Remarks and a Question-and-Answer Session With Reporters on Fiscal Year 1983 Federal Budget Legislation

May 6, 1982

The President. I know you're all wondering why we asked you here.

Last Thursday evening I told the American people that the road to economic recovery begins with a responsible budget now. I pledged to them my personal all-out commitment to work with the Members of both Houses of Congress on both sides of the aisle to break the budget deadlock, and we've been doing that continuously. And last night, in cooperation with the Senate Budget Committee, we took an important step toward the balanced and fair compromise the American people want and our economy needs.

We reached agreement on a 3-year deficit reduction package totaling $416 billion. Two-thirds of the amount will come from spending reductions and interest savings, only 23 percent from revenue increases; and while we realize no compromise can please everyone, this one meets the most important criteria. It will continue to bring down the growth in Federal spending.

It should measure financial markets -- or reassure, I should say, financial markets by sharply reducing projected deficits next year and in the years beyond. It will preserve our commitment to a stronger defense and to the all-important incentives to broaden the tax base by stimulating more savings, investment, production, risk-taking, and growth in the private economy.

Let me emphasize one other point. This package includes measures to restore the solvency of the Social Security Trust Fund. But as I promised the American people, social security beneficiaries will receive their full 7.4-percent cost-of-living increase in July, and we will continue to protect the basic benefits of social security recipients in the future.

And now with me this morning are some of the key leaders in the Congress that we've been working with in the past few weeks. And with their great leadership and the leadership of many others from both parties, I believe we can put our country firmly on the road to economic prosperity. And I'm going to turn around and say thanks to these gentlemen right now for being here. Pete?

Senator Domenici. Thank you, Mr. President.

Social Security

Q. Mr. President, $40 billion out of the social security. How are you going to make that up?

Q. Mr. President, $40 billion out of social security -- --

The President. Whoops, wait a minute.

Q. How can you do it, Mr. President?

The President. That figure -- --

Q. How can you do that without cutting benefits? You've said you won't cut benefits.

The President. No, that figure is a plug that is simply put in there based on -- you'll remember, there is a task force working, a bipartisan task force, on restoring the solvency of social security, the integrity of it which we told the people a year ago was lacking. And, at that time, this was rejected, and there were people who told us in the debate that, oh, there was no danger to the system. They now recognize, yes, there is.

We have put in that figure as what will be necessary in the restructuring of the program in order to restore solvency to the program.

Q. Mr. President, why wait until January the 1st, sir? Why can't you put Alan Greenspan in a dark room and lock the door like Lyndon Johnson did and tell him to go to work now and finish his study?

The President. They are going to work now, and they are working. It's -- --

Q. Can't you make him do it quicker?

The President. Well, we gave them till December 31st. If they come in with something earlier, we'll be very happy about it. But that still allows us time -- --

Q. Can you assure that there will be no cuts in social security benefits in the future?

The President. I have said to the delegates that I appointed to that task force that the people who are now dependent on social security must be assured that they're going to continue to get their benefits.

Q. Aren't you passing the social security buck until after the elections, sir?

The President. No, that was decided back when the bipartisan agreement came to have a task force, a bipartisan task force. We made an effort last year to restore the solvency, and if you'll remember, it was made into a political football -- and not by our doing -- and it guaranteed the continued benefits as they are to the people under -- --

Q. [Inaudible] -- Mr. President, to make the system solvent, the $40 billion has to come from somewhere, doesn't it? -- either from increased revenues or from decreased benefits.

The President. No, it could come from an entire restructuring of the program, actuarially looking back down toward people who are just beginning in the program. As you know, there is a gigantic increase in social security tax built into the system past -- well, it went into effect in '78. We had one increase in the payroll tax in January. There will be two more in the next few years that are scheduled to take place. And the task force is supposed -- and that does not restore the solvency, even though the promise was made by the previous administration that that guaranteed the program's solvency until the year 2015. It didn't even guarantee it beyond 1984.

Tax Revenues

Q. Mr. President, you've said repeatedly that you wouldn't balance the budget on the backs of the taxpayer -- --

The President. That's right.

Q. -- -- but you've now, apparently, agreed to large, new taxes that the taxpayers will have to pay one way or the other -- the American public. What made you change your mind?

The President. No, if you'll remember, the original budget proposal we made proposed $13 billion of additional revenues, not necessarily in tax increases, but in changes in the tax structure, advantages that people were getting that we did not believe had ever been intended in the structure. And all we've done is come up on the first year 7 billion on that. Now, that does amount to, as that goes on -- --

Q. But over the 3-year period, sir.

The President. Over the 3-year period -- when you institute something in 1 year, then that continues and is reflected in the growth of the economy in the years to come, just as the -- but the main thing -- --

Q. Well, what's the figure you've agreed to in 3 years? Do you know?

The President. It will be -- it's 20 and 35 and 40 in the third year.

Q. That adds up to $75 billion.

The President. No, $95 billion.

Q. $95 billion -- my math's a little off. Well, isn't that a large tax increase the American public will have to pay, sir?

The President. Not when you stop to think that maintaining our present tax cuts, as we will, that that amounts to the $358 billion tax cut over the 3 years.

Now, these -- the things that we're considering are not the kind of things that are going to impinge on the incentive features of the way we have built in the business tax cuts and the individual income tax cuts.

Q. Will you slip your 3-year tax cuts or your third year tax cuts?

The President. No. That remains intact.

Q. And indexing won't be slipped?

The President. Indexing will not be slipped.

Q. Sir, are you now conceding what the Democrats have been saying all along, which was that last year's tax cut was simply too big?

The President. No, not at all. I am suggesting that the fact that we have inflation virtually down to zero and that it's come down that fast -- and other factors in the economy that indicate that the recession is bottoming out indicate that we would have been better off economically right now if they had not made us compromise and if the tax cut had been retroactive to January 1st, 1981, and had been 10 percent, not 5. We really are not beginning our tax cuts in reality to have an effect on the economy until this first July tax cut.

Let me, if I could, also say something else to many of you. You seem to have been confused about something and have referred a number of times that the budget that we first presented in February was a budget that included a $182 billion deficit for '83 and then increasing deficits beyond. Let me make something plain. The deficit figures are the figures if nothing is done. They were not -- in other words, our original budget proposal would have vastly reduced those deficits. But many of you have continued to refer that our budget proposal contained a $182 billion deficit. It did not.

U.K.-Argentine Conflict

Q. Mr. President, could I ask a question, please, on the Falkland Islands situation? I wondered if you would comment and give us your assessment, sir, about whether the United States has a creditable role yet to play as an honest broker in that we've come down on the side very clearly of Great Britain rather than Argentina?

The President. Well, we stand willing, as we always have been, to achieve a peaceful settlement under the conditions of Security Council Resolution 502, which calls for both a ceasefire and a withdrawal. And I'm not going to single out any particular approach that we're pursuing, but we're open to every approach that can. We now have the help of the President of Peru who has involved himself in these negotiations.

We'll do whatever we can to help, but it must be within that framework.

Q. Mr. President -- --

Q. Mr. President -- --

The President. Wait a minute, I promised him.

Q. On the Falklands -- --

Deputy Press Secretary Speakes. This'll have to be the last question, too, Jerry [Gerald E. Udwin, Westinghouse Broadcasting Co.], please.

Q. -- -- I think there is some concern that the Falklands could escalate into a greater war and some concern even that it could involve, eventually, the United States and the Soviet Union. What steps have you taken, if any, to try to head that off from happening -- such as contacts, perhaps, directly or otherwise, with the Soviet Union?

The President. Frankly, I do not see the danger of this escalating to that extent. And the steps that we are taking are the steps that we've always been taking, and that is seeking within, as I say, the U.N. framework, this kind of a resolution that calls for ceasefire and calls for withdrawal of all forces, while this is done. Now, so far, there has not been agreement on that.

Q. Mr. President, are you committed to -- --

Mr. Speakes. I'm sorry. Let's take Lou [Lou Cannon, Washington Post], and no more, please.

Social Security

Q. Are you committed to following what that commission advocates at the end of the year, even if that means cutting the cost-of-living increases of social security recipients?

The President. Well, this is one -- no, I have to say, there, I'm on record, and I don't think they would do that. I don't think that the people who are dependent on social security should be frightened any more than they have been by the political demagoguery that's been going on about this issue. The people who are presently dependent on social security must be assured that they're going to continue to get their benefits.

Mr. Speakes. Thank you.

FY 1983 Budget Plan

Q. Will the Democrats buy this plan that the Republicans have agreed on now in the Senate?

The President. This plan?

Q. What if they don't buy it, sir? You can't pass it without them, can you?

The President. Well, it'll be rather difficult for them to explain how they did not want to be a party to a plan that was going to reduce the 3-year deficit by $416 billion and would give us deficits that would go down from $106 in this first year to 69 next year, and to 39 in 1984, with a continuing line downward that makes certain a balanced budget in the next several years.

Q. You're trying to make the Democrats the fall guys. You'd say the Democrats had caused the recession to continue if they don't agree to this.

The President. If they can come up with a better proposal or one that will do this, we'll be very willing to listen. We want to work with everybody on this.

Q. Are you going to negotiate?

The President. What?

Q. Are you going to bring in the Boll Weevils and start trying to build your own coalition?

The President. My goal from the very first, and the reason for ``The Gang of 17'' and everything else, was that I believe the American people, in this time of economic distress, should have had the assurance of seeing the Democrat and Republican leadership in the Congress and this administration stand before them together and say that we have agreed on a plan to help cure this recession and reduce these deficits. And so far we have not been able to bring that about. But we are going to continue to try.

Mr. Gergen. [Assistant to the President for Communications] Thank you very much, Mr. President.

Q. Why do you call them the ``Gang of 17''?

The President. What?

Q. Why do you call them the ``Gang of 17''?

The President. They named themselves that. There were 17, and they began naming themselves after they got to about 13 meetings as ``The Gang of 17.''

Q. You know what happened to the Gang of Four in China. [Laughter]

The President. Well, but as I told Sarah [Sarah McClendon, McClendon News Service] one day, you know a sweet guy like me wouldn't -- [laughter] -- --

Note: The President spoke at 11:17 a.m. in the Rose Garden at the White House.