Remarks and a Question-and-Answer Session With Representatives of the Western Forest Products Coalition in Klamath Falls, Oregon

The President. Let me, without directly replying to the things that have been said-because I know we'll take care of that in the question-and-answer session that follows-but Governor Atiyeh, Senator Hatfield, and Congressman Smith, and the people of Klamath Fails, I want to thank you all for welcoming me here and for these informative reports.

These are critical times, I know, for your industry, your workers, and your families. But my visit here and our improving economy convince me that together we can and will put the people of Klamath Falls and the rest of America back to work.

First, let me say what a pleasure it is for me to be in the great Northwest. When the rest of the country hears the name "Oregon," I think everyone thinks of a rich, green land that lured so many west—explorers, traders, and lumberjacks—to a State of tall timber and wilderness. And when William Cullen Bryant wrote that "forest groves were God's first temples," he must have seen the majestic sweep of Oregon in his mind's eye.

But, as you've said, Oregon and our mighty lumber industry have suffered greatly from this last recession—mills shut down, workers were laid off, and businesses closed across the State. These problems were triggered by profligate spending, excessive taxation, and burdensome regulations imposed from the other side of the Nation, in Washington, D.C. Deficit spending and a tax system which allow the Federal Government to profit from inflation drove up prices. Interest rates hit 21.5 percent. And suddenly the American dream of owning a home seemed an impossibility for millions of people.

With the housing industry on the rocks, the lumber industry ground to a halt. And Oregon's mills and forests fell silent. But in 1980 the people of Oregon, recognizing what was happening, voted an unmistakable mandate to clean up our economic mess. And in the last 2 years, that's just what I think we've been doing in Washington.

We've begun returning America to the strict principles of economic responsibility that made us great in the first place. We've made great strides toward limiting government's role in our marketplace and in the lives of our people. We've cut the growth in new regulations by a third, and government's rate of growth by 40 percent.

Incentive, hard work, and savings are being rewarded again by a reformed tax policy. We offset the largest tax hike in history that had been passed during the previous administration—we offset it with the largest tax cut in history. A third installment of the tax-cut rate will take effect in a few, short months. And America's working families will reap the most benefits. Our tax indexing provision also ensures that cost-of-living raises won't push workers into higher tax brackets.

Meanwhile, we're tackling the monster of deficit spending, which still threatens the road to recovery. We've proposed a budget and a fiscal plan that will steadily reduce Federal deficits until eventually we balance the Federal budget. As a result, the economy is finally revving up.

New home sales, as you know, in January were up 10 percent, and that was more than a 50-percent improvement over the same month last year. Housing starts increased by 36 percent, and that was the largest jump in history. Permits to build were up by 13 percent to the highest level since September of 1980. Overall construction spending rose nearly 9 percent, and that was the most dramatic improvement since 1946. And the increase in the sale of existing homes broke all the records in the books.

Something exciting is happening. You can feel it in Klamath Falls and, I think, in towns all across America. Inflation has risen at an annual rate of only 1.4 percent for the last 6 months. And that's down from the agonizing 12.4 percent, which was the annual rate when we took office. That success, along with a moderate monetary policy, has enabled interest rates to come down, key to our recovery.

Many people just don't realize the parallel between the two. And this was why inflation was our prime target from the very first day in office. If you're going to lend money and the value of that money is depreciating because of inflation, you have to get an interest rate high enough to not only bring an earning on your money but to offset that depreciated value so that when the dollars are given back you receive the same purchasing power that you loaned in the first place.

Well, those rates dropped again last week and are now less than half of what they were in 1980. I believe they're going to go down even farther. Lower, more realistic interest rates are unlocking the chains that are binding our people, our businesses, and our economy. Still more improvement will free us to create the kind of prosperity that was our heritage and that we must restore for ourselves and for our children.

Already, overall productivity is improving. Our automobile industry is rebounding, and real wages are rising for the first time in several years. Unemployment, though still painfully high, has begun to dip, and the leading economic indicators have been signaling recovery for 8 out of the last 10 months. The latest report on those indicators released this week showed the largest monthly gain in more than 30 years.

Now, all this is good news for Klamath Falls, for Oregon, and for America. After nearly a 3-year slump, the forest products industry is coming back. I just left a lumber mill that has reopened, and I can tell you the whir of the machinery there was music to my ears. Since February of 1982, about 475 plywood mills and sawmills around the country have reopened or resumed full production. Here in the West, the number of employees directly affected by sawmill closures or production curtailments is half what it was a year ago.

Loggers and sawmill workers are going back to work. And when people in Klamath Falls go back to work, it means that papermakers, carpenters, homebuilders, and an endless array of others across America are also being called back to the job.

Now, I know times are still very difficult. We're not out of the woods yet. Maybe in this particular place I should put that another way. [Laughter] You're not back in the woods yet as much as you would like to be. [Laughter]

Your industry is still operating far below capacity, and many thousands of workers here still wait for that call-back notice. But our recovery is building and gaining in strength. And I believe it will be powerful and sustained.

We've had seven previous recessions since World War II in every one of which government rode to the rescue with a quick fix and an artificial stimulant and guaranteed that in anything from 2 to 3 years we would have another recession—and it was always worse than the last. Each one started with a higher level of unemployment to begin with and with a higher inflation rate. This time we've tried to go back to the basic rules of economies that built this country and have a recovery that is based on commonsense business practices and that will be lasting and that will be without inflation.

I believe it will be powerful and sustained-this recovery. It should be because, as I say, it is the result of time-tested, commonsense economic principles that have worked when they've been tried.

When I began speaking today, I described how other Americans view your abundant national wealth out here. I would like to add that when we think of your people, we think of independent men and women of strength and foresight, imbued with a frontier spirit. I wish the rest of the country could see and hear what I have today, because they would realize how richly that reputation is deserved. I think they'd appreciate, as I do, that the Oregon spirit is the American spirit and that with that spirit, there is no challenge too great for us to overcome.

They say that out here in the great Northwest the trees grow so high that it takes a whole week to see the top of them. Well, it's that way with good results, too. Sometimes the reward comes a long spell after you begin the effort. But anyone who's looked out over the top of an Oregon forest knows how worthwhile the wait can be.

So, I thank you for your vision, your hard work, and your faith in America. And together we're putting our country to rights again, and I think it'll be worth the effort and the wait. And I thank you for giving me this opportunity, and God bless you all.

But let me anticipate, in the line of questioning, just a couple of the things that were said here earlier.

I recognize some of the problems that have been pointed out here. I have a man right now working, investigating everything administrative that can be done with regard to this particular problem here. And we are going to continue to work on that to find out, first of all, all that we can do administratively.

There are other things that have been brought up here that I know will be repeated in the questioning, so I'll stop and let us get to that questioning. That's what I've been looking forward more to than making a speech. So—

Mr. Murphy. ¹
Thank you, Mr. President. We do have some good news for you, too. And I think John Stephens ² wants to share a little bit of that with a question or two.

¹ Peter C. Murphy, Jr., president of the Murphy Co. in Springfield, Oreg.

² President of the Roseburg Lumber Co. in Roseburg, Oreg.

Q. Mr. President, since last fall, our company employment has increased by over 750 full-time jobs. All of our plywood plants are now running. And we've realized a 13-percent productivity improvement in that same period. Now, this improvement is partly because of market recoveries. But the most important reason were the short-term timber contracts made available to us from the Forest Service and the BLM [Bureau of Land Management]. Will these kind of contracts continue to be available?

The President. Yes. I don't think there would be any change in that at all. And, as a matter of fact, all of you know better than most some great misunderstanding, for example, about our national forests and the BLM land and all.

I ride fairly regularly through a national forest in the East now when I can get to Camp David. And I'm amazed, and I know you're all aware, of what people think is nature being preserved, but how such a useless tangle and then the taking over by lesser valued trees is taking place because there is a lack of harvesting in there that would keep those forests more alive and what they were supposed to be. But the tangle of downed trees that have been allowed to mature, grow old, and then, before their harvest, succumb to insect and age reveals that we have a long way to go in recognizing the assets we have and making full use of them, and at the same time retaining better forestland for those who want it for recreational purposes and all than we presently have.

Q. Mr. President, our company and many other small companies like ours have endured heavy financial losses in the last couple of years. We can't survive another downturn. Can we count on interest rates continuing at their present levels or, hopefully, lower?

The President. Hopefully, lower, because we're going to continue the fight against inflation that—you know, most people have forgotten that for more than 30 years inflation was a deliberate, planned government policy. They called it "the new economics." And I remember being out on the mashed potato circuit about 25 years ago complaining about it, that it wouldn't work. They said that a little inflation was necessary to maintain prosperity. Well, I said a little inflation is like radioactivity. It's cumulative. And pretty soon, it gets out of control—as it has.

And, as I say, these last 6 months—for the year of '82, the official annual rate was 3.8, down from that 12.4. But for the last 6 months, it had been running at 1.4. And even industry had a part in contributing to institutionalizing that. When industry yielded wage contracts that raised wages above increase in productivity, then that became an increase in price that had to be passed on to the customer. And, thus, you built in further inflation. So, industry, itself, has got a hand in this battle; labor has a handle in this battle to ensure the projection.

But we're going to do everything we can. And I am convinced that, as this continues to go down—right now, interest rates are still higher than they need to be, cannot be justified on the basis of present inflation. It can only be a lack of faith that the government in Washington is going to stay the course—you maybe have heard that expression before— [laughter] —and continue this fight.

They're still skeptical that we might go back to the old ways of the artificial stimulant and then the increased inflation. Well, I'd say, "over my dead body," but there are too many people willing to take me up on that. [Laughter]

Q. Mr. President, we understand your recent recommendations concerning the deregulation of natural gas allows for a renegotiation of the contracts. Is it possible for this type of approach to be used in reference to government timber sale contracts?

The President. This is what, as I say—I have someone in my office right now that is looking into this and all the administrative terms. And I know that this is what's on the Senator's mind, also. And this is something very definitely to be looked at.

We know there are two industries in this country that—either one of them alone can start a depression or recession: the housing industry, the automobile industry. And because of the high interest rates, we got a double-whammy. It came from both. And it started, it was evident, clear back in late '78 and in '79, and just kept on skyrocketing and going to the present situation that we have.

So, those are all things that we want to look at, because we realize that half of the unemployment today may be structural and is—the need for training for new industries and new jobs. The other half of it is brought on by the recession. And the only way to get that half back to work is to get this economy moving again.

Q. Mr. President, you may be aware that proposed additional wilderness legislation in the West would take millions of acres of land from our existing timber base. Would you consider vetoing any unreasonable wilderness proposals?

The President. You used the right word there to allow me—I usually am reluctant to talk in advance about what I will or won't veto. If it's unreasonable, it'll be vetoed.

But I know that problem also. And, you know, there has been a great effort spread over a number of years by the Government to get possession of more land. Now, the United States Government owns one-third of all the real estate in the United States. And the bulk of that is here in the West. And they've used various devices to do it.

In '66, when I was running for Governor-and I remember I addressed a forestry products group in San Francisco, and my opponent went out and said that I, in my address, had said that if you've seen one tree, you've seen them all. I never said any such thing. But then it was outdoor recreational land. You remember that there was a big wave. They were even foreclosing on some mining claims, and they were buying up land and using eminent domain to do it, claiming that it was needed for the future so there would be outdoor recreational space. Well, finally when they'd exhausted about all they could do with that, then came the environmental surge and the urge that—for the environment—[inaudible].

We have 80 million acres of wilderness land now. This is land that you cannot have a road in or anything of the kind. It's there because out of the 250-odd million Americans in this country, we realize that at least 240 million of them are backpackers who want to hike into that wilderness area. [Laughter]

But at one time one of the public officials in some of this land acquisition in Washington made a statement that was shocking. He said, "In the beginning we urged the private ownership in order to get development of the land. Now it is necessary for government to regain control over the land." And I realize, yes, there are some areas that I think still should be protected, that are so unique—I mean, in addition to the 80 million, to add to those. But let's be reasonable and sensible about that. And we intend to be. And if there is definite reason from an esthetic and the uniqueness of the land, a standpoint to do that, to add that to the wilderness, fine; but not to go out on the wholesale amounts that they are talking, because that wasn't the intention, and the private sector has not been guilty of rape of all the natural resources. There is today in the United States as much forest as there was when Washington was at Valley Forge.

And the industry itself now, with its sustained yield approach of replantings and cuts. There was a period once upon a time when there were so few people and this country loomed so big and unexplored that, yes, people used and then moved on. But that isn't true anymore. And—

Mr. Murphy. I was just going to say we have time for one more short question, Mr. President.

The President. Oh, I'm sorry. I'm answering them too long, but I—

Q. The President, many of our mills have their backs against the wall. They actually can't hold out much longer. Could you help to speed up the effort to find a solution to our timber contract problem?

The President. Yes, we shall work as fast as we can. I know that—some other things—I know that the threat of some subsidized import into America and so forth is being investigated by ITA, and that report is due in in July. But I know also that our Commerce Department is looking at some of that and expects to have an answer in May, after a thorough investigation.

But, yes, we want to do everything we can, because, as I say, your industry and all that surrounds it, housing and so forth, this can start and this can end a recession, this industry. And it's encouraging that—and the word that was spoken about employees that are back at work. Just last October, the unemployment in your industry was just about 22 percent. It is now down to 14.1 percent. That's still too high, much too high. But that shows quite a sizable drop from October to the present. And we know that the housing starts are up at a level of about, annualized, a million seven. So, we're going to do everything we can.

Our idea is that—when I said in my State of the Union address, I know some people cheered the one line, but cheered for the wrong reason—when I said that government has a part to play, yes, it does. Government has a part to play by not doing the stupid things that it's been doing for so many years and by getting out of the way and getting off the back of business and industry.

Well, I won't try to top that. [Laughter]

Q. Well, Mr. President, we just can't thank you enough for sharing your insight into our forest products industry with us here today. It obviously is a historic day, a memorable occasion for all of us. We will make every effort to build on the spirit of cooperation you have extended to us. We believe we can play a very major role in your economic recovery, and we want to be a major part of it.

The President. Well, we welcome you. And we won't try to be a senior partner.

Q. Mr. President, we have—you have a name [plate] sitting in front of you, but this is one that is out of about a 300-year-old Douglas fir. And it's got a little gold chain around there, and it memorializes our visit here in Klamath Falls with our industry here today. And we'd like to have you take that home with you.

The President. Well, thank you very much. I'd be very proud and happy to have that. Thank you.

Well, I guess the time has come to move on.

Q. Thank you very much, Mr. President.