Remarks at the Annual Meeting of the American Council of Life Insurance
November 16, 1987
Thank you all very much, and thank you, John Creedon. As many of you know, John is giving the Nation outstanding service on the AIDS Commission. Thank you also, Carey Hanlin, and a special thank you to someone I miss seeing at the Cabinet table, a man of courage and principle, one of the best Secretaries of Health and Human Services our nation has ever had: Dick Schweiker.
I've come here today in what I'm sure we would all agree is a time of unusual worry and unusual promise. Today we Americans have it within our power to lead the entire world into a new age of prosperity and peace or to return it to the stagnation, drift, and uncertainties of the late seventies. History records few moments when an entire people arrive at a place of turning and either choose the right or the wrong path. We Americans have come to such a place, but as we've seen in the markets these last few weeks, many wonder if we'll pick the right course.
I believe we will if we recognize our opportunities. The problem of recognizing opportunities -- it reminds me of a story about Moses. He had led the children of Israel out of Egypt. He got to the Red Sea. God parted the waters. Moses looked around and said, ``Oh, Lord, just as I was going in for a swim.'' [Laughter]
Now, I know you've heard a lot of whys and wherefores about the volatility in the market these last few weeks -- some of it not all that helpful. After 4 years of amnesia, our critics -- God bless them -- have all of a sudden remembered the word Reaganomics. When I hear them talk about stock prices, I can't help thinking of the judge who was questioning a prospective juror. And the judge asked the juror if he had any opinion about the guilt or innocence of the defendant. And the juror said, ``No, your honor.'' The judge asked, ``Do you have any reservations in your conscience about the death penalty.'' The juror said, ``No, sir, not in this case.'' [Laughter]
You in the life insurance industry make a profession of keeping a cool head when others panic and of fixing your eye on the promises as well as the dangers of the future. Well, that's how you make the right decisions. In the last 7 years, I've found that's how to make the right decisions on national economic policy, too. Look at opportunities. Look at dangers, too. Look at reality. Yes, financial market gyrations are a reality, but this is reality, too: Our underlying economy is strong and getting stronger. Two weeks ago it became official: America had achieved 59 months of uninterrupted economic growth. That is the longest peacetime expansion on record in our entire history.
Within 2 weeks of the stock market plunge, we learned that gross national product was rising at a healthy 3.8-percent annual rate. Much of this growth was because of new business investment, which is soaring at an almost unbelievable annual pace of 24 percent. And after a brief spurt earlier this year, inflation has fallen back to less than 3 percent. We also learned that manufacturing productivity was rising at a nearly 5-percent annual rate. Manufacturing exports are an important reason why our total real exports have been growing at a nearly 17-percent annual rate. Why, just the other day, I learned that Americans are even about to export chopsticks to Japan.
Yes, in the last 2 years, our manufacturing output has been rising sharply. Take just one industry, steel, which had been said to be dying. Now the talk is about its rebirth. As a recent Business Week headline said: ``Cancel the Funeral -- Steel is on the Mend.'' In our expansion, the biggest stories have been new businesses, rising family income, and jobs. They're stories that each of you knows about. After all, the life insurance industry's venture capital investments have helped finance America's entrepreneurial boom. And in working with your policyholders, you've seen firsthand how, after a decade on a falling roller coaster, the average American family's income has once again risen strongly since 1982.
You've also seen your markets expand, as America created more jobs in the last 5 years than Europe and Japan combined. And as for the critics who talk about how bad are the millions of jobs America has created in service industries -- ``hamburger flipping'' is how critics characterize them -- well, those critics ought to talk to you, because many new service jobs are in life insurance.
Just the other week, figures came out showing that we continue to create jobs at a record pace -- more than half-a-million new jobs in October. They came from both manufacturing and service. And as one private economist said: ``The strength was across the board.'' Another summed up: ``The economy was gathering momentum.''
The potential employment pool in America, as maybe some of you don't know -- I didn't know for a time -- is everyone, male and female, from age 16 up. It includes all retired people. It includes kids in school and so forth. That is the potential pool against which we match our employment record. Well, this year more than 60 percent of that group has been employed. That is more than ever before in our history. This is the strength and promise in our economy today. There are dangers, too, of course. But as Fortune magazine warned last week: ``The most immediate danger is that in a rush to do something to calm the frenzied international markets, Washington will do the wrong thing.''
Well, trade is one area where we're in danger of doing the wrong thing. Forgive me for saying, but some in Congress have been playing with economic dynamite this year. More than 10 million American jobs are tied to imports, exports, or both. From the day George Washington took office to the present, when international trade has grown, the number of jobs has grown. When trade has dwindled, so have the number of jobs. Yet a bill with some of the most protectionist provisions we've seen since Smoot-Hawley is working its way through Congress. Now, that's just what we don't need right now -- to declare a trade war, to become a casualty ourselves.
I spoke at the beginning of places of turning, and here's one: Congress can either turn towards a protectionist trade bill or it can enact responsible legislation and ratify the free trade agreement we recently concluded with Canada, and make that agreement a model for our policy toward all nations. Under this agreement, trade barriers between the world's two largest trading partners will, for the most part, vanish by the year 2000.
In the last 7 years, we have used our trade laws as never before to open world markets to American exports. For the first time, an administration has started unfair trade practice cases on its own, not waited for industry. Korea recently responded to one of these cases and agreed to end its ban against foreign firms underwriting insurance, including life insurance. This will guarantee American firms access to Korea's insurance market, and that's good for everyone, Koreans and Americans.
Not long ago, I ran across a startling example of what ending trade restrictions can mean. In January New York State put an end to a domestic trade barrier. They let in milk from New Jersey. You couldn't buy New Jersey milk in New York before that. The result: The average price of a gallon of milk on the Lower East Side of New York City dropped by 40 cents. That was just one product traded -- not between two nations but between two States. Put that on a world scale, and you see how much protectionism costs America's families. It's just this simple: America needs more trade, not less.
Last week I emphasized that it was not our policy to drive down the dollar. Exchange rates that whip around with every shift in the wind make business reluctant to sail the seas of international commerce. That hurts all trading nations. But enduring calmness on the currency markets must come from better coordination of economic policies among the major industrial countries. And that's why I was pleased by the recent action taken by Germany and other countries to lower interest rates. Coordination of policies that produce growth -- that's good for everyone and something the United States continues to support.
Here in Washington, I'm working with Congress to take another American step toward less deficit spending. But as in trade, there are right steps and wrong steps, and hiking tax rates is the wrong step. As a front page story in the New York Times 2 weeks ago warned, higher tax rates could, as the article said, ``chill the economy, reduce personal and business incomes, and thus lower tax receipts.'' Last year we cut the deficit by $73 billion -- nearly one-third of what it was in 1986. We're determined to achieve at least a $23 billion reduction this fiscal year and stay on the path to a balanced budget.
I'm confident we'll get there one way or another. But let me repeat something here I've been saying for some time now: Deficit spending is in large part an institutional problem, and a comparatively recent one to boot. In the mid-seventies, Congress, in effect, shoved the President to the side in the budget process. It legislated a major shift in the checks and balances of budgetmaking power, and the results came immediately. Before that, Federal debt with inflation taken out had been steady or falling for a quarter of a century. Since then it's been in a steep climb.
In my years in the White House, I've seen one Member of Congress after another call for lower deficits and less spending and then go out and vote for more spending. Some, of course, just want more spending, period, but many are sincere. They're prisoners of a dilemma. If nearby districts or States get so many Federal dollars, they must bring at least as much home or look bad. So they swap increases for increases, and deficit spending goes up.
A perfect example is the housing bill being considered in the Senate. Now is not the time to add to the deficit, and this bill could add as much as $7 billion more in spending than I requested for this year. What's more, it costs at least $3 billion more than they say it costs, because they mandate things they don't pay for. That's budget gimmickry, pure and simple. Federal housing programs should be designed to help those who cannot help themselves. But under this bill, even though it's a budget-buster, aid to poor and needy Americans could actually be cut. You see, the bill diverts enormous amounts of money to subsidies for those who don't need subsidies at all. That is morally wrong. If this bill arrives at my desk, I will veto it.
What we do need right now is an extension of FHA authorities. That issue has been hanging fire for too long. I call on Congress, by the end of the month, to provide a permanent extension of those authorities, but not with so much else attached. We can't have it both ways. We can't make speeches calling for cuts in the budget deficit and then vote for bills like this that bust the budget. If Congress is serious about joining with me to cut the budget, they should show it by starting with this housing bill.
The sad fact is there's only one way, once and for all, to stop them before they spend again, to free these prisoners from their dilemma. And that's to restore the role in the budget process of the only elected official who speaks not for local interests but for the interest of the entire Nation: the President. And that's why I've said over and over that it's time for the President to have what 43 Governors have, what I had as Governor of California: a line-item veto. Saving Congress from itself and America from Congress' compulsive spending is also why I've said that we need for the United States something that 32 States have: a balanced budget amendment to the Constitution. A favorite person of mine, Prime Minister Thatcher recently said: ``Early and decisive action'' on cutting U.S. deficit spending is ``the most important single thing of all'' to restore the world financial markets. Nothing could be more decisive and convincing than these reforms.
Now, I've spoken to you today about our economic future and the world's. But that's not the only area in which America will soon make choices for the future. Next month I will meet here in Washington with General Secretary Gorbachev of the Soviet Union. If all goes well, we'll sign an agreement that will, for the first time in history, eliminate an entire class of U.S. and Soviet nuclear missiles. It's a good bargain. For every nuclear warhead of our own that we remove, they will be giving up four. Recently, all seven living former Secretaries of Defense were asked, if they were still in office, would they recommend this agreement to the President? All seven said, yes, it's a good agreement.
Some details remain to be worked out. The most important is verification. I cherish no illusions about the Soviets. It's said: For them, past arms control treaties were like diets: The second day was always the best, because that's when they broke them. [Laughter] Any treaty I agree to must provide for effective verification, including onsite inspection of facilities before and during reductions and short-notice inspections afterward. The verification regime that we've put forward in Geneva is the most stringent in the history of arms control negotiations. I will not settle for anything less.
We're also pressing now for an agreement on reducing our two nations' strategic arsenals by one-half. Our Geneva negotiators have made progress. The Soviets must, however, stop holding strategic offensive missile reductions hostage to measures that would cripple our investigation of a strategic defense against ballistic missiles, the SDI. From the Krasnoyarsk radar facility, whose very construction violated the 1972 ABM treaty that the Soviets so vocally claim they want to preserve, to their modernized deployments around Moscow of the world's only ABM defenses, the Soviet Union's own SDI projects have become big news throughout the world in recent months. The Soviets have put billions into their program. They have more than 10,000 scientists working on military lasers alone. We know this, and they know that we know, and we know that they know we know. [Laughter] It's time for them to stop the charade and admit their own deep involvement in strategic defense work.
For us, SDI is a vital insurance policy, a necessary part of any national security strategy that includes deep reductions in strategic weapons. It will help protect our allies, too. In decades to come, it will underwrite all of us against Soviet cheating on both strategic and intermediate-range missile agreements. It goes hand in hand with arms reductions. We cannot -- we will not -- bargain it away to get strategic arms reductions.
SDI will also protect us against accidental missile launches and ballistic missile threats -- whether with nuclear, conventional, or chemical warheads -- from outlaw regimes. In the decades ahead, missile technology will proliferate, just as nuclear weapons technology already has. We can't be sure just who will get it, how competent they will be, or how rational. We must have an insurance policy against that day, as well. So, no, SDI is not a bargaining chip. It is a cornerstone of our security strategy for the 1990's and beyond. We will research it. We will develop it. And when it's ready, we'll deploy it. Remember this: If both sides have defenses, it can be a safer world. But if we leave the Soviets with a monopoly in this vital area, our security will be gravely jeopardized. We must not let that happen.
My talks with General Secretary Gorbachev will cover the full range of U.S.-Soviet relations, including human rights, exchanges between our peoples, and Soviet involvement in regional conflicts such as in Afghanistan, Angola, and Nicaragua. I believe that if America remains firm and strong, if we don't give up in squabbles among ourselves things that should be the subject of negotiations with the Soviets, we can usher in a new age of peace and freedom.
Yes, we live in a time of promise and a time of worry, of hazard. In the next few months, we can take steps that will lead America and the world toward a new age of prosperity and peace or, if we take the wrong steps, in just the opposite direction. So, I have a very simple appeal to you today. I need your help. I need your hand. Let's work together to make certain that the steps America does take are the right ones.
You know, I have developed a hobby recently, and I'm annoying audiences with it, I'm sure. I can't close without telling you what that hobby is. I have begun collecting jokes that I can prove are told by the Soviet citizens among themselves, which show their great sense of humor, but also a certain cynicism about their system. And I couldn't resist in the last meeting with the General Secretary to tell him one of those jokes. [Laughter]
It had to do with an American and a Russian arguing about their two countries. And the American in the story said, ``I can walk into the Oval Office, I can pound the President's desk, and I can say, `Mr. President, I don't like the way you're running our country!''' And the Soviet citizen said, ``I can do that.'' The American said, ``You can?'' He says, ``Yes. I can go into the Kremlin to the General Secretary's office, I can pound his desk and say, `Mr. General Secretary, I don't like the way President Reagan's running his country.''' [Laughter] Thank you all. God bless you.
Note: The President spoke at 11:06 a.m. in the Sheraton Ballroom at the Washington-Sheraton Hotel. He was introduced by John J. Creedon. In his opening remarks, the President referred to H. Carey Hanlin, chairman and chief executive officer of Provident Life of Tennessee.