, down inside, neither side really wants the violence. So, we'll hope for that.

But, no, there would be no involvement militarily by the United States.

Ms. Small. ² One more.

Q. Concerning that

The President. She said one more.

² Karna Small Stringer, Deputy Assistant to the President and Director of Media Relations and Planning.

Q. In his statement, this morning, Secretary Haig said that, if there is a military conflict, the United States will be providing military materiel to Great Britain. May I ask what the nature of that supply would be and what Argentina's response has been to the statement?

The President. I haven't heard any response to that statement as yet. It was only just made this morning. That would only be in keeping with our treaties, bilateral treaties that we have with England by way of the North American [Atlantic] alliance. And we've had—at this moment we've had no request for any such help from the United Kingdom.

But I think what the Secretary was saying is, we must remember that the aggression was on the part of Argentina in this dispute over the sovereignty of that little ice-cold bunch of land down there, and they finally just resorted to armed aggression, and there was bloodshed. And I think the principle that all of us must abide by is, armed aggression of that kind must not be allowed to succeed.

Q. Would you grant what materiel Great Britain requests?

The President. I'm sure that we would, because I'm sure they wouldn't make any request that was not in keeping with the bilateral arrangements that we have.

Ms. Small. Thank you, Mr. President.

The President. Well, I'm told that I can't. They tell me that I have to leave here. I'm terribly sorry.

Q. May I ask one quick question about another island in the Atlantic that may be.—-

The President. If I can answer it in one word or two.

Cuba

Q. Will there be normalized relationships between the United States and Cuba sometime in your administration? What would that take?

The President. What it would take is Fidel Castro, recognizing that he made the wrong choice quite a while ago, and that he sincerely and honestly wants to rejoin the family of American nations and become a part of the Western Hemisphere and the American nations again. And it would take more than words. I think there are some deeds that if he performed those deeds it would prove his sincerity. And no one would welcome him more than we would.

Thank you all very much for being here.