The President's News Conference

ANTI-INFLATION PROGRAM

THE PRESIDENT. Last night at this time I was participating in a remarkable event, truly historic in the development of our Nation. I was in the Cabinet Room, next to the Oval Office, along with the leadership of the Democrats in the House and the Senate, discussing the features of and the implementation of a comprehensive, anti-inflation program for our Nation. We mutually pledged to assure that this program would be successful, and the Democrats, the leadership, after 10 days of intense discussions and negotiations with my administration, themselves offered adequate cuts in the existing budget to ensure a balanced budget for 1981.

I'm very grateful for this cooperation. And during the same afternoon the Republicans, the leadership there, pledged that if the Democrats would take the leadership they would also cooperate, which I think will ensure that the Congress will guarantee that with our cooperative effort this will be successful.

Just a few hours ago I described the basic elements of this program, to intensify America's battle against inflation. These actions will be painful. They will not work overnight. But they are necessary to preserve the power of the greatest economic nation on Earth.

Inflation is bad in our country, but it's not as bad as that in some of our major allies, Great Britain, Japan, Italy. We have many reasons for this high inflation rate—the unprecedented increase in the price of oil, the fact that we as individuals and a society have tried to beat inflation by borrowing. It's as though we have come to believe that a penny borrowed is a penny earned. Our whole society, beginning with the Federal Government, must live within its means. We must exert discipline on ourselves. We must act decisively, and we must act now. And I will set forth a revised budget for 1981 that will be a balanced budget.

To achieve this goal I will defer or reduce or cancel many new programs which have been proposed recently to the Congress. I will cut expenditures throughout the Government. I will freeze Federal employment immediately, to cut down the total number of employees on the Federal payroll by at least 20,000 between now and the 1st of October. These budget cuts will be difficult politically and also because there will be inconveniences and disappointments among many people. But some sacrifice now will be much less onerous and burdensome, particularly to the needy among us, than the serious suffering that will occur if we don't arrest the inflationary spirals.

We will have a balanced budget beginning in October. To ensure this goal I will veto any legislation that exceeds our spending limit. I will use my powers under the budget acts to hold down budget-busting appropriations, and, if necessary, I will ask the Congress for additional powers to make sure that these goals are realized.

A balanced budget is not a cure-all, but it's a necessary part of an overall commitment. Without a balanced budget commitment there would be no way to put together a credible anti-inflation program. The Federal Government simply must accept discipline on itself as an example for others to follow.

Secondly, our governments have been borrowing, but so have people and institutions in our Nation been borrowing too much. So, credit controls will be implemented, as authorized by me and as administered by the Federal Reserve System of our country, to moderate the expansion of credit, with special emphasis provided, however, to meet the needs of small businesses, farmers, and those who would buy homes.

Third, we'll have improved compliance with our voluntary wage and price constraints. Mandatory wage and price controls will not be used. They have never worked in peacetime. Prices have always continued to rise even under an enormous Federal bureaucracy, and the greatest harm has come to the average American family living on a fixed income with frozen wages while the cost of vital necessities like food and fuel continue to go higher and higher.

And fourth, as I said earlier, the price of imported oil has more than doubled in the last 12 months. Last year's increase in prices of oil alone was greater than all other increases in the price of oil since oil was first discovered many years ago. We simply must cut these imports. We are now approaching the final stages of implementing through law a comprehensive and an adequate energy policy for our Nation. But we cannot meet the goal of reducing imports adequately unless we control the unwarranted and extravagant consumption of gasoline.

Therefore, to make reductions in oil imports, I will impose an oil import conservation fee, equal to about 10 cents a gallon, to cut down on the use of gasoline. The first year this will result in savings of 100,000 barrels a day of imported oil; after 3 years, about 250,000 barrels per day will be reduced because of this charge. And we will be able, this year, to cut our gasoline consumption, and therefore oil imports, 400,000 barrels of oil per day.

I'll take long-term efforts to improve the vitality of our economy and to increase productivity through tax reductions. But these tax reductions can only come after we have been sure that we can exercise and maintain the discipline of a balanced budget.

There are no quick answers to inflation. There are no easy answers. There are no painless answers to inflation. If so, they would have been carried out long ago. The American people are not going to be deceived on this issue. The projects that I've outlined will involve costs; they involve pain. But the cost is far less in taking action than it will be if we take no action.

I must tell you very frankly that the results will not be immediate. We can expect several more months of very high inflation. But toward the end of this year the inflation rate will begin to drop, I think drop substantially.

The hard truth is that there is no easy way. Americans must do this together.

The final point I'd like to make before I take your answers is that our Nation is strong and vital. We are similar to a superb athlete who has simply gotten out of shape. The American economy has an underlying strength and resiliency. With discipline and restraint and with a willingness to accept, perhaps, some aching muscles at first, our economy can perform again like a champion. In the fight against inflation what is at stake is more than material wealth, it's more than material comfort; what is at stake is whether we as Americans, as a nation, as a people, will control our own destiny. In order to do so we must control inflation. And the Congress and I and, I believe, our entire Nation is determined to make this effort successful.

Thank you very much.

Mr. Cormier [Frank Cormier, Associated Press].

QUESTIONS

BALANCED FEDERAL BUDGETS

Q. Mr. President, do you look forward to more than one balanced budget in a row—because if you look for more, we haven't had two in a row since Eisenhower, three in a row since Truman, and four in a row since Herbert Hoover. I just wondered how you look forward to that.

THE PRESIDENT. My hope is that once we establish a precedent of a balanced budget under the present very difficult circumstances, that we will be able to maintain that financial discipline and that budget discipline that we have achieved.

ISRAELI SETTLEMENTS

Q. Mr. President, is Israel keeping faith with the Camp David accords and the autonomy talks, when by government policy it continues to confiscate the land of Palestinians?

THE PRESIDENT. There is nothing specifically in the Camp David accords concerning the settlements themselves. There is an agreement in the treaty between Israel and Egypt about settlements that have been established in the Sinai region, which is Egyptian territory. I might say concerning that, that our policy is set by me, as President. There has been no, change in our policy. That policy is guided by U.N. Resolution 242 and 338, the basis of all of our negotiations; by every word in the Camp David accords, signed by me on behalf of our Nation; and by Begin and Sadat on behalf of Israel and Egypt. We intend to carry out that agreement.

Right now we are indulged in some very difficult but very important discussions and negotiations to establish full autonomy on the West Bank, Gaza area. I believe that these discussions can be successful. It's crucial to our own Nation's security that they be successful, that we have peace in the Middle East; and, it's, I think, crucial to the whole region that these discussions be successful.

I might add one other point. It's not easy. We've had tedious negotiations at Camp David. We had tedious negotiations almost exactly a year ago, when we finally concluded and signed the Mideast peace treaty. Our principles are well known by Prime Minister Begin and by President Sadat, and I stay constantly in touch with them and our negotiators to make sure that we are successful.

I believe that we will have peace in the Middle East, with a secure Israel behind recognized borders, with the Palestinian question being resolved in all its aspects, and with peace between Israel and her neighbors.

Q. You say the policy is set by you.

THE PRESIDENT. Yes.

Q. And this is a question about the recent mix-up on the U.N. resolution. My question really goes to process. The resolution was not the resolution that you wanted. Are you the only one who can determine that it's not the resolution you want? Does your staff not know when it's not a resolution that you want, or is it possible that some of your foreign policy advisers are trying to make policy for you?

THE PRESIDENT. I don't think anybody in my administration doubts that I'm the one that sets the policy. The U.N. resolution, as it was passed, was not in accordance with the policy that I have established. It was not in accordance with the agreements that I had made with Prime Minister Begin, well understood by President Sadat.

We had agreed among us that we did not approve, as an American Government, of the settlements on the West Bank and Gaza area—that they were an obstacle to peace. But we also had agreed that during the time of the negotiations, we would not call for the dismantling of existing settlements. That was to be resolved as an issue in the ongoing negotiations.

Also, President Sadat, Prime Minister Begin, and I agreed on a paragraph in the Camp David accords concerning Jerusalem. It called for, and we still believe, that there should be an undivided Jerusalem, but that those who look upon those places in Jerusalem as holy places, should have unimpeded access to them for worship.

This resolution in the U.N. violated those two very important and basic principles. Those issues have not yet been resolved. There is nothing in this resolution at the U.N. that established the permanent status of the West Bank and Gaza area. That will be established after a Syear interval period, during which full autonomy is enjoyed by the residents of the area. So, the resolution was in violation of my policy.

I might say that I have absolute confidence in Secretary Vance. I have seen him days and days and weeks negotiating to achieve the security of Israel and the peace of Israel. It was an honest breakdown in communications between me and the United Nations. I'm responsible for anything that goes wrong in this Government, and I'm also responsible, on occasion, for things that go right. Secretary Vance is responsible for the State Department. But to say exactly how the communications broke down is very difficult to do.

But I made it known as quickly as I discovered it, that this resolution did violate the policy and disavowed our vote for it.

ANTI-INFLATION PROGRAM

Q. Mr. President, the other three times that you proposed a new anti-inflation program, you pledged each time that they would help restrain the rate of inflation, and yet we've seen it climb from 5 percent, when you took office, to more than 18 percent now on an annual basis. What assurance can you offer the American people that the plan you announced today will bring down the rate of inflation?

THE PRESIDENT. I have absolutely no doubt that the plan that I outlined today, when implemented, will indeed bring down the high rate of inflation which exists today. There are some elements that cause the present high inflation rate-which is a worldwide problem—over which I have no control.

One is the price of foreign oil, when we are importing so much of it. As I said earlier, it has more than doubled in price in the last 12 months. In fact, just 1 month ago, the price of energy in our own Nation increased 7 1/2 percent in 1 month, which is an annual rate of 90 percent. But I can control how much oil is imported at that high price, and we can shift to more plentiful supplies of energy' in our own Nation.

We have not had a balanced budget in 12 years. We've only had one balanced budget since 1961. But I can guarantee you that we will have a balanced budget in 1981, fiscal year beginning October 1.

The Nation is aroused now, as it has never been before—at least in my lifetime—about the horrors of existing inflation and the threat of future inflation. Never in the history of our Nation has there been so much of a common commitment and a common discussion and a common negotiation between any President and his administration and the leaders of the Congress. This is a mutual commitment. It's not just something that I'm proposing to Congress with little expectation of success.

So, there are several elements, including those I've just described to you, that make it certain, in my mind, that we will have a substantial reduction in the inflation rate during this year—the latter part of this year. And I believe that we'll be under double-digit inflation next year.

STRATEGIC ARMS LIMITATION

Q. Mr. President, I'd like to ask you two questions if I could, please, about the SALT process—one general, one specific. The first question is, given the fact this is an election year, do you still intend to push ahead with Senate ratification of SALT? If so, when will you ask the Senate to ratify SALT? The second question deals with the Trident submarine. When that begins sea trials in July, I think under the SALT I agreement you will need to begin decommissioning Polaris submarines to stay within the limits of the SALT I agreement. Will you begin decommissioning Polaris submarines when Trident begins its sea trials, or will you opt for technical violation of the SALT I agreement?

THE PRESIDENT. The agreement which we presently have with the Soviet Union, which I intend to honor as long as they reciprocate, is to comply with all the terms of the interim SALT agreement, which is known as SALT I.

SALT II has been signed by me and President Brezhnev. I consider it binding on our two countries. It has not yet been ratified. We will observe very closely to make sure that the Soviets comply with this agreement. I will not ask the Senate to ratify SALT II until I have a chance to consult very closely with the congressional leadership on the Senate side, particularly Majority Leader Byrd and others who work with him, both Democrats and Republicans.

Because of the Soviet invasion of Afghanistan it is obvious that we would not be successful in ratifying SALT II treaty at this time. It is still on the calendar. It will not be brought up until after that consultation takes place. I will also continue to consult with congressional leadership as far as compliance with SALT II is concerned.

But my present intention, within the bounds of reciprocal action on the Soviet Union and consultations with the Senate and, to some degree, the House leadership, I intend to comply with the provisions of SALT II.

Q. Mr. President, I'm a bit confused by that last answer. You both said that you regarded the treaty that you signed as binding on this country and that you would consult on compliance with it. I guess the question then comes down to whether or not the United States, in absence of ratification, would observe the provisions of SALT II and the notion that it's in its own best interests and, I suppose, inviting Soviet comparable action. Is that what you're saying to us?

THE PRESIDENT. Ordinarily, when a treaty is signed between the heads of two nations, the presumption is that the treaty will be honored on both sides absent some further development. One further development that would cause me to renounce the treaty would be after consulting with the Members of the Senate to determine an interest of our Nation that might cause such a rejection, in which case I would notify the Soviet Union that the terms of the treaty were no longer binding.

So, there will be two provisos in the continued honoring of the SALT II treaty. One is that the Soviets reciprocate completely, as verified by us, and secondly, that the consultations that I will continue with the Senate leadership confirm me in my commitment that it's in the best interests of our country to do so.

FEDERAL GRANTS TO CITIES

Q. Mr. President, you've been accused of buying votes in this particular election. With your efforts to balance the budget, will you continue to favor those particular cities and persons within those cities who favor your reelection?

THE PRESIDENT. We have never favored any person or cities who favored my reelection.

FISCAL YEAR 1981 BUDGET

Q. Mr. President, you submitted your fiscal '81 budget just 7 weeks ago, and then we had the January CPI figures and everyone was shocked, of course. My question is, why, sir, could you not have anticipated increased inflation and submitted a balanced budget at that time, the kind of cuts that you announced and the kind of package that you announced today and, as you mentioned a minute ago, arouse the country at that time?

THE PRESIDENT. Well, circumstances have changed drastically since we completed work on the 1981 budget, even since I submitted it to the Congress in January. At that time there was a general presumption that quite early this year we would be faced not with rapidly escalating inflation, but with an actual recession. Everyone has been amazed at the strength of our economy, the rapidity with which growth has occurred, of business investments, an actual reduction in unemployment, and other indicators of a very hot economy in spite of the fact that energy prices and other reasons have caused the inflation rate to escalate. So, when circumstances change, as I've just described, we must change our policy.

I think that when we submitted this budget in January it was a very stringent budget. When I ran for President, for instance, in 1976, the budget deficit was over 4 percent of the gross national product. The 1981 budget, as submitted, had cut that 4 percent down to about one-half of 1 percent. So, we've been making good progress in cutting down the budget deficit. But now, because of increasing evidence of uncontrollable inflation and uncontrollable interest rates if we don't take more drastic action, we decided to take the drastic action that I described this afternoon.

PROGRAMS FOR MINORITY GROUPS

Q. Mr. President, the Congressional Black Caucus has labeled your 1981 budget proposal an unmitigated disaster for racial minorities, the poor, and the elderly. And they also say it reflects the level of indifference that the administration has adopted towards the minority community. Could you respond to that?

THE PRESIDENT. Yes. That's not an accurate assessment, but I think it's an accurate report that you just gave on their attitude. We've had a very successful first 3 years in increased programs and increased sensitivity to the needs of the disadvantaged people in our country, including minority groups. We've had an unprecedented increase in jobs. We've had all unprecedented commitment to the urban areas of our country, inhabited by the poor and quite often by minority groups. We've had a 75-percent increase in educational funds from the Federal Government, primarily oriented toward the disadvantaged children and others. So, we've got an excellent record so far, not only in the allocation of funds and programmes for those who need them most but also in the appointment of very knowledgeable and very competent minority representatives, in my administration as a whole, and also to Federal judgeships and other similar positions in the regulatory agencies.

Now, in my opinion, the people in our Nation who will most benefit from controlling inflation are the ones who are most damaged by it, and that's the ones on low incomes, on fixed incomes, who have to face day after day an 18- or 20-percent increase in cost of the things they have to buy on those relatively fixed incomes. There will be some transient inconvenience or disappointment, but it will be much less than the permanent damage to the quality of life of those poor people on the long term if we do not get inflation under control.

So, in my judgment the best thing that I could do for the people about whom I am deeply concerned, the disadvantaged and the poor, is to take every step to control inflation. The cuts that we have put into our plans that will be revealed to the Congress very shortly have been worked out by the very liberal Members of the Congress who helped to initiate those programs in the first place. And as we have put together this package, we have had a special sensitivity for those who are most disadvantaged and have minimized the adverse effect on them by the cuts that will be proposed.

AMERICAN HOSTAGES IN IRAN

Q. Mr. President, can you give us some new word on the hostage situation in Iran? Is the administration content to just wait until the parliament is elected, or do you have any plan to resolve this? Do you plan to bring any more pressures on Iran?

THE PRESIDENT. We are not content for the innocent American hostages to be held by terrorists for one single day. This is an abhorrent act in direct violation not only of international law but the very Islamic principles which these militants profess to espouse and to support. We have done everything we possibly could in the last 4 months to honor the principles of our Nation, to protect the interests of our Nation, to try to preserve in every way the health and the lives of those hostages, and to work for their freedom.

I don't know when they'll be released. We have constant negotiations and attempts to provide continuing communication with the leaders of Iran. I believe that when there's a stable government in Iran, which may possibly occur after the elections—the vote, as you know, began today. But our past few days have been characterized by bitter disappointments, because, in effect, commitments that had been made by the newly elected President and administration of Iran were not honored, because prior to these parliamentary elections they obviously do not have the authority to speak and carry out their own commitment. Whether they'll have that authority after the elections are completed I don't know. I certainly hope so.

SENATOR EDWARD M. KENNEDY

Q. Mr. President, how much longer before you will feel that you have whipped, to use your phrase, Senator Kennedy's donkey? [Laughter] Will it take the Illinois primary, or New York? At what point do you feel that you will have this job done?

THE PRESIDENT. Well, I think we've got 35 or 36 primaries, and the rest are caucus States. During this 5-day period, I think, we've got 11 elections. We've done very well recently in those contests, but the acknowledgement of defeat is a judgment to be made completely by my opponents, and not by me. And I have no indication arid no expectation that there would be any termination to their election efforts anytime in the near future.

IRANIAN IMMIGRANTS

Q. Sir, why did we let in over 9,000 Iranians to come here and be citizens of this country after they took our hostages? Was that an accident or what happened?

THE PRESIDENT. No, it's not an accident. There's a difference between a great and a free and compassionate democratic nation on the one hand, and other countries from which refugees flee, looking for freedom, looking for the right to worship as they please, trying to escape possible persecution. We have screened the immigrants very closely, and in every instance, they have been determined to have a real, genuine, legal interest and reason for coming to our country.

It would not be advisable for us, it would not be humane for us, it would not even be decent for us, in my opinion, when we have an intense confrontation-an extremely emotional confrontation with a revolutionary country like Iran, to refuse to accept refugees who are trying to escape circumstances there and coming to our Nation for a haven. This was a decision made by me, it's in accordance with the American law, and I believe it's in the best interests of our own country to do so.

GASOLINE CONSERVATION FEE

Q. Mr. President, would you please explain how an oil import fee of four dollars and sixty-some odd cents per barrel, and an eventual 10-cent-per-gallon tax on gasoline will help fight inflation, rather than create more inflation?

THE PRESIDENT. The immediate result of that will not be a reduction in inflation. It will be an increase in the inflationary status of our country, as measured by the CPI. But what we must do is to cut down on our excessive dependence on imported oil.

This year, we're going to send out of our Nation between eighty and ninety billion dollars of hard-earned American money to foreign countries to buy their oil. As we import that excessive amount of oil, we also import inflation and unemployment. When we reduce our unwarranted demands to buy the existing amount of oil that exists on the world markets, it causes a lessening in demand and therefore tends to hold down prices.

I believe that because of our action in cutting down oil imports and conservation measures, combined with that of other major oil-importing countries, we have already seen some moderation of the price of oil. I have no belief at all that 1980 will see anything like the increase in oil prices that resulted in 1979 when demand exceeded the available supply.

So, we benefit in two ways: One is keeping the money and the jobs in our own Nation, instead of sending it overseas. And secondly, we help to moderate the worldwide price for energy which ;viii have a major effect in cutting down inflationary pressures in our country in the future.

But there will be some transient, temporary adverse effect because of the increase that I will bring about by the conservation fee.

MR. CORMIER. Thank you, Mr. President.

THE PRESIDENT. Thank you, sir.