November 16, 1982
Thank you very much. Governor Treen and Chairman Green, I thank you very much. Distinguished gentlemen here on the platform, your officers, and you ladies and gentlemen:
It's a great pleasure to be back in this beautiful Bayou country. Today brings me a very special honor, too. I understand that I'm the first sitting President to ever address the U.S. League of Savings Associations. Well, that makes me happy, because when one thinks of the people who live by the values and traditions that made America great -- faith in God, love of family and freedom, service to community and country -- the leaders of your industry come immediately to mind.
I'm told that when the U.S. Constitution was less than 50 years old, a group of men met at Thomas Sidebotham's Tavern in Frankford, Pennsylvania. Their aim was to form a club to pool their savings to finance their homes. The Oxford Provident Building Association offered its first mortgage in April of 1831 to a local lamplighter named Comly Rich. And he used $375 to buy a home, which still stands today on Orchard Street in Frankford. And from that idea has grown the $625 billion savings and loan business, devoted to the business of savings and homeownership. You can be very proud.
I couldn't help reflecting, as we flew down, that New Orleans is too good not to enjoy. People who come here usually come to celebrate. And you know something? I thought I detected a smile or two on your faces. I heard a rumor around that Roy Green and some of you think the Sun is beginning to shine again on savings and loans. Might that be true? [Applause]
You know, thinking about what your group has been through reminds me of the story of the three gentlemen who had departed this Earth and were standing at the gates of heaven waiting for admittance. One was a surgeon, the other one an engineer, the third one an economist. They'd all been good, upright people, but it developed that there was only room inside for one. So St. Peter said, ``I'll tell you what, I'll pick the one who comes from the oldest profession.'' The surgeon stepped right up, and he said, ``Well, I'm your man. Right after God created Adam, he operated. He took a rib, created Eve, so surgery has to be the oldest profession.'' And the engineer said, ``No.'' He said, ``You see, before God created Adam and Eve, he took the chaos that prevailed and built Earth in 6 days. So, engineering had to precede surgery.'' The economist spoke up and said, ``Just a minute. Who do you think created all that chaos?'' [Laughter]
Well, chaos is what your industry faced in 1980 -- a situation that was created by people with noble intentions but without a solid grip on how the real world works. Housing, the bedrock industry that provides your daily bread, had been brought to its knees. For millions of Americans, the dream of homeownership was shattered by soaring costs, record interest rates, and economic mismanagement. Between 1977 and 1980 -- in those 3 years -- the average monthly payment for a mortgage loan nearly doubled.
Now, those policies of big spending and big taxing left a trail of disappointment and broken promises. With the economy going haywire, the thrift industry was trapped in the vise of an earnings squeeze and over-regulation. Others capitalized on the financial revolution of money market funds, but there was no light at the end of your industry's tunnel, no way to make a new niche in the market and compete for the saver's money.
Well, I've said before, we didn't go to Washington with more snake-oil remedies for quick fixes, and we don't suffer from paralysis by analysis. [Laughter] We're determined to make America well again. We intend to rebuild this country, not from the government down, but from the people up. I believe the true strength of America and her passport to greater glory resides on the streets where you live, with the American family. Calvin Coolidge said, ``Look well to the hearthstone, for therein all hope for America lies.''
The goal of our administration has been, and will remain, to restore to families, communities, and places of work their rightful positions of honor, strength, and leadership so, together, we can lift America to new progress and opportunity for all her citizens. The means of reaching that goal have been, and will remain, to liberate individuals, deregulate markets, and place limits on the size and authority of the Federal Government. No longer must government be allowed to ride roughshod, absorbing the people's wealth, usurping their rights, and crushing their spirit.
This is why the health of your savings and loans, the community builders of America, is so important to our future. So, yes, we designed a program to attack our economic disease at its roots. And I know this comes as a shock to some, after what you've heard the last few months, but our program is beginning to do exactly what it was intended to do.
In 1980 the growth of Government spending was zooming at 17-percent annual rate. That was a blueprint for bankruptcy, the end of our American way of life. We cut spending growth by nearly two-thirds. And today, America no longer suffers from double-digit inflation. Inflation has been beaten all the way down, here in this 11th month, to 4.8 percent so far this year. And I'll let you in on a little secret: We're not finished yet; 1982 could go down as our best victory against price increases in the last 10 years.
We pledged to provide new, strong incentives for Americans to invest in their future, to save again, to put their money in institutions like yours that supply the mortgage loans families so badly need. So, we expanded the limits on IRA accounts and Keogh plans; we cut the top rate of tax on interest and dividend income; we're reducing everyone's personal tax rate by 25 percent; we're aggressively pursuing deregulation of financial markets; and we're encouraging business savings by permitting more rapid depreciation of plant and equipment.
I'm pleased to report to you that an old-fashioned American value -- thrift -- is making a strong comeback. Personal savings, the lifeblood of your industry, have not only reversed their decline but reached their highest level in 6 years. Seventeen percent of all American households opened up IRA accounts in the first part of 1982. With your help, we'll see another big surge in the remainder of this year and in 1983.
This greater pool of savings helped fuel the historic rise in the stock and bond markets, which means more investment for jobs. So, here's the clincher: This nation's nest egg is beginning to grow again. For the first time in nearly 20 years, hard-working families can keep more of their income that they work so hard to earn. I happen to believe that's an important part of what justice and compassion are all about.
Bringing down inflation and expanding the savings pool explains another piece of good news; in fact, it's great news. We don't have a 21\1/2\-percent prime rate of interest anymore. The prime rate is down to 12 percent, and mortgage rates -- your stock-in-trade -- are coming back down, too.
Now, I hope that I'll be pardoned for pointing out that the conventional commitment rates for long-term home mortgages peaked at nearly 19 percent in September of '81 -- that was the month before our program began. By last week, the nationwide average had fallen to 13 percent. And I want you to know that we're determined to bring those rates down further.
These are all reasons for hope. But we're also trying to go to the root of the special problems making life so difficult for your industry. Early on, we appointed a Presidential Commission on Housing, headed by Bill McKenna, to come up with responsible policy recommendations. And I realize I'm not impartial on this, but I just have to believe that Richard Pratt is the best darn Chairman the Federal Home Loan Bank Board has ever had. After many years of struggle, your industry now has greater flexibility in the instruments it can use to raise funds and a greater variety of opportunities for investing those funds, including the variable rate mortgage. So, now you can compete on a more level playing field.
And that's not all. With leadership from Secretary Regan, Chairman Brank -- Bratt -- B[r]anking Committee Chairman Garn -- [pause] -- I'll get this straight yet! -- [laughter] -- and your active support -- your active support, I recently signed some landmark legislation as you've been told -- the depository institutions act. And from now on, you'll be free to compete for the saver's dollar. And we hope you agree this legislation can be the Emancipation Proclamation for America's savings institutions.
Now, we're not promising a panacea. We're just saying, as Winston Churchill did, we'll give you the tools and you'll get the job done. This historic legislation can increase competition. It can open up a supermarket of services for small savers, grant them greater access to loans, a higher return on their savings. And, when combined with recent sharp declines in interest rates, it'll mean more housing, more growth, more jobs. It can mean we hit the jackpot. We think the next Congress can go even further with financial deregulation.
There's a new spirit building in America -- a spirit of confidence, optimism, and hope. In September, we saw solid increases in the sales of new homes, in the growth of housing starts and, even more important, in new housing permits.
We still have a long way to go before we make things right again. Far too many people are still hurting. But we believe the turnaround in your industry signals a turnaround in the rest of the economy, and that's mighty good news for America. So, the question now is, where do we go from here?
Well, let me tell you a few places we're not going. We're not going back to the policies that left America with record inflation, record interest rates, and the worst peacetime tax burden in our history. We will not negate all the good that we accomplished in these first 22 months. Compromise must not mean incremental retreat on principle.
We cannot permit the Congress to take away the third year of the people's tax cut or the indexing provision, and we're not going to allow them to do that. This would mean a net tax increase of about $3,000 over the next 5 years for a typical working family. It would compromise incentives to save, just now beginning to pay off. And it would send up the white flag of surrender to big spenders. Reducing deficits on paper by raising taxes on people invariably leads to more red ink, not less.
We intend to press forward for a constitutional amendment to bring back something millions of Americans have never known -- a balanced Federal budget. We intend to press forward for our enterprise zones proposal to bring new jobs, growth, and hope to the most depressed areas of our country.
Above all, we intend to wage a full-court press for economic truth. What this economy needs to grow stronger, to become more productive and competitive, to create new jobs, and to ensure higher real wages and incomes for our people is the power of investment. Savings finance investment, and investment creates growth. Tragically, our rate of savings and net investment in America during the last decade has been pitifully weak -- less than half that of our principal competitors in Europe and Japan. A little more than a year ago we passed our program of tax incentives to begin correcting the investment gap. It represents a mere downpayment on what needs to be done. We don't need fewer incentives to save and invest; we need more incentives.
And let's quit kidding ourselves: We will not solve the problems of unemployed auto-workers and steelworkers with another giant, temporary public works program financed by depleting still more of the Nation's precious seed corn. Over a 7-year period ending in 1981, government spent $66 billion on so-called job programs, and during those 7 years, unemployment increased and the economy worsened. What the unemployed need most is a broad-based economic recovery. We must seek out and develop new markets around the world, make our goods more competitive, accelerate job training, and give greater incentives to the pioneers creating products, technologies, and jobs for our future.
Every decision we make must be weighed as to whether or not it will help restore our economy. The answers to the challenge of the eighties don't lie in the make-work programs of the sixties and seventies. Our decade-long trend of rising unemployment was not caused by highway potholes. Repairing America's infrastructure is important; indeed, it's necessary. And I'm considering an initiative for that. But our highest priority is to restore America's industrial power to get America back on the cutting edge of growth through greater investment.
The investment challenge is America's challenge for the eighties. For the sake of every citizen who wants and needs a job, I ask the Congress to work with us on initiatives that will move America forward, not backward. The American people weren't put on this Earth to become managers of decline.
Now, deficits are a great threat, because government borrowing eats up savings that should be financing investment. When I arrived in Washington, we faced a trillion-dollar debt. This year Uncle Sam must borrow $110 billion just to pay the interest. And we face large projected budget deficits in the future.
A propaganda campaign would have you believe that these deficits are caused by our so-called massive tax cut and defense buildup. Well, that's a real dipsy-doodle -- [laughter] -- because even after our tax reductions are fully in place, they will barely neutralize the enormous payroll tax increases that were approved in 1977. One installment of that increase went into effect last January, and there will be a tax increase on some or all of the people every year from now on, between now and 1990, either by raising the amount of pay that is taxed for social security or by raising the actual tax rate.
During the next 5 years our planned defense increase will come to less than 2 percent of the gross national product, or $70 billion at the 1982 level of gross national product. As a matter of fact, defense spending as a share of gross national product will be below the level that it was in 1960, which was before our Vietnam buildup and, more importantly, before the unprecedented Soviet buildup. Defense spending is 30 percent or less of our total budget. It used to run regularly around half of the Federal budget.
There's simply no escaping the truth: Current and projected deficits result from sharp increases in nondefense spending. If the United States is to meet its investment challenge, we must get the growth of nondefense spending under control once and for all.
In the past 2 weeks, I've been conducting an intensive review of our economic and budgetary situation. Difficult choices lie ahead. They'll require political courage. No one ever said that democracy was easy. But we do know that democracy works if we make it work. So once again, we're asking for your help. We need your support at the grassroots as we put together a program to reduce projected deficits. It must be a balanced program that brings deficits down without violating our goals of reducing the burden of taxation, protecting the needy, and moving forward with our program to rebuild America's badly neglected defenses. I believe we can do this. And I know the American people will respond to reason and leadership.
I hear the cynics who have given up on our country. They're so quick to run down America, to find fault with everyone but themselves. To hear them talk, no one feels concern for a fellow citizen or cares about our future. Sometimes they give the impression the United States is dying from cirrhosis of the giver. [Laughter]
Well, I travel a little bit. I receive a letter or two. And let me tell you, the spirit of America is good. Her heart is strong and true. Never has the world known a more generous and industrial people. Maybe we don't always see them on the news, but ours is a land of quiet, unsung heroes. They spend a lifetime giving themselves -- to their families, schools, churches, and communities. Don't let anyone tell you that our best days are gone and America's spirit is crushed. We've seen it triumph too often in our lives to stop believing in it now.
Above all, let us remember the mountain of strength that offers the greatest hope and inspiration for all. I believe with all my heart that standing up for America means standing up for the God who has so blessed our land. We need God's help to guide our nation through stormy seas. But we can't expect Him to protect America in a crisis if we just leave Him over on the shelf in our day-to-day living. There's a lovely old hymn which says: When morning lights the eastern skies, O Lord Thy mercy show, on Thee alone our hope relies, let us Thy kindness know.
Trusting in Him, believing in each other, working together, we will rebuild America -- the land of our dreams and mankind's last great hope.
I told you that I get a letter or two. The other day, there were a group of young people, teenagers, at the White House. They were from all over the United States, from your towns, your States. They were young volunteers who have engaged in volunteer, kindly deeds and charitable work in their communities. And they gave me, leather-bound, a book of handwritten letters that each one of them had written about what this meant. And just one incident from one, a little girl who the -- you know that very Special Olympics for the children who are retarded. It's going to be held here, I believe, very shortly, the world Olympics.
But this little girl was to help out with just one of the more local Olympics, and it was raining cats and dogs. And her chore was to be out on the softball-throwing contest, returning the balls in the rain. And she was pretty depressed, and she was cold, and she wondered what she was doing there. And then she saw a little boy, one of the participants, one of those handicapped children, and he looked cold and wet and as if he was wondering what he was doing out there in the rain. And she went over to him and handed him the ball and said something to him nicely. And she told me what it meant, that then in that instant, he looked up, put his arms around her, and said, ``I love you.'' ``And suddenly,'' she said, ``it couldn't have been raining anymore. The Sun must have been shining.'' And she said that just from that one thing, from that little child, she said, ``I learned the joy of service and why we're doing these things, these volunteer things.''
That's our children. We can't have done everything wrong if we've got kids in America that feel that way and are doing what they're doing.
Thank you for inviting me to be with you today. God bless you all.
Note: The President spoke at 1:56 p.m. in the Grand Ballroom at the Hilton Hotel following remarks and an introduction by Roy Green, chairman of the U.S. League of Savings Associations.
Following his remarks, the President was presented with a medal with a portrait on the front side of Isaac Shallcross, the first secretary of the first savings and loan association when it was founded in 1831. The special medal was struck in commemoration of the President's address before the convention.
Later in the day, the President attended a fundraising reception at the Hilton Hotel for Governor David C. Treen. Following the reception, the President traveled to Miami, Fla., and remained overnight at the Omni Hotel.