February 5, 1983
My fellow Americans:
I'd like to talk to you about a word. It's a word we've all been hearing a lot lately. The word is ``Reaganomics.'' Somewhere along the line, our economic program got tagged with that label. To tell you the truth, it isn't a name I would have chosen. It sounds like a fad diet or an aerobic exercise. But we seem to be stuck with it. With every anchorman on the evening news, a goodly share of political pundits, and more than a few politicos using it, it has a good chance of becoming standard Americana.
There wouldn't be anything wrong with that, except that it's used as a term for something that's supposed to have failed. So if you don't mind, I'm asking for equal time -- well, at least, for about the next 5 minutes.
We are, and have been for some time, in a recession. Unemployment was running at 10.8 percent as the year ended. But we learned yesterday the welcome news that it dropped to 10.4 percent in January. And if you include our men and women in the military as part of the work force, which makes sense, it's down to 10.2 percent.
Still, only about two-thirds of our industrial capacity is being used. Our government is facing large deficits, and interest rates are still too high. And we're told all of this is the result of an economic program put into place by our administration and which, for obvious reasons, is called Reaganomics.
I know some will say I'm being defensive, but I'll risk that, because in the weeks ahead decisions are going to be made here in Washington that will have a bearing on whether unemployment continues to go down and the economy continues to turn up. You will help determine some of these decisions because public opinion does influence government. Therefore, you must have a clear fix on the facts, the economic realities.
Thomas Jefferson said, ``If the people know the truth, they'll never make a mistake.'' So, let's start with some dates.
Back in 1979 inflation was rising, unemployment was increasing, and by 1980 we were in a recession. Unemployment had reached such a point in the last half of 1980 that I referred to it as a depression. I was criticized for that by technical-minded people who said it was only a recession. But you'll have to forgive me. I was campaigning in Flint, Michigan, where the unemployment rate was already 20 percent; in Detroit it was 18 percent, and across the line in Ohio, steelmills were closing. In an Indiana city, unemployment was 23 percent. Inflation was in double digits for 1979 and '80 and reached 14 percent during the 1980 campaign. Interest rates went to 21\1/2\ percent, and the housing industry was at a standstill.
Our administration opened up shop on January 20th, 1981. The prime interest was still above 20 percent, inflation was 12.4, and unemployment was 7.3 percent. The 1981 budget had already been put in place by the previous administration and began on October 1st, 1980. Now, there was nothing we could do about that budget -- it wasn't ours -- although we did manage to squeeze out a few billion dollars through some management changes. For the most part, however, we were engaged in a struggle to get our budget proposals for 1982 adopted and the other part of our economic recovery program -- tax cuts for all Americans to help stimulate the economy.
All the time, interest rates stayed high, unemployment kept increasing and, by July, the bottom had fallen out.
About this same time, our economic program, most of it, was passed -- major reductions in the growth of spending and a 25-percent cut in income tax rates to be phased in over a 3-year period. But none of this went into effect until October 1, 1981. The first portion of the tax cut was only 5 percent; another 10 percent would take place in July of 1982. Reaganomics, as they would have it, started only 16 months ago. There was another 10-percent cut in the income tax scheduled for this coming July.
Now, what has happened in those 16 months of Reaganomics? Well, with the help of the Federal Reserve Board, inflation has dropped to only 3.9 percent for all of 1982, the lowest it's been in 10 years. Interest rates are about half what they were. The effect of that is a 40-percent increase in housing starts. Automobile sales are up, as are all retail sales. Factory orders have begun to increase. One timber company I know of, which a year ago today was completely shut down, is now on two shifts a day, 5 days a week. Real wages are up for the first time in 3 years. And the rate of personal savings is up, meaning more capital for investment. And, as I've already mentioned, ``the lagging indicator,'' as it's called, unemployment, just took its first drop -- 10.8 to 10.4. A survey of business establishments shows somewhere around 300,000 more people working. We've a long way to go, but that's a start at last.
Now, I've seen in the flesh some of these statistics I've quoted. A few days ago, I visited a Chrysler plant in Fenton, Missouri, where 1,700 workers are being called back to a newly modernized plant. Another plant will be calling back an additional 1,500 workers by late summer. In nearby Hazelwood, the Ford plant was adding another entire shift. And General Motors has announced it plans to call back more than 21,000 of the indefinite layoffs over the next few months. For 8 out of the last 9 months, the leading economic indicators have been up.
In the weeks ahead, there'll be debates as to what course we should follow. The choice that will be offered is to turn away from our economic recovery program and go back to what was being done before. May I point out, all of the good things I've mentioned didn't begin until after our program, Reaganomics, if you will, was put in place. Prior to that, everything had been a mess for 3 years or more. I wonder if they'll still use that name when they've found out it works.
Until next time, thanks for listening, and God bless you.
Note: The President spoke at 12:06 p.m. from Camp David, Md.