February 9, 1982
Natural Gas Prices and the Economy
Mr. Weber. With all the changes that are being proposed, one that is paramount in the eyes of many Iowans, particularly those on fixed incomes, is how they're going to maintain their current standard of living with the soaring natural gas prices. I went around doing a little interview with my friends here, and that seemed to be one of the prime issues. And I just wonder, what do you contemplate happening in regards to these people?
The President. Well, I think what we're talking about is the same old problem of inflation. Natural gas is still controlled. I'm not sure that that's the best idea, because we found out when we decontrolled gasoline, the oil prices, that the price went down, not up. It encouraged more exploration and more development at the source. And maybe the same thing would happen with natural gas, but no decision has been made on that.
But the people on the fixed incomes are, of course, always the ones who suffer first in inflation. Our program is aimed at bringing that down. And I have to say, not enough recognition has been paid to the fact that we have brought it down. We brought it down to single digit, where it's been for the last 3 years -- double digit. And I think that we're going to continue bringing it down with the program that we have in place.
That has to be -- I know today a great concern of the country, and it is of ours, is unemployment and this recession. But underlying that, helping cause that, everything comes back down to the fact that we've been in the longest -- in fact, the world has been in the longest sustained period of runaway inflation in world history. And we're very happy about it. As a matter of fact, we've succeeded beyond our expectations, and that's what's contributed to the coming deficit.
You know, government gets a profit from inflation. Inflation is a tax. If it's a sales tax, and the price of a commodity goes up, and the sales tax is based on percentage, the government's percentage goes up. In the income tax for the Federal Government, that's been the big steal, where people getting cost-of-living pay raises have been moved up into upper-income tax brackets. Today, a sizeable percentage of the normal working people in this country are up to the 50 percent bracket. And so we haven't been able to turn it down to where prices are going down, but we have cut that rate at which they're going up.
Mr. Weber. There's quite a bit of concern here in Iowa and throughout the Midwest about the stability of the family farm. And there is fear on the part of many that these farms are going to go under. Can you provide any signs of encouragement for the Iowa farmer?
The President. Yes. We have an Illinois farmer as our Secretary of Agriculture. And we know that this is the whole basis of any economy; has to be that. One of the things where we believe government can participate and be of help -- and we're trying desperately to do this -- is to encourage foreign markets, export markets, because there's no question, the American farmer can and does produce more than the people in our own country can eat, so he has to have an export market. He's been caught worse than most people in the cost-price squeeze of inflation. The cost of the things he buys, even the finished products of the food that he himself grows, when he then buys that in the form of bread and so forth in the market, he finds that he's on the low end of the totem pole when he sells that raw product, but he's paying like everyone else is, the inflated price as it's gone through the industrial processes.
We don't believe that government, as we've known in the past, is the answer of a -- continuing to control and subsidize the farm. What we must do with government is help agriculture get back into the market in getting a fair price for what it produces.
Mr. Weber. I was doing quite a bit in the promotion of gasohol. We've had plans for many more plants here in Iowa, but the plans seem to be falling by the wayside now because of a loss of Federal funds. Is it true that all Federal gasohol funds are being dropped?
The President. Well, we're reducing a great deal of our subsidy now of synthetics, simply because we believe that industry has become involved enough, that the free marketplace should take hold and help with that.
Mr. Weber. I can go back here a little bit. I can recall a visit that you made to Des Moines a number of years ago on behalf of General Electric. Hal Reed -- he worked with my dad down at International News -- and at that time, I think the thing we were talking about was socialized medicine. But very vivid in my mind in regards to the remarks that you made then -- and then also, back in Harlan, I recall in an interview that you talked about what you had done in California as Governor in terms of welfare. And as I recall, you were talking about how, evidently, you were allowed to experiment with the welfare programs there.
I'm just wondering, in regards to your new approach here on federalism, if your experience in California in terms of welfare played a major role in your thinking in changing this plan?
The President. Yes, that and all my years as Governor there when I saw how extravagant and wasteful it was to have to run a program where the Federal Government imposed every rule and restriction as to how you must use the money, establish the priorities. The priorities are not the same in community after community or State after State. They say, ``This problem Washington has decided is of this priority, and therefore most of the money must be spent here.''
But you can come to a community where that isn't their major priority, but they do have another problem that they need to help on, but they don't have the flexibility to switch the funds. And this is what we're trying to do with the new federalism program.
I could cite chapter and verse of horror stories about this and about these programs. My first veto of a Federal program, when I was Governor, was a program that on the surface sounded just fine. It was one of the poverty programs, and it was in a rural county of California, a project -- they were going to put 17 able-bodied welfare recipients to work in the county parks, maintaining and helping to keep them clean, the parks.
Now, you think that sounds great. That's exactly the type of thing that we want to do. My veto was because under their rules, over half the budget would have gone for 11 administrators to handle the affairs of the 17 people that were going to work in the park. And I thought that was a little unbalanced, and I vetoed it, and the Federal Government had 60 days to override the veto. They didn't override it when I made public why I was vetoing it.
Mr. Weber. I have copies of some minutes of the National Conference of State Legislatures in a meeting that you participated in. One of the sections here is in regards to welfare, and they're quoting you as saying that one of the major reasons for keeping welfare at the Federal level is the likelihood that differing benefit levels among the States was based on a court ruling handed down while you were Governor of California. Do you recall that? And it said the courts had struck down the State residency requirements for welfare because it was a Federal program. And I'm quoting from the minutes here: ``The President implied that if the Federal Government got out of the program, residency requirements might be acceptable to the courts.'' Is that a problem here in regards to your welfare change?
The President. No, and this will be one to see as we work with all these people -- I gesture because I'm in the statehouse -- to see if this is one of the things that could also then be helpful.
It is true that the welfare standards vary, based on -- and this is under the Federal domination of the program -- so these people who say, ``Well, this State might cheat and not give as much as another State,'' are talking through their hats, because that's the present situation.
But the Federal Government insists on minimums that are based on percentages of what is a basic cost of living in the various areas. But because Federal money was involved, the States had residency requirements so that you had to legitimately be a citizen of that State in order to get welfare.
When the Federal Government -- the court -- on the basis of the Federal funds, struck that down, you found people just going shopping. And there was a great influx, not only into California, New York City -- that was when its great problem developed. People only saw the end result of the amount of money that was being paid. They didn't translate it into the added cost of living, of living in those places. Theoretically, you weren't supposed to be better off in one State or the other, that the lower amount was because of the lower cost of living in that area.
But today, our idea is to find out if this is a part of what they want, to get the help of the State and local officials in fleshing out this concept that we've created in turning these programs back.
Mr. Weber. So we're quoting here in regards to Medicare -- the suggestions made here. Under consideration is a voucher system for Medicare. Is that correct?
The President. This -- although here we're still in the early stages of trying to find a better method of providing the needed care for -- Medicare is the program for the older; Medicaid is the program that we have suggested the Federal Government take over instead of giving back and to find a way of doing it that will maintain the funds that are needed for people with a true illness or injury and not the waste, the shocking waste that we have today.
For example, I can give you a case -- let's say this isn't in Medicare or Medicaid -- that has just come to us, a man who told the story himself. He fell at work and broke his finger, went to the emergency division of the hospital, and they X-rayed and then splinted the finger. And then an attendant there told him, when he said he was going back to work, said, ``Well, you know that under the rules you're entitled to 2 weeks at full pay without returning to work.'' Well, he said, ``No, I want to go back to work.'' Believe it or not, they kept him there for half an hour trying to persuade him to take the 2 free weeks. What business was it of theirs? They were there to heal him. And then, he added to his story, he went back to work. And he told that 2 weeks later he called in a doctor that he'd been referred to to check the finger on how it was coming. And the doctor spent a total of less than 10 minutes looking at the X-ray and looking at his finger and submitted a bill to the government for $100. Now, we think there are better ways to run a railroad.
Mr. Weber. Shifting gears here a little bit, a lot of people seem to be picking your budget apart in terms of the money that you want to spend on the military. Why are you so strong in your support of this additional spending?
The President. I'm strong for military spending for this reason. In the last several years before this administration, the military was literally starved. There is a dangerous window of vulnerability. Even with our military buildup, we will not even be back in the range of ability to stand in the face of our adversaries, the Soviet Union, until the mid-eighties. We will still be below them no matter how much we do now.
But the truth is we're only spending about 6 percent -- our military budget is only about 6 percent of the gross national product. In years past, in the fifties and the sixties, this averaged over 9 percent with the military budget. And even in the peace years, without the Vietnam war or the Korean war, it was over 8 percent, almost 9 percent. So, in point of history, we are not up to what used to be considered the normal peacetime budget.
But we have to show our adversaries that we have the will to defend ourselves. They have thought for several years we don't. But coupled with that, my idea of the real way to save on defense is with them knowing that they're going to have to accept that we're going to build up to their level for our own security.
I want to sit down -- and we already are sitting down with them -- to discuss legitimate arms reductions, and that would be the major savings in defense and for both sides. Today they are literally starving their people of consumer products in order to maintain this great military buildup. We think they've been able to get away with this because we've been unilaterally disarming for the last several years. When they see that we mean it -- I think a cartoon told it all the other day. There was a cartoon that showed Brezhnev talking to a Russian general and he was saying, ``I liked the arms race better when we were the only ones in it.''
Mr. Weber. By ``them,'' obviously you're talking about the Russians.
The President. Yes.
President's Previous Visits to Des Moines
Mr. Weber. It just dawned on me, one of my colleagues here wanted me to ask you if you've ever been in the Capitol before.
The President. In this Capitol?
Mr. Weber. Capitol, yes.
The President. No, I don't recall ever being in here before. I do recall sleeping out on the lawn. [Laughter] I'm old enough to remember when air conditioning was only found in motion picture theatres, and on some of those hot Iowa nights, this Capitol lawn out here would literally be covered with whole families that would bring a blanket and come over to the lawn and sleep all night around the Capitol lawn from all the residences around here.
Federal Tax Reductions
Mr. Weber. Swinging back here, would you favor moving up the 10-percent cut in Federal taxes from July 1 to some time in the spring?
The President. I would be very pleased to see that, because I think it would be beneficial, except that those who are proposing it are then proposing in return that we cancel the third year's cut. Now unencumbered, just a simple move up, yes, I would favor that. I think that one of the things that could have mitigated if not prevented the present recession is if we had gotten our original request. We originally wanted a 10-percent, not a 5-percent cut, retroactive to January 1st of 1981. And I think if that had been in place, there might be a different situation with regard to the recession. As it was, to get the bill we had to cut to 5 percent on the first installment and delay to October 1st in order to get passage of the bill.
Mr. Weber. Many economists are predicting that the economy is going to start turning around in the second quarter. If it doesn't, what will you do?
The President. Well, I think we're going to begin to see turns then. The regrettable thing is that the last to recover is unemployment when you're coming out of a recession and that is our major problem today -- the people that are without jobs. But, yes, I think it is going to begin to turn. There is already, in just these few months since October 1st, there's an increase in the rate of saving, personal saving on the part of our people.
So we believe that our program that is in place of cutting the cost of government and reducing the percentage that government takes in taxes is the answer.
Views on the Presidency
Mr. Weber. Just one more. You've been in office for a year. How is the Presidency different than what you perceived it to be before you took office?
The President. Well, I can't say there have been too many surprises. First of all, there's a great deal of publicity about the office itself, so you know something about it. But I had the 8 years' experience as Governor of California, which is the largest, most populated State in the Nation, so I was prepared for the daily routine and the daily schedule and all the things that had to be done.
I guess if anything surprised me, it was the amount of leaks in Washington. I knew about them. They occurred in Sacramento when I was Governor. But in Washington, it seems as if you can have a meeting in a room like this to discuss something, and you haven't made a decision -- it's just an option that you're considering -- and it seems as if 15 minutes after you're out the door and the meeting is over, you're hearing on radio and television or seeing in the print that you've made a decision, and this is what the government is going to do.
Mr. Weber. I think I'm getting the high sign here. I think we will come to a close. I do want to thank you. It's been my privilege. Thank you very much.
The President. Thank you.
Note: The interview began at 10:30 a.m. at the State Capitol Building.