February 9, 1982

Governor, honorable gentlemen here with me on the platform, and you ladies and gentlemen:

I can't thank you enough for that very warm Hoosier welcome.

You know, the late Herb Shriner, who was from Fort Wayne, said that he was born in Ohio, but he moved to Indiana as soon as he heard about it. [Laughter] Well, with Governors like Bob Orr and, before him, Doc Bowen and Senators like Dick Lugar and Dan Quayle, a mayor like Bill Hudnut, and a legislature like this one, I have a fondness for Indiana myself.

In 1919 William Herschell, a columnist for the Indianapolis News, came upon another admirer of this State, an old man near Knightstown who was sitting on a log in the warm sunshine, fishing in the Big Blue River. And with a sweep of his arm, the old boy encompassed the whole countryside, and he says, ``Ain't God good to Indianny!'' Well, God certainly has been good to Indiana, but unfortunately over the past few decades, the Federal Government hasn't been quite so kind. If the Federal Government had been around when the Creator was putting His hand to this State, Indiana wouldn't be here. It'd still be waiting for an environmental impact statement. [Laughter]

And it's not an exaggeration anymore to refer to the almighty Federal Government. In recent years, power and tax dollars flowed to Washington like water down the Wabash. And yet things didn't get better. We didn't move closer to solutions; we moved farther away. Hoosiers, like citizens all over this country, began to realize that the steady stream of money and authority to Washington had something to do with the fact that things didn't seem to work anymore. And the closer you look, the clearer it becomes. The Federal Government has taken too much tax money from the people, too much authority from the States, and too much liberty with the Constitution.

Over the last year, with the help of the American people, we started correcting these imbalances in our governmental system. We have cut the growth in Federal spending nearly in half, brought about the largest tax reduction and the most sweeping change in our tax structure since the beginning of the century. And with farmers and family businesses in mind, we raised the estate tax exemption and eliminated the estate tax for the surviving spouse so that survivors don't have to sell the family farm or the family business in order to pay the tax when death comes. We cut the increase in new Federal regulations nearly in half. And we undertook policies that strengthened State and local authority rather than erode it.

As Indiana's December unemployment rate of 11.9 percent indicates, much remains to be done. We know it. And we take our commitment to the people seriously. We have in place an economic program that is based on sound economic theory, not political expediency. We will not play hopscotch economics, jumping here and jumping there as the daily situation changes. We have faith in our program, and we're sticking with it.

To the paid political complainers, let me say as politely as I can, ``Put up or shut up.'' We have a solid plan already in place. What do they have? Either they give the American people a better alternative, or they join with us in our efforts to get the economy right.

The 1983 budget, which we recently released, is one of the new-wave budgets that will be rolling in for the rest of the decade. These budgets will require constant and comprehensive pressure so that we can reduce the future growth of government spending and the government's share of the gross national product. I hope the Congress will accept the future. I hope the Congress will approach the new budget proposals with the same cooperative spirit and good will as it did our proposals a year ago.

Now, the defense budgets over the next several years will be especially important. Studies indicate that our relative military imbalance with the Soviet Union will be -- believe it or not -- at its worst by the mid-eighties. As President, I can't close my eyes, cross my fingers, and simply hope that the Soviets will behave themselves. Today a major conflict involving the United States could occur without adequate time to upgrade U.S. force readiness. It's morally important that we take steps to protect America's safety and preserve the peace.

In the months ahead as we pursue a strengthened economy and a strengthened defense, we will also be working toward a revived federalism. During the campaign, I said we would cut taxes, and we have. I said we would reduce regulation, and we have -- 23,000 fewer pages in the Federal Register than there were a year ago, and that's the thing that lists all the regulations. And I've said that we must return more power to the States, and we will.

Now, there are those who for their own narrow political purposes say our federalism plan is a mere diversion from our economic problems, or that federalism is simply a means to cut the budget further. Well, don't you believe it. Our federalism plan stands on its own merits, a key to a freer, better America. Federalism is too important an issue to be treated as a distraction, and the American people deserve a full and public debate of the proposal's merits.

In the State of the Union speech, I sketched the framework of our federalism concept. We hope to send enabling legislation to the Hill by early spring, but we're not doing that until we've had extensive consultation with the Nation's Governors, legislators, and city and county officials. We genuinely want your advice and counsel, and that's why I'm here today. We seek your help in developing a program that will bolster what Governor Orr said in his State of the State address: ``. . . Hoosiers have the ability to solve Hoosier problems . . .7E7E.'' Without your participation in the plan's development, it would simply be another program imposed by Washington. We want this new partnership to work.

There's a story about the two partners who decided to take a day off and go fishing. They'd rowed out to the middle of the lake, baited their hooks, and were waiting for the first bite when all of the sudden one of them said, ``Sam, oh my gosh! We forgot to close the safe.'' ``So what?'' said Sam, ``we're both here aren't we?'' [Laughter] For too long, that's the kind of partnership the States and the Federal Government have had. Neither really trusted the other, but it's Washington that's been dipping into the cash drawer when the States weren't looking.

America's needs today are too great for one partner to solve alone. As I pointed out in the State of the Union address, in 1960 the Federal Government had 132 categorical grants costing $7 billion. When I took office there were approximately 500 such grants, costing nearly $100 billion -- 13 programs for energy conservation, 36 for pollution control, 66 for social services, 90 for education -- and in the Congress it takes at least 166 committees just to try and keep track of them. They try to keep track of them, but Federal grants are like rabbits -- they multiply like crazy, and when they're out you can't catch them. [Laughter]

The Congress spends most of its time on the budget these programs represent. Governor Babbitt of Arizona said that the Congress should worry about arms control, not potholes. And if Congress did that, he has said, we would have both a better chance of survival and better streets.

I've got to pause right here and interject something about that. I'm delighted in telling about the town that decided in the interest of safety, they were going to raise all their street signs and everything that were only 5 feet high to 7 feet high. And the Federal Government came along and said, ``We've got a program that'll do that for you.'' Well, it was quite an undertaking to change the height of all these. The Federal Government's idea was they'd lower the streets 2 feet. [Laughter]

But according to an independent governmental commission -- intergovernmental commission -- the growth of such programs has made the Federal Government ``more pervasive, more intrusive, more unmanageable, more costly, and above all, more unaccountable.'' Polls show that the majority of Americans feel the State government can handle local problems better than the Federal Government. Absolutely no one, except the special-interest groups and those who do their bidding, believes that we can continue as we have.

In many respects, the Federal Government is still operating on the outdated and, if I may say so, arrogant assumption that the States can't manage their own affairs. At one time possibly, yes, certain States did ignore a portion of their citizenry. And when the Great Depression hit, the States weren't prepared to handle that kind of an emergency. But that was 50 years ago. There've been great changes in our land.

As Governor Thompson of Illinois, speaking for most State and local officials, has said, ``It's time to give us our money back; it's time to give us our power and authority back; and it's time to let the Governors and mayors of this Nation respond to the needs of the people in their States.'' And to that I say, ``Amen.''

It's high time the issues were debated. And our federalism initiative is designed to focus that debate. The plan, as you know, has two major components. Starting in fiscal 1984, the Federal Government will assume full responsibility for the rapidly growing Medicaid program in exchange for the States picking up Aid to Families with Dependent Children and food stamps.

Now, by assuming the whole governmental cost of health and virtually the entire financial responsibility for the elderly population, the Federal Government will be taking on the most rapidly growing social domestic needs. The States will be picking up the areas where growth is much less rapid. Under current law, the total funding for AFDC and food stamps is projected to increase only 10 percent by 1987, compared with a projected 83-percent increase in the total cost of Medicaid for the same period.

The other aspect of the plan is a turnback of responsibilities to the States for over 40 Federal programs in education, community development, transportation, and social services -- along with the resources to pay for them. In 1984 the Federal Government will apply the full proceeds from certain excise taxes to a grassroots trust fund that will belong in fair shares to the 50 States. By 1988 the States will be in complete control of these grant programs.

Now, we have not filled in the details of the federalism program, because we want your assistance. We want the plan to be fair and equitable. And I'll give you a flat and binding pledge: There will be no net winners or losers. This will not be a roll of the dice. The State will not end up like the horseplayer who says, ``I hope to break even; I need the money.'' [Laughter] You'll break even, and there will be no gamble.

There are other guarantees as well, like the mandatory pass-through to the local governments of some funds, such as for mass transit assistance, community development. We will ensure civil rights protections and adequate welfare, and the transition period will allow plenty of time for discussion and fine-tuning of the program.

The concept of federalism is like the green and gold quilt of Indiana crops. There is protection in variety. Well, there's protection in the quilt of the 50 States as well. What the current issue comes down to is whether or not we trust the people and those closest to them to make governmental decisions -- to make government itself work. I trust those James Whitcomb Riley, the Hoosier poet, who called them ``the good, old-fashioned people -- the hale-hardworking people.'' And I believe that the decisions that come from this statehouse are as solid as the limestone it's built of.

Statehouses all over the country must regain the authority to make decisions about those things that affect them most closely. In 1947 the General Assembly of Indiana adopted a resolution ``serving notice on the Congress of the United States that the people of Indiana are fed up with subsidies, doles, and paternalism, benevolently described as Federal grants-in-aid.''

In 1951 the Congress still hadn't taken Indiana's good advice, so the Assembly again passed a resolution stating, ``We Hoosiers believe that the historic constitutional rights and responsibilities of the States must be recovered; that the tax sources of which we have been deprived must be restored; and that the Federal Government must restrict its activities to matters of the broadest national interest.'' Well, it's taken over 30 years, but, I'm happy to report, your message has finally gotten through. To tell you the truth, I believed you the first time you said it. [Laughter]

Today in Washington there's someone -- at least in the White House and a couple of Congressmen of yours sitting right here -- who are on your side. This administration seeks nothing less than a realignment of government, a realignment that will give power back to those most responsive to the people. Of course, I'm referring to you who sit in the State legislatures, the county boards, the city councils of this country -- you who know the needs of your neighbors and the programs that will serve them best.

I've told you I'm confident our economic recovery program will succeed. This is not wishful thinking. Our plan is based on simple logic. We have deficits because government spends more than it takes in. We've had only one balanced budget in the last 20 years. Today's interest on the trillion-dollar debt is greater than the total budget in Eisenhower's day. So, we're reducing the size and cost of government to bring the annual increase in costs to less than the increase in tax revenues. And increasing tax rates is not an answer. We doubled taxes between 1976 and 1981 and had the biggest string of deficits in our history. Besides that, taxes reduced our ability as individuals to save.

Today we're the last among the seven top industrial nations in savings and investment. Our industrial plant and machinery average 17 years in age. In Japan the average is only 10 years. So, we're reducing the tax rate.

Government regulations have cost the American economy an estimated $100 billion a year. We're reducing, as I said, the number of regulations.

I've got to pause again and just tell you how they can -- in a nearby State, a hospital was built with some Federal funds, so therefore the Federal Government can manage everything about it. And they had the experience, and they put -- as is customary today -- and they put under the regulation of one government department those plastic bags in the wastebaskets to protect the employees from contamination in handling the waste. But in came another Federal department, took one look, and said, ``Unh-uh, someone might throw a cigarette butt in there, and the fumes of the burning plastic would be injurious to the patients. Take them out.'' Well, they never did get together as to which one was right, so the only thing the hospital can do now is kind of keep an eye on the front door to see whose inspector is coming. Take them out; put them in. [Laughter]

The Federal Government has at great cost been attempting to perform tasks that are not its proper function, so we're restoring the 10th amendment to the Constitution, which says the Federal Government will do only those things called for in the Constitution, and all others shall remain with the States or the people.

The great American experiment will soon enter a new phase that will last until the end of this century and prepare us for the next. And you here are the ones who will carry this experiment forward. You are the public servants who offer the most creative solutions and most promising hopes for our nation's future.

America needs your vitality and her people need your responsiveness. Let us join together to restore federalism, to restore the Nation's vigor, and to restore the faith of our people in their government at every level.

Thank you very much.

Note: The President spoke at 2:33 p.m. in the House Chamber of the State Capitol, after being introduced by Governor Robert D. Orr.

Following his address, the President returned to Washington, D.C.