Radio Address to the Nation on the Economic Recovery Program
October 30, 1982
My fellow Americans:
I've received a letter declaring that our economic recovery program must be changed before it causes ``more economic destruction and human suffering.'' Well, the writer then went on with further criticisms, as well as proposals for specific actions I should take. Since he's gone public, nationally, on TV and in the press, with much of what was in his message, I am replying to his specific points with an open letter on today's broadcast.
I find it hard to understand your unquestioning belief that our economic recovery program is not only responsible for unemployment -- which was already serious 2 years ago -- but that it threatens ``further collapse of the economy.''
My feelings of sorrow for those bearing the burden of unemployment are every bit as deep as yours. But you seem to write off or ignore the fact that unemployment was high in 1979 and went higher in 1980. Indeed, in the spring of '80, 1,400,000 workers were laid off or lost their jobs in a period of only a few months. In the last half of 1980, the money supply increased at an alltime high rate of 13 percent. Interest rates went right up with it to a 100-year high of 21\1/2\ percent. And, of course, the inflation rate, the basic villain in all this, was in its second straight year of double digits -- 12.4 percent.
Now, we both know the high interest rates led to layoffs in the automobile industry. And as that industry slowed down, so did steel, rubber, and glass. Those same high interest rates brought down the housing industry as mortgages became too costly, leading to layoffs in lumber, appliances, furniture, and many other related industries.
Now, all of this was taking place before our administration had even taken office. During our first several months in office, the Federal Reserve was below its targeted growth rate in money supply. This had the effect of maintaining the high interest rates well into the summer of '81, when the recession worsened substantially. Our economic recovery program didn't go into effect until October of '81, and then only a part of the program. So, we've only had 13 months of the economic recovery program, and not the entire program at that. And yet, inflation has come down to 4.8 percent so far this year. Interest rates are 11\1/2\ and 12 percent, not 21\1/2\. The rate of increase in Federal spending per year has been lowered from 17 to 6 percent. And our people have had the first real tax cut since the one John F. Kennedy gave them in the early 1960's.
Is the economy continuing to decline as you said it was? Housing starts and building permits are up. There's been an above-normal increase in home sales for this time of year. Real purchasing power is up. The rate of personal savings is higher than it's been in 6 years. The stock market is some 215 points higher than it was just 10 weeks ago. Now, it's true, there have been a great many bankruptcies and business failures, but the number of new businesses starting up is near a record level.
You suggest that I urge the Chairman of the Federal Reserve to loosen the money supply so as to reduce interest rates. But interest rates have come down almost 50 percent. In 1980, when the money supply was loosened, interest rates skyrocketed. You say put a moratorium on loans for corporate mergers, but that would be getting into credit control, which was tried and failed a few years ago.
With regard to your proposal to send our special trade representative, Bill Brock, and others to negotiate trade regulations with Japan and our European trading partners -- they've been doing that and have had considerable success and intend to continue.
You urge that we embark on a giant public works program funded by government. Isn't that what we tried in all those seven other recessions since World War II? And all we got for that spending was a temporary quick fix, followed by more inflation and then another recession, usually deeper than the one before. Doing this would increase deficits and then repeat the high inflation and deep recession cycle we want to avoid. Make-work jobs would be offset by lost jobs in the private sector.
You mentioned defense spending and two particular construction projects that we could do without. Well, defense spending is providing jobs for hundreds of thousands of American workers, besides providing for our national security.
I appreciate your invitation to come to Michigan to see the unemployed firsthand. When I was in Michigan campaigning in 1980, unemployment in the city of Flint was then 20 percent, and in Detroit it was 18 percent. I saw similar tragic examples in Ohio and other industrial States.
You speak of Americans ``searching in vain for jobs that do not exist.'' Well, certainly that's true. But there also are jobs that do exist and are unfilled because of the lack of workers with the particular training or skill called for in those jobs. Count the pages of help wanted ads in our metropolitan papers on any given Sunday. Two weeks ago, the Washington Post ran 34 such pages. On the other side of America, the Los Angeles Times on that same day carried 52 pages.
I'm sure that you'll be pleased to know we're starting a job training program in which the Federal Government will work with local officials and businesses and industrial leaders at the community level. The idea will be to train individuals for jobs now available in the communities where they live. Now, since two out of five of today's unemployed are between the ages of 16 and 24, the group with the highest unemployment rate, the program has a great potential.
I think a careful study of the success of our existing policies in laying a groundwork for economic recovery will convince you they deserve more than the 13-month trial they've been given.
End of letter.
Well, I'll be back next Saturday. Till then, God bless you.
Note: The President spoke at 12:06 p.m. from Camp David, Md.