Remarks and a Question-and-Answer Session at a White House Briefing for the Board of Directors of the National Newspaper Association

The President. Actually, I just came from a St. Patrick's Day lunch put on by Speaker Foley up in the Capitol. Very good hands-across-the-aisle kind of thing.

Well, welcome. We call this the White House complex. That's not the "beltway syndrome," but this is the White House complex. And you don't have to show any ID to get out of the place, so I'll put you at ease. I know it's been a pain coming in.

But I'm just delighted you all were here. I hope you've benefited from some of the briefings you've had here. And I'm delighted to see you all. We'll go to the questions, but I want to underscore some of the same points that I tried to make this morning to the National Association of Manufacturers annual Washington meeting about the economy.

The fact is that the economy remains sound and steady. The facts are these: The gross national product, up; the exports, up; personal income, up. Take a look, then, at the trade deficit; it's down. The Federal deficit -- I'm not happy with it, but down. And the prime rate -- far better than it was several years ago. And of course, unemployment is down. Last year's rate was the lowest in the past 16 years.

So, that is good news, but there's a great deal that we have to do to keep this expansion going. The economy at this moment isn't as robust as I'd like to see it; but we've got, basically, I think, a sound economy. Now we've got to do certain things. We've got to create incentive for investment. And I get hit in the political arena on my concept of cutting the capital gains tax, or reestablishing what we call a capital gains differential, some calling that a tax that favors the rich. I think it favors jobs. And I cited some statistics today that Japan taxes capital gains at 5 percent; Korea, Germany, Hong Kong, Taiwan tax capital gain at 0.

Now, you should be saying, "What are you doing to help us be more competitive around the world?" And the capital gains -- one of the reasons I favored it is, is I do think it will help us be much more competitive around the world. I'm also proposing to the Congress incentives to encourage research and development, so that'll keep us competitive.

Of course the most crucial investment is in the field of education. We know that we can't remain competitive or remain a world-class economy without first-class schools. So, we got together with the Governors and adopted national goals, not trying to tell the local schools what kind of curriculum to have but goals that all the Governors agreed with, and now try to go forward and try to meet those goals, such as Head Start and a literate America and then passing certain standards as the kids go from 4th-grade and 8th-grade and 12th-grade level.

And so, we've got sound goals. And if these work and if we're successful, not only in the tax end but in the education goals, then we're going to have not a "peace dividend" but a "growth dividend" and a return on our investment in expanded opportunity, more jobs, and a higher standard of living for Americans.

I made that point this morning, and I will continue to make the point that we need to do certain things to stimulate investment and savings. And that, I think, will help us become very competitive. I've had some fascinating meetings in the last couple of weeks with, first, the Japanese Prime Minister and then just a few days ago with Takeshita, former Prime Minister and very much of a power in Japan. And I did my level best to impress on these very important leaders, these friends of the United States, the need for us to have more access to their markets. So, we'll see where we end up.

But no further ado, who wants to go -- yes, sir?

Soviet Political Developments

Q. I'm Jerry Moriarity [Pine-Palm Publishing], from Minnesota and Arizona. I'd like to ask you: With all the power that's gravitating into the hands of Gorbachev while the Soviet world is collapsing about him, do you see any danger of a dictatorship evolving?

The President. No, because I think there's much less danger today given what they've done in their Parliament, or in their congressional side of things. They've come out of the totalitarianism of the past. They give the new President great power, but I don't see it as a threat, and I certainly don't see it as a threat at this juncture in history.

You know, I shifted our support from going more like this: "We support reform and perestroika," to "We support perestroika and reform, and we want to see Gorbachev succeed." I am convinced that one of the reasons we've had peaceful change in Eastern Europe is because of the approach that Gorbachev himself brought to bear on the problem. And I've consulted with him, had communications from him -- one, for example, on the question of Germany -- and I think he's a reasonable man.

So, I'm not worried about the constitutional changes because as you look at the total picture inside the Soviet Union, you see an evolution that none of us would have believed possible 5 years ago or 3 or 2 in terms of democratic institutions. And I'm talking about the power in their Congress. They had a guy named Primakov who is the head of their Congress. And he was over here, and he came and told me -- he said, "Well, I'm here to learn from the United States." And I said, "Mr. Primakov, you've come to the wrong guy in telling you what to do about the Congress. I'm not having too much luck." [Laughter]

But the very fact that he was here, you know, and in a spirit of very good will, getting -- and I was only being semifacetious there -- but it's very different, Jerry, than it used to be. It's amazingly different. I dealt with these guys back in the United Nations, and I can't tell you how different it is in terms of self-criticism on their part or debate. When you have a difference, you can do it agreeably. It doesn't have to be disagreeable like it was in the heart of the Cold War days. So, I am not overly concerned.

American Hostages in Lebanon

Q. You said in your national newscast the other day [see news conference, March 13] that the media and all the people there would be surprised and fascinated when the hostage situation is resolved. What did you mean by that? Can you expand on it?

The President. Well, I can't really expand, except to say I was addressing myself more to this incident of this phone call that proved to be a hoax and that I am not at liberty to discuss. In terms of the hostages, there was a wave of speculation a week or so ago that frankly confused me because we are going down every alley, we are trying every avenue to free the hostages. But there is no negotiation going on with any part of the U.S. Government or anything of that nature.

I saw the speculation, and I was wondering if it was some private initiatives on the part of lawyers or those representing the families of individuals held hostage, because I wish I could tell you that there was a serious, immediate effort that would pay off, but that isn't the case. So, when I was talking there, I was really talking about this phone call. And some of you may remember there were some cartoonists -- I gave them a great deal of opportunity to have some fun at, you know, picking up the phone -- "Who is this," you know, and all that. [Laughter]

But I would do it again because I feel -- I don't know why -- it weighs on me, the burden of Americans held against their will. And I don't mind taking one on the chin if I go the extra mile. I ought to do that as your President, I think. And I made the comment that the next phone call of that nature may have a little more difficulty getting through -- [laughter] -- but I'm glad we tried. So, I was talking in that context.

U.S. Economy

Q. More from the spirit of democracy, this good economy -- what can be done to move some of that into the Rust Belt areas, the pockets like the Ohio Valley Rust Belt?

The President. Not sure I have a specific idea, but I'll guarantee you that if we are successful in getting the budget deficit down, then you have an economic climate in which new businesses start up. We've had a reasonable success -- and I'm not crowing about it -- in the creation of small businesses that are not identified with one industry. And so, I think from the Federal standpoint the best thing we can do is to see that where we do have assistance -- education, and to installations going into places -- that there's fairplay. But I really believe, for the Ohio Valley or wherever else it is, that just fundamentally sound fiscal policy is the answer.

I am not in favor -- maybe this will be a disappointment, but I had better level with you all -- in targeting funds or kind of choosing winners and losers. I don't think that is the role of the Federal Government -- industrial policy in a broader sense, where you say we're going to put our efforts into one industry or another. I don't think that's the role of the Federal Government. Certainly, I don't think it's the philosophy under which I was elected.

So, there are programs. I'm strongly in favor of job retraining -- Job Training Partnership Act -- I think we're doing better on that. I hope our whole approach to education pays off. So, it's a general response to a very specific question.

Q. There's a growing sense of frustration across America that the standard of living in this country may be in decline. We hear the rich are getting richer, the poor are getting poorer. There are always reports that this country is no longer able to provide the standards of education, health care, housing that other nations in the industrialized world are able to give their people.

The President. We still have the highest standard of living in the world. I think if we are successful in our battle against narcotics -- which is not going to be done by the Federal Government alone, but certainly I must use the bully pulpit and our National Drug Strategy I, National Strategy II to try to set a tone for the rest of the country in what can be done to fight narcotics for a successful education, antidrug fight -- and then the competitiveness legislation that I've referred to -- math and science education, R&D, capital gains -- I believe that we will continue to have the highest living standard.

So, I am not that pessimistic, and yet I don't want to stand here with some Pollyannish attitude about the economy. There are some signs that worry me; there are some signs that make me feel that growth will continue and that the economy may be doing better now than it was a month or two ago. But I don't accept the premise that we're a second-class power or that we are in decline.

There's a marvelous book that was quoted around here about the decline of the United States. We've got some problems. But if you want to put it in a broad philosophical sense, we're winning. Our concept of freedom and democracy is winning around the world. And I sometimes wish as President that there were more funds readily available -- read that less of a deficit -- to help the fledgling democracies of Eastern Europe or of our own neighbors to the south, which we must never neglect.

But even then, even without the largess that we could bestow on others from budget surplus or operating in balance, we still can help countries; and we are winning in the ideological battle and the philosophical battle. And if we can make fair markets -- help create market incentives and then have fair markets -- I really believe we're just on the threshold of a whole age of increased living standards for the United States. But that's our goal.

American Volunteers in Nicaragua

Q. Mr. President, will you encourage the use of Peace Corps volunteers who see that aid actually gets to the poorest villagers to be a substantial part of the aid you're seeking for Nicaragua and Panama?

The President. Yes. I'm strongly in favor of the Peace Corps. I've talked to our Peace Corps Director. You know, it's not quite right there. Let me tell you something that does trouble me, though, in Nicaragua. I've answered the question because I'm a great believer in the Peace Corps. And I'll tell you, the demands for Peace Corps in some of these countries, particularly in Eastern Europe, now Poland and Czechoslovakia, is wonderful. It's a wonderful tribute to the young volunteers that go into the Peace Corps and to the concept of a great nation willing to help emerging democracies.

But I am frustrated a little bit by some of the Americans that have gone down to Nicaragua, been there for 2 years allegedly to help the people of Nicaragua. And then Nicaragua has a free and fair election, and it turns out these people were interested in helping the Sandinistas, the Sandinismos. And now they're picketing. Some of them have been -- I don't know whether they're still there -- in front of the U.S. Embassy because in their view the wrong people won the election. But that's not the role of the United States. If we want to help the people and there are verifiably, certifiably free elections, they ought to stay down there -- if they're acting in this philanthropic way -- and try to help, as the Peace Corps does in Nicaragua. Consider my spleen vented. [Laughter]

Federal Budget

Q. This noon you had lunch with Speaker Foley. In the spirit of St. Patrick, did you work out a deal on how to reduce defense spending?

The President. No, that has not been worked out. We've made some proposals; and he is, I think, waiting, in fairness to him, for his budget process to work. But I find him very reasonable. We differ philosophically on some of these questions. I've cited capital gains, for example. I mean, I just haven't properly sold an honorable man like Foley on what it means to create jobs, what it means to be competitive -- I cited for you now the differential between what it is in Japan, what it is in Korea, and all of this -- so I've got to do better in communicating with some of those people on the other side.

But on the defense, I think we must retain a reasoned defense. Colin Powell [Chairman of the Joint Chiefs of Staff] and Cheney have testified on a different kind of force. I've had strong support, vocal support, from Foley on things like our latest proposal on reducing our force levels in Europe, the proposal with Gorbachev to both reduce to 195,000 in Central Europe and then 30,000 additional troops that can be deployed under agreement with the Soviets. So, we're getting some support there, and I believe we will be able to work out an agreed defense program. I hope we will, because I don't want to have to see defense all caught up in politics. And the rapidity of change is such that I think we are in a good position to negotiate further reductions with the Soviet Union, and that's one of the reasons I'm looking forward to the summit with Mr. Gorbachev.

Lithuania

Q. Under what circumstances would the United States begin the process and when would we begin the process of recognizing an independent Lithuania or any other Soviet republic?

The President. In the first place, we have never recognized the incorporation of the Baltic States, which you are talking about -- Lithuania, Estonia, and Latvia -- into the Soviet Union. It was never a question of having recognized their incorporation into the Soviet Union.

I think there are standards of control over one's country -- or control over one's, in this instance, territory -- that guide recognition. But I think that the best role for the United States, having encouraged self-determination, having not been willing to recognize Lithuania being incorporated into the Soviet Union, is to encourage a peaceful evolution from now on.

Lithuania, under the right of self-determination, expressed themselves. To the credit of the Soviet leaders, all the way from Ligachev [Communist Party Chairman, Agrarian Policy Commission] to Gorbachev on over, they have said: We will not use force. We're peaceful. We want to see this resolved peacefully. It is very important to the people in these Baltic States that the evolution be peaceful. And so, I am, just as in East Germany when the Berlin Wall started down -- some of my political opponents were saying I was unenthusiastic about it. And I told one of our star TV commentators, well, that's the kind of person I am. I mean, some people jump with joy and do cartwheels, and I've got different genes or something. [Laughter]

But having said that, another political leader said, Well, you ought to go to Berlin, and the President should be seen at the wall. I had communications from the most respected leaders in East and West, several of them, saying, don't do anything silly. I mean, we're concerned now as this evolves. And sometimes caution and prudence, I think, are right. And I think in this case it proved right because that evolution has moved peacefully, and we did not provoke some kind of outbreak through exhorting there at the Berlin Wall that could have caused other countries to act differently.

I'm very pleased with the way the Lithuanian situation is developing, and we're watching it closely. We will encourage the fundamental principles of self-determination, and we will encourage the concept of peaceful change. And I hope both major parties in that discussion will continue to adhere to peaceful change.

Voice of America

Q. It seems to me that the Voice of America has been one of our best tools for exporting the ideas of democracy, and yet I understand that we want to cut their budget. Don't you think that it would be better if we just maintained the budget in order to continue to have this influence in the countries of the Eastern bloc?

The President. I'm embarrassed to say I don't have the figures, but I am not aware of any cut in the budget. Because like you, I accept your premise, your hypothesis. And you know why? Because Havel, Vaclav Havel, the playwright President of Czechoslovakia, expressed his not only appreciation for what the Voice of America did in keeping the hope of democracy and freedom alive but also insisted that it's essential that the Voice still go in there.

So, I don't think -- can someone -- we don't think that we have recommended cuts in the Voice, but maybe we could get your name. It's a good specific question. And, Barrie [Barrie Tron, Deputy Director of Media Relations], maybe you could find that, and we'll let you know the exact numbers.

But whatever the figures, believe me, there is no philosophical commitment to ratchet down or cut back on the Voice, because I agree with you that it's even more important that that message of freedom continue to be heard; and I accept the word of Havel in the process.

Now, we've got one more, and I see an urgent -- I've not been very good about the left side of the room. Yes, sir?

Foreign Aid

Q. Don Mulford, Montclair Times. Does it bother you at all the proportion of the foreign aid budget going to two nations, Israel and Egypt? Irrespective of any comment on Jerusalem -- [laughter] -- is there some thought of perhaps lowering the level of the funds going there in the hope that it might promote peace -- to stop funding both nations on such a large level of our resources?

The President. I would not favor that. I do favor greater flexibility for the President, which means a weakening of or an elimination of earmarking, because what's happened is a tremendous percentage, as Don points out, of our foreign aid budget is going to just a handful of countries. And you cited Israel, and I could add Egypt -- well, you added Egypt -- and there's Pakistan and one or two others. And by the time that money is disbursed, there is almost nothing.

And I'll give you an example. In Jamaica, I must confess that when Mr. Manley [Prime Minister] came in, based on his past record and his proximity to Cuba and his former fraternity with Mr. Castro [President of Cuba], I didn't know how it would go. Manley campaigned on a different policy this time. He said, "I'm not going to push our country into the arms of Fidel Castro." And he's been very good, and I salute him. And when I go to try to help the impoverished people of Jamaica, we have very little flexibility.

And so, I don't want to suggest cutting to good friends, but I have asked that we be accorded more flexibility, perhaps a fund that's known as a discretionary fund, for the President to be able to prioritize the interests of this country and go forward with them.

So, Bob Dole raised the question, and I saluted him for raising the question. And we will continue to work with the Congress. I think there may be some sentiment for it, but I don't think you'll see it in slashes in the budget to accomplish that end because there's some strong reasons of friendship for that and there's some powerful political forces that would argue against that.

Well, listen, thank you all very, very much. A pleasure to be with you.