National Conference of State Legislatures Remarks at the Advisory Conference.

THE PRESIDENT. Speaker pro-tem Dick Hodes, Senator Ross Doyen, legislative leaders Irvin around the country:

And particularly my good friend Al Holloway, the president pro-tern of the Georgia Senate and my former floor leader when I was Governor—he got me in a lot of trouble and got me out of a lot of trouble during the 4-year period. Al, I'm glad to see you again.

Before I begin my prepared remarks, I would like to make an announcement and a comment.

As you know, we have had voluntary wage and price restraints or guidelines in place for a year and a half. They've done a much better job than has generally been recognized. Last year for instance, wage increases went up about 4 or 5 percent less than the inflation rate, as a matter of fact less than was the case in 1978. Most major U.S. corporations have also pledged their cooperation with the voluntary price restraints.

Several large firms that received notices from the Council on Wage and Price Stability that they were out of compliance took immediate action to reduce their prices in order to comply with the price standards. Among them was Sears Roebuck, who reduced prices in the whole catalog and even gave refunds to people in their open stores. And Warner-Lambert was another, Faberge was another one. And other companies have cut their prices to come into compliance even before they received notices from us that their prices exceeded the guidelines. Among them were Alcoa Aluminum Company of America, the Greybor Electric Company, Scott Paper Company, and others.

But I was disappointed today to learn from Bob Russell, the Director of the Council on Wage and Price Stability, that one major oil company, Mobil, has refused to take corrective action to bring their own prices into compliance with the price guidelines. Mobil's overcharges to their customers in the third quarter of this past year exceeded $45 million. They were asked to bring corrective action by reducing their prices now in order to return on future sales what they have overcharged in the past. But so far, including this morning, they have refused to cooperate and to meet those price standards.

It's difficult for me to understand Mobil's position at a time when most business firms are acting responsibly to observe the price standards that are so important to our Nation. The Council on Wage and Price Stability currently is looking into compliance with other companies, including several other oil companies. It's only fair to the American consumer and to those businesses who are acting responsibly for the public to know about companies who refuse to cooperate in this taking of reasonable action to comply with the volunteer standards.

I come before you today, responsible leaders of our country, at a time of great challenge not only for our own Nation but, indeed, for the entire free world. Abroad, among other challenges I have to face personally along with you as American citizens—turmoil in Iran, aggression in Afghanistan, and many other issues that are important to all our people—while our resolve is firm, we must act carefully and we must act in concert with other nations. At home we face the great challenge of inflation, fueled by excessive dependence on imported or foreign oil. But here at home we are free to act as America needs us to act, and we must choose to act for America now. We have to make hard choices, as individuals and as governments, and as a nation. Our future security literally depends upon the implementation and the observance of discipline on ourselves now.

In the last 10 years we've had a series of economic shocks that have indeed disturbed the entire world. Oil prices have increased more than 1,000 percent. American oil imports have been multiplied 20 times over. In the past single year, 1 year, oil prices have increased more than they have since oil was first discovered. Americans this year will pay more than $80 billion to foreign countries for imported oil. $80 billion is hard to understand, but that amounts to more than $1,500 on the average for every single family in the United States, money that we could now not use to increase American productivity, to provide jobs, to reduce American taxes, to reduce inflation. And energy, as you know, permeates our economic society. It affects the cost of everything we buy, everything we produce, everything we build, everything we transport.

Inflation is certainly not limited to this country. Every industrial country is suffering, and some of the developing countries are suffering even more. The wholesale price index for the latest month, for instance, in Japan was up 27 percent. In West Germany it was up 20 percent. In Great Britain, 18 percent. In Italy, 46 percent. This knowledge that other nations share this problem does not make it any easier for us, but it emphasizes the importance to us not only to take action to benefit our own country but to set an example for the rest of the world to emulate.

Our country is in a better position to deal with inflation than are most others. We have more than one-sixth of all the world's energy reserves in a widely diverse way. Our land produces bountiful crops beyond the dreams of most nations. We are blessed with great underlying strengths economically and socially and politically that let us tap the great opportunities of a free people in a free enterprise system. But sometimes in the past we have been so strong and so confident that we thought that those very strengths could make us immune from restraints on our lives, problems like energy shortages, problems like high inflation, that often we have seen beset other nations when we ourselves were fortunate enough not to be so severely affected.

We are fortunate still, but we are not immune. We must face reality, and we must regain control of our own destiny. Two weeks ago I put forward a tough program to combat inflation in this country. I took the difficult step of imposing a conservation fee on imported oil. We must reduce imported oil. The action I took will save us 100,000 barrels per day the first year, at the end of the first year, and after 2 or 3 years, 250,000 to 300,000 barrels per day of oil will be saved.

I also used my authority under the Credit Control Act of 1969 to put restraints on credit. Revolving credit, often used by individual citizens of our country, has increased in 2 years more than 225 percent, more than tripled. This is the first time a President has ever invoked this authority, and I did that because we absolutely must discourage unnecessary borrowing and encourage saving.

Americans now save about 3 percent of what we earn, the lowest level of savings in more than 30 years. Other countries save as much as 25 percent of the earnings of the individual citizens. Next Monday I will present to the Congress a balanced budget, the first time in 12 years. We've only had one balanced budget in the last 20 years.

But my responsibility does not end there. All of us must fight to make sure this budget and your budgets stay balanced. We who serve in the government, at whatever level, must set an example for the rest of the country by proving that we can enforce self-discipline on ourselves.

I want to acknowledge your own sustained and continuing support. I know you've been long voicing your concerns about fiscal responsibility, not only for States but for local and the Federal Government as well. We know from hard experience that the closer we come to balancing budgets the greater the pressures and the temptations to abandon that goal. We must not be moved, and together we will not be moved.

For Fiscal Year 1981, beginning in October of this year, we will have a balanced budget for the Government of the United States of America, and you can depend on that.

Federal budget reductions must be approved without delay, but at the same time I intend to consult very closely with State and local government leaders to consider three things. First of all, which levels of government are best suited and best equipped to carry out particular functions. This needs to have a reassessment. I need you to help me with it. Second, how can we possibly consolidate categorical programs aimed at reducing administrative and overhead costs and therefore costing less money for the same services, while we continue to meet our responsibilities to provide equitable service and protection for those within our society who are most vulnerable and who need protection most? And third, how can we consider the fiscal and the economic impact which is often imposed on State and local government—in the past at least, without consultation with you—in carrying out new or existing or proposed Federal programs?

In hammering out a balanced Federal budget, I have made three commitments to our Nation: first, to ensure fairness; second, to protect the most distressed or needy Americans; and third, to preserve our Nation's security. I intend to keep those commitments, and I also intend to keep my commitment to control inflation.

Most of you have lived with balanced budgets throughout your careers in public life. I had the same experience as a State senator—I was on the appropriations committee—and later as the Governor of our State. State constitutions, many of them, prohibit deficit spending. Georgia can only have deficit spending if the State is being invaded, and as long as Alabama behaves themselves, we'll keep the budget balanced in Georgia. [Laughter]

You know how difficult that can be when so many dedicated, responsible people, benevolent interest groups, come to you and push worthwhile projects or ideas or proposals that you just cannot afford. And you know what it is to say no when its so much easier politically to say yes.

Well, we just cannot afford to play politics with our Nation's economy or our Nation's currency. We can't both pound the table for restraint on the one hand and make politically expedient promises on the other, because America cannot afford it.

The people want us to be strong. Inflation hurts everyone—the housewife, the wage earner, the student, the home buyers, the homebuilders. Small business and farmers are particularly vulnerable to the wage-price spiral and to very high credit terms. Lower income people will be hurt some by budget cuts. But the people who suffer most from inflation now are those very same people, the ones who have very low incomes, who are not, quite often, very well educated, who are not mobile, who can't shop around for bargains, who never buy anything wholesale, who live on fixed incomes, and who are timid and fearful because their economic status is not secure.

Inflation is the cruelest and most regressive of all taxes, and that's a tax that I'm determined to cut this year, in 1980. We are making distinctions with a scalpel, not a meat-axe, between functions that the government absolutely must continue to perform at both the Federal and local levels, and programs and services that may be desirable but simply must be reduced or deferred or canceled.

We are not abandoning our urban policy, local revenue sharing, Urban Development Action Grants, mass transit, summer job programs. We are not abandoning the helpless. We're making adequate but prudent, intelligent, careful reductions and deferrals, tightening the belt where it will hurt the people about whom we are most concerned the least. This does not mean the cities will be exempt. It does not mean that social programs will be exempt from the cuts. We are trimming social services with minimum adverse effect to the poor.

Our youth employment initiative will go forward. We are not cutting back on social security. We are not cutting back on Medicare or aid to dependent children or the 25-percent increase in subsidized Federal housing, because the housing industry particularly needs help right now. We have done our best to protect those key programs, but we will have to do something on many programs, which is not pleasant and which it would be easy to try to avoid.

I wish I could promise you quick results, but inflation has been building up now for more than 10 years. The average inflation rate for the last 10 years has been more than 8 percent. It will not go away overnight or in a few days or a few weeks. As you know, the consumer price index will continue to register the large increases that must be passed through now from the extraordinary increases in energy and home financing costs for the next few months.

You know as well as I do that there are no quick or easy answers, no painless corrective actions. Mandatory wage and price controls pretend to be all three of those, but in fact they are none of the above. I do not have wage and price control authority. I do not want wage and price control authority, and the Congress is not about to pass legislation to give any President mandatory wage and price control authority. Such controls would require a massive Federal bureaucracy and massive dislocations in our economy. It would put a terrible squeeze on working families, whose wages likely would be frozen, who would be faced with uncontrollable price increases in food, in imported oil, and other necessities of life which could not be controlled in price under any reasonable proposal.

Controls would not even do a good job in temporarily hiding the symptoms of inflation and would certainly do nothing to address the causes of inflation. Indeed, they would very likely become a substitute, a false substitute, for taking corrective action, which might prevent taking that corrective action which is needed. Controls, mandatory controls, are not a solution to inflation. They are an evasion of responsibility to cure inflation.

The actions I'm taking to balance the budget and cut down on excessive consumer financing are very serious. They are designed to dampen the dangerous expectation that inflation will continue indefinitely, that government will continue to spend more than it takes in, and that there will be an atmosphere of irresponsibility prevailing in the fiscal life of our economy. That psychology of inflation has convinced far too many Americans that a dollar borrowed is a dollar earned. It has encouraged Americans to buy now and pay later. It's rewarded speculators. It has penalized savers, and I intend to stop these trends.

One of the most important things to remember today is that the time has passed when the different branches of government or the different levels of government can shift responsibility back and forth. The time has passed when one branch or level of government can talk about inflation and expect the other branches of government to act, even in an election year. This is no time for political cowardice or demagoguery. We must stand firm, we must resist political pressures, and we must tell the truth. We must realize that there is no more a rich Uncle Sam with a bottomless bag to hand out goodies, but that Uncle Sam is all of us. The time has come for us to act together, not with a slogan or idol or false promises, but with a courageous and consistent and tenacious policy, and a common purpose.

When I send the balanced budget up to Capitol Hill next week, Americans will need your help. You and I, every one of us right here in this room today, must guide this Nation safely down from the dangerous precipice of inflation. And together that's exactly what we are going to do.

I'd like to close my remarks by quoting a thought from our first President, George Washington. His words are as relevant today as they were when he spoke them almost 200 years ago. He said, "If to please the people we offer what we ourselves disapprove, how can we afterwards defend our work? Let us raise a standard," he said, "to which the wise and the honest can now repair." That is a philosophy that has always stood our Nation in good stead when we faced difficult questions, serious problems, or apparently insurmountable obstacles. A unified America has never failed, and the problems that we face now are much less than many that we have faced in our own lifetimes and certainly in the history of our own great country. I hope that in facing this problem of inflation that you will join with me as partners and make, as I often say, the greatest nation on Earth even greater in the future.

Thank you very much.

I didn't know before Dick announced it that I was going to take questions, but I'll be glad to take a couple if you don't mind. Yes?

Q. Mr. President, I'm a Carter/Mondale supporter, and I followed what Congress apparently is going to cut. It's not certain at all what your proposals are going to be, because the specifics are not before us now. What I would like to say is, as one of your supporters, I think it would be tragic if the poor are asked to bear a further burden in this war on inflation. They're drafting the wrong people, and I hope that no social programs are cut. I'm sure that they're not all perfect, but to start talking about day care centers and fuel assistance programs and CETA programs and food stamp programs and nutritional programs is, as I say, drafting the wrong people. And I hope that you will resist any congressional attempts to do that, and I sincerely and respectfully hope that your own budget does not make those cuts.

THE PRESIDENT. Some of those programs will be cut. We have worked for the last month with the leadership in the House and Senate, encompassing a broad range in the political and economic spectrum of the Congress, including the authors of many of those programs that you described. I would say that the proposals that have already been revealed to the leaders in the budget committees of both the House and Senate are well understood by them. And we will present the final revised '81 budget to the Congress on Monday.

We have worked literally around the clock to get this done. I have consulted personally with more than 300 Members of the House of Representatives, with the subcommittee chairmen of the House and Senate Appropriations Committee, with the key leaders, Democrats and Republicans, in both Houses, with the leaders in the budget committees, and also with interest groups, Governors, mayors, members of your own organization, in the State legislatures and constituency groups, homebuilders, and others.

We have had to revise about 14,000 line item entries in the '81 budget. And as you know, when I present the budget to the Congress, it can't be just hazy concepts or approximate answers; it has to be down, balanced to the nearest penny. And that document will be presented to the Congress on Monday.

Some of the programs you described will be cut. But as I said, we have tried as best we could—successfully, I believe—to protect those who are most needy in our society. And we've done it not with a meat-axe, but with a scalpel. I think you'll be pleased when you see the results.

Q. Mr. President, given your understandable and appropriate call for discipline, and given the fact that we in New Jersey—and I am a Carter supporter-since '76 have had budget and spending limitation attacks all across the country. Given what you've just said about a meat cleaver approach, is it fair as we see one set of proposed cuts, but only $875 million is being cut in administration overhead, and yet $1,700,000,000 in State revenue sharing is being meat-axed out of the budget?

THE PRESIDENT. The administrative cuts are more than you describe, because they are scattered throughout the government. For instance, we are putting on a freeze in Federal Government hiring for 3 months. We will cut back 20,000 personnel who are employed by the Federal Government between now and October of this year. The State revenue sharing funds have been incised from the budget by us, in a delicate way. [Laughter] And we will advocate that part of those funds, particularly those that were passed through formally to the local governments, will be retained and targeted specifically on the communities that are most in need.

I might also say that we have tried to modify the other programs, for instance, in credit restraints, to protect those that add most to our own economy and who can honestly say they've been affected most adversely. The homebuilding industry has been protected as much as possible. Credit restraints are not being imposed on people who are buying homes and automobiles. And we are trying to exclude the impact of those credit restraints on small businesses and on farmers, because they are highly vulnerable to those changes.

And as you well know, we have had some substantial reaction in the marketplace. The dollar has strengthened tremendously. Gold has dropped. Silver dropped because of this and other reasons, as you know, and I think now the market has fairly well stabilized—at least it is today. You can't control what happens in those international markets, but they have been highly approving of the action that we've taken. It's going to be a steady, consistent, and persistent effort.

I will not consider, by the way, any reduction in taxes until after I am convinced that the 1981 budget will be Balanced. The breadth of the program is far beyond the balancing of the budget. But I don't think any program would have been credible, no matter how far-reaching it might have been, had we not exercised self-discipline on ourselves in balancing the Federal budget. It's a symbolic thing, but it's also a substantive thing to do it.

When I was running for President-thank you for your support, both of you-in 1976 we had a deficit of more than $66 billion, which was about 4 1/2 percent of our gross national product. Even with our original '81 budget we had cut that 4 1/2 percent down to six-tenths of 1 percent deficit as a percentage of the G.N.P. And now, of course, we'll have a zero deficit. This will mean that the Federal Government will not be borrowing any appreciable amount of money after April 15, this year, and we will not be borrowing any new money throughout the fiscal year 1981. We will remove a lot of pressure or competition in the credit markets, which will make it easier for other borrowers to get the limited funds which will be available.

We expect substantial reductions, in the near future, we hope, in interest rates and inflation rates—certainly, I hope, by the end of this year. I would like to see it done before the first week in November if possible. [Laughter] And I think next year we intend to see additional help. But it's not pleasant to have cuts like this, and I think the Congress has been extraordinarily courageous. Many of the proposals were originated, I would say, by the Congress, but we've had a very close, perhaps even an unprecedented degree of cooperation.

Maybe one more question.

Q. Mr. President, I guess I'd better say I'm on the other side of the aisle.

THE PRESIDENT. Very good.

Q. I was curious, where you've talked about using the scalpel approach.

THE PRESIDENT. Yes.

Q. In the States, we've oftentimes had the argument of States rights, that the States should be handling a certain area. What would be your attitude, were a group like this to be able to reach a consensus opinion—the Federal role and the Federal system—if we were to assume a certain role, what would your attitude be toward doing away with the program area and all the rules and regulations that are concomitant to that?

THE PRESIDENT. The three proposals that I outlined earlier, that we are going to address with the help of many of you and with the representatives of Governors and mayors and local officials, were proposed to me by Governor Busbee of Georgia after he consulted with other Governors. He pointed out, I think quite accurately, that the Governors are not overjoyed at the decision we made on State revenue sharing, LEAA funds, and others. But he thought that if we could sit down during this year, knowing that you can't change the definition of categorical grants and so forth as peremptorily as you can change the budget, and address those three particular items: how to define more advisedly the responsibility of the Federal Government on the one hand, the State Government on another, and then the local governments, reassess that whole program; how to redefine how many of the programs that the Federal Government puts on your shoulders and on local governments' shoulders that require very large expenditures on your part to administer the programs after they are initiated, which you did not anticipate-this was a constant problem for me when I was Governor—and third, again in a very sensitive way, protecting the interests of those who might be affected adversely, to see which of the categorical grant programs can be consolidated to save on administrative cost and also to make them be more effective in the delivery of services for the same allocation of funds. Now, that's a sensitive issue because, as you know, many recipient groups are very proud of the categorical grant applying directly to them, and mayors are much more cautious about consolidation of programs than are State legislators and Governors.

But I think the addressing of those three basic issues, along with the more rapid reductions in the 1981 budget, will be beneficial to our country in the long run.

I might say in closing that I'm very grateful that you would let me come over here. I enjoyed two terms in the Georgia State Senate and learned a lot from it. I enjoyed one term in the Georgia Governor's office and learned a lot from it. And the last few months, I have thought a lot more of those two original jobs that I did sometimes during my political career. [Laughter] Thank you very much for letting me be able to speak to you.