Remarks to the United States Chamber of Commerce on the Economy and Deficit Reduction
November 19, 1987
We all talk about the difficulties of getting around in Washington when it snows -- it's 5 hours to get home and that sort of thing -- but it's taken us 2 weeks to get here. [Laughter] I appreciate this opportunity to be with you today. First and foremost, this occasion gives me a chance to extend to you my personal thanks for all the United States Chamber of Commerce has done -- in the arena of commerce and industry and the political arena, as well -- to lay the foundation for the tremendous economic strides America has made and that Mr. Delchamps referred to.
A special thank you to both Chairman Ollie Delchamps and to Vice Chairman William Kanaga. I'm sorry one of your leaders, a friend of mine, couldn't be with us today: Chamber President Dick Lesher -- the man who is to Federal tax rates what Conan the Barbarian was to anyone who got in his way. [Laughter] Seriously, we've been part of a team that has accomplished much, and we have every reason to be proud. I understand you just saw a film entitled, ``Making It,'' which documents America's entrepreneurial spirit as evidenced in six small, but growing companies; and believe me, I'm honored to have just been able to meet the stars of that film here on stage.
I happen to believe that -- I know you agree with me -- that it is this spirit of enterprise that is the secret of our country's success. Over the 200 years of our Republic, our economy has produced more wealth, more opportunity, and a higher standard of living for more people than has ever happened before. In these last 7 years together, we have sought to unleash that same creative and economy-building spirit of enterprise that built America.
The collectivism, excessive regulation, and high tax rates of the last decade brought our people unbearable inflation, sky-high interest rates, economic decline, and national pessimism. Instead of trying to harness the energy and resources of the American people, which seemed to be the goal of our liberal predecessors, we have sought to set them free. And I've always felt, and I think events have proven me right, that the best thing the Government can do for free people is to get out of their way.
So, that's what we set out to do. It was tough going just to clear away the deadweight of excessive regulation, to get the massive increases in Federal spending under control -- and we were only partially successful at that -- and to bring down the tax rates from the economy-killing levels they were at. And then we had to stick to our guns while our program had time to work its magic.
Well, 5 years ago something began that even our harshest critics had trouble ignoring. A surge of energy could be felt across the width and breadth of our country. And much to the dismay of those who said it would never happen in the first place, it just kept coming and coming. Last month we passed a milestone, and today it's fitting that I've come here to recognize it with all of you. It couldn't have happened without you. Together we put in place growth-oriented tax, regulation, and spending policies that have brought our fellow citizens 5 years of uninterrupted economic growth -- the longest peacetime expansion on record.
This expansion is not just statistics; it's meant a better life for our fellow Americans. I've received letters from people all over this country telling me the wonderful things that they have been able to accomplish. Of course, everyone hasn't been satisfied, especially those who opposed our reforms in the first place. And even though this undeniably has been a period of tremendous economic renewal, there's been a constant drumbeat of doom and gloom, rumors, and misinformation. Will Rogers once said: ``Rumor travels fast, but it don't stay put as long as truth.'' So, I'd like to touch on a few of the myths that have made the rounds of late.
First, we've heard time and again that America's industrial base is eroding, that our manufacturers are noncompetitive, and that our country is becoming deindustrialized. Well, the facts tell a far different story. Manufacturing, as a percentage of our total real output, has stayed virtually the same for the last two decades. Some manufacturing industries have gone down, no doubt. Others, however, have gone up.
But while the overall percentages have remained about the same, pervasive change has been the order of the day in America's basic industries, and there's always a certain degree of apprehension and employee dislocation during such times. The picture coming into focus now, however, is not of American manufacturing surrendering and fading into oblivion but of renovation, revitalization, and computerization on a grand scale. Instead of pessimism, what we see is reason for confidence and optimism.
For a year now, our manufacturing output has been rising steadily. Giants in the manufacturing of new technologies are emerging. Some traditional industries, all but written off a decade ago, are now making dramatic strides. Steel is, perhaps, the most impressive example. Business Week reports that U.S. steelmakers are now among the world's most productive.
One of the primary goals of our economic recovery program was encouraging investment to keep our companies competitive. Well, now it's paying off. Real investment has risen to about one-sixth of the gross national product, and along with a new spirit of cooperation from the assembly line to the boardroom, it's keeping us competitive and ensuring that the American worker remains the most productive in the world. And speaking of working people, we currently have a higher percentage of our work force employed than ever before in our history. An incredible 14 million new jobs have been created since the expansion began. I think that's something to crow about.
Yet even as we beam with pride, a myth has spread that the new jobs being created are actually low-paying, dead-end jobs. Well, again, this information may have wide circulation, but as an old Virginia lawyer once told a hometown jury: T'ain't so. According to Department of Labor figures, nearly two-thirds of the new jobs have been in higher paying occupations, and only 10 percent in lower paying, low-skill occupations. Over 90 percent of the new jobs are full-time. In short, these are, by and large, better paying, more competitive, more challenging, and more rewarding jobs.
And this new opportunity is being shared by all Americans, of every race. In the last 5 years, black employment has soared forward twice as fast as white employment. Hispanics have found over 2 million jobs since the recovery began. Perhaps one aspect of this expansion of which I am most proud concerns the advances made by less fortunate citizens. In the late 1970's, an ominous increase in the poverty rate began. Black Americans were among the hardest hit. One of the myths being heard today is that we're in a time when the poor are getting poorer and the rich are richer. Well, in fact, we have at long last turned around the increasing poverty rate that we inherited from those who now criticize us. Black Americans, whose standard of living began dropping in the late 1970's, now are on the way up. Real family income in the black community is up, and since 1982 it has grown almost 40 percent faster than white income. This August the percentage of blacks employed was the highest on record. Now, this is not to say that things are perfect or all the problems are solved. There's still a long way to go, but things are heading in the right direction.
Our goal has been an America with freedom and opportunity for all; an America where, as John Kennedy once said, a rising tide lifts all boats; an America where people can rest assured that their life savings will not be decimated by double-digit inflation; an America, as our Founding Fathers wanted her to be, where government is the servant, not the master; a vital, future-oriented America being catapulted forward by the hard work, creativity, and enterprise of its people; a compassionate and caring America, where the people don't wait for government and bureaucracy, but reach out themselves to help one another and to assist those in need.
Nearly 7 years ago, my friends, this is what we set out to accomplish. And much has been done to achieve these laudable goals. But let us give credit where credit is due. It is the American people who built this recovery. What we did right was simply to believe in them. There are, of course, challenges, serious challenges, to be met in the months ahead. It is in just such times as these, when the pressure is on, when the people look to us for leadership, that we must have the courage to stick with our principles.
A few weeks ago was Halloween. You know, there's a story about a fellow who dressed as the devil for a costume party. And at the party he had a little too much to drink. Being tipsy, he got lost on his way home. But he spotted a small church, and the lights were on, and he decided to go in and see if he could get directions. Well, it was a stormy night, and just as he flung open the door of the church, a lightning bolt, and accompanied by thunder, flashed across the sky. The congregation turned around, and there he was dressed in the devil's costume. Pandemonium broke out. Parishioners ran from the church screaming. They jumped out the windows and raced out the back door. After only a minute or two, the church was completely empty except for one lone, little old lady with a cane who slowly walked up to this fellow who she thought was the devil himself, looked him right in the eye, and said, ``I've been going to this church for 40 years, but I've really been on your side all the time.'' [Laughter]
Well, 1 month ago, pandemonium broke out on Wall Street. The stock market had been rocketing to new highs, smashing old records, and then reaching even higher. When the market turned down, no one who owned stock wanted to be in the group that bore the brunt of a loss, which was expected as part of a long-awaited adjustment. A stampede was the result. It has, as one would expect, unnerved many throughout the country and throughout the world. In making an assessment of the situation, I cannot help but point out that the stock market today is about where it was at the end of 1986, after 4 years of economic growth. It is roughly twice as high as it was when the expansion began. So, while there's every reason for concern, there's no reason to be apocalyptic.
And if explanations are needed, let us not accept myths or unfounded statements about our economy. The Wall Street slide coincided with the following positive economic news: The gross national product was picking up steam, rising to an impressive 3.8-percent annual rate. Inflation, after a brief spurt, was settling back to a modest 2.7 percent. The unemployment rate went to its lowest level in 8 years. New third-quarter statistics from the Department of Commerce underscored that the economy was strengthening almost across the board. Furthermore, manufacturing jobs, many of them export-related, grew by over 300,000 in the 12 months prior to the market slide. Over that period, manufacturing productivity grew by an outstanding 4 percent, and real exports were up more than 13 percent.
There are those, of course, who suggest that nervousness about the high level of Federal deficit spending contributed to skittishness on Wall Street. Well, excessive spending and large deficits have been and remain a vexing problem. But the most recent news on this subject is that deficit spending actually dropped by $73 billion. That's right; we have cut in 1 year one-third of the red ink this year alone.
Now, not even the experts can tell us with certainty what caused the market slide. The important thing from my view is where we go from here. I believe that the movers and shakers of commerce, industry, and investment are most concerned about how and if we will handle the Federal Government's deficit spending. We must make certain that growth forces prevail and that recession is avoided. It's up to us, because the course we follow, the policies we pursue, will determine the future. Let me say without reservation that I see no reason to believe that the market drop should drag our country into recession, because the adjustment still leaves us with a market almost twice the size of when our economic expansion began.
Nobel Prize winning economist Paul Samuelson has quipped that Wall Street has predicted nine of the last six recessions. [Laughter] To be specific, stock market drops have happened, and on a surprising number of occasions the economy has kept moving up. The continuing volatility of the market, however, necessitates that great care must be taken with major economic decisions. Two significant stock market declines in this century that had two different aftermaths can help us determine our best course of action. In 1929 the market crashed, and later the economy sank and stayed sunk. In another case, in 1962 the stock market, over a 4-month period, lost almost a third of its value. This market slide was followed by the most robust period of growth in United States history.
What made the difference? Well, after the 1929 market drop, President Herbert Hoover signed into law protectionist trade legislation; and in 1932, at the depth of the market crash, the Congress, taking exactly the wrong action, passed tax increases that condemned the people of America to the Great Depression. In stark contrast, in 1962, with a market in a critical decline, the Trade Expansion Act was passed; and President Kennedy proposed dramatic tax rate cuts. Our economy took off, and the American people enjoyed an unprecedented period of high growth and low inflation.
Another difference between 1929 and 1962 was the liquidity provided to the economy by the Federal Reserve System. And I'm pleased that our new Federal Reserve Chairman, Alan Greenspan, is taking all the steps needed to provide the banking system with the necessary liquidity.
The country is now looking for cooperation among all responsible government leaders to bring down the unacceptably high level of deficit spending, but we must do it in a way that will not threaten the economy. The Senate on Tuesday showed that it can do its part when it voted to prevent consideration of legislation exceeding congressional budget targets. And I applaud the Senate's courage. This housing bill is a classic example of unnecessary spending, just the sort of thing America can no longer afford.
There's been a lot of talk in Washington the past several weeks about reducing the Federal budget deficit. My representatives have been meeting with negotiators from the House and Senate, attempting to craft a package that will deal fairly with all elements of the Federal budget, place the deficit on a downward slope, and avoid the automatic cutting device, a sequester. While the final package may not be all that I might want, it will not be all that Congress wants either. But it is vital that the negotiators complete their work now. Any agreement that comes from these sessions probably will not be the final word on reducing the Federal budget deficit, but it will be the right signal at the right time and will show our determination to work together to solve this problem.
Now is the time for final action, and now is the time for fairness. I urge the negotiators to produce a budget plan that is enforceable and gets the country on a path toward long-term deficit reduction. Whatever understanding is reached, it must bolster economic growth, and that certainly means it must encompass more than simply extracting more money from the taxpayers' pockets.
Now, as popular as the notion seems to be within the Beltway, I cannot bring myself to operate under the assumption that our citizens are at fault because they're undertaxed and selfishly putting themselves above the national interest. During this administration, the tax revenues of the Federal Government have risen from $600 billion to $854 billion. Between 1980, the final year of the last administration, and the fiscal year that ended September 30th, 1987, Federal revenues then increased not 5 percent, not 10 percent, not even 25 percent, but 65 percent. The people aren't undertaxed. The problem is the Federal Government is spending too much money.
In fiscal year 1987 we made substantial progress in slowing the growth of Federal spending. I am absolutely committed to working with Congress to ensure that this represented the beginning of a downward trend that will bring our budget back into balance in the not-too-distant future. Hard choices have to be made. The Federal Government can not be all things to all people. Some spending programs are more important than others, and some are a downright waste of taxpayer money. There are cuts out there to be made, and it's in the national interest to make them. More than anything else, in formulating a solution, we must be realistic.
You know, I used to tell a little joke about the Federal Government compared to the private sector and even local and State governments and all. And then I got out of the way of telling that story. But now, with their attitude toward the deficit spending on the part of some of them up there on the Hill, I remember it. And that was the local town that decided to raise its traffic signs from 5 feet of height -- its direction signs -- up to 7 feet to make them more visible to the motorists. And the Government came along and said, oh, we have a program to do that for you. We're going to lower your streets 2 feet. [Laughter] You know, it's imperative, now more than ever, that decisionmakers in this country learn the lessons of history. Ben Franklin once wrote: ``If you will not hear reason, she'll surely rap your knuckles.'' Well, we don't need our knuckles rapped.
It was 58 years ago, on December 5th, 1929, that President Herbert Hoover stood here and addressed a group of business leaders not unlike yourselves. He acknowledged the stock market panic and reassured everyone of the fundamental strength of the American economy. And this is where the parallel ends. We're not rushing forward to increase tax rates as the Congress did in 1932. In fact, next year a tax rate reduction, the main phase of our tax reform package, will kick in just when we need it the most. The impact will be forceful and energizing, like a gigantic shot in the arm.
As far as raising tariffs, like the Smoot-Hawley catastrophe, we're moving in just the opposite direction, toward a historymaking, near-total elimination of trade barriers with our biggest trading partner, Canada. And make no mistake, our free trade agreement will be a boon to both our peoples and a major stimulus to economic growth.
I have long felt that the people who came to the New World, especially here in North America, have a mission to perform in proving to the world there is a better way. Canada and the United States will soon be doing just that: demonstrating to all humanity that there are, indeed, no limits to what people can accomplish when they are free to follow their dreams. Once this step has proven successful, there's no reason others should not use our success as a model. Ours is a dream of an open world where all are free to trade and do business together, to enjoy the fruits of prosperity, and to live in peace with one another. And we're making that dream a reality. It is the American dream.
Are America's best days ahead? You bet they are, and together we're making certain of that. Any budget compromise will prove again that freedom is right and it works, that we Americans can make the tough decisions, can find the common ground necessary to keep our nation growing and moving forward. And I welcome this chance to thank you, all of you, for what you are doing. God bless you.
Note: The President spoke at 10:55 a.m. in the Hall of Flags at the U.S. Chamber of Commerce building to local business leaders. He was introduced by Oliver H. Delchamps, Jr. In his opening remarks, the President referred to a meeting with the chamber that had been scheduled for November 12 but was canceled because of a snowstorm.