June 22, 1987 Governor Martinez, Congressman Nelson, Maxine Nohrr, I thank you, and I thank you all. This is a most heartwarming greeting, and well, it's good to be here in Melbourne, Florida, the city that just next year will be celebrating a hundredth anniversary of its founding. Come to think of it, maybe I ought to return next year for the celebration. As I said earlier today, it's not often these days that I get to go to a birthday party for something that's older than I am. [Laughter] But it's an honor to be able to address this luncheon hosted by the Greater South Brevard Area Chamber of Commerce. So many people have helped to make this event possible that I can't thank them all. But I do want to express my gratitude to the Melbourne Municipal Band and the new pride of Melbourne -- high school choir.
Now, I came down here today on very serious business: to tell you about an historic issue in Washington -- an issue that will shape the future of our entire nation and even the world -- and to ask for your help. In my address to the Nation from the Oval Office just last Monday, I spoke about the Venice summit and gave a statement of American policy in the Persian Gulf. But our polls showed that, of all the subjects I touched on in that speech, the American people listened with the greatest interest and concern to my discussion of the Federal budget and of the threat posed to our nation by deficit spending.
You may remember that when I ran for office back in 1980 the American economy was in the worst mess since the Great Depression. Government was everywhere, running up taxes, causing inflation, raising interest rates, and taking a bigger and bigger share of our earnings. So, when our administration was elected, we enacted an across-the-board personal income tax cut of nearly 25 percent. Then we indexed the tax brackets, making it possible [impossible] for inflation to push you into higher and higher tax brackets. Many people didn't understand that subtle way in which, without having to pass a tax bill, the Congress was getting a tax increase every year. People working in that inflationary period would get a raise to cover the cost of inflation, to keep them even with where they were in the previous year. But the Government's tax was based on the number of dollars, not their value.
So, as the number of your dollars increased, even though you weren't any better off than you were before, you were worse off because you paid a higher income tax. Well, we fixed that; we made the tax brackets have to go up with the inflation, also. The big spenders and special interests predicted economic ruin with what we were doing. We proved them wrong. You don't tax and spend your way to recovery. Today inflation and interest rates are down -- way down. Inflation alone has fallen from over 12 percent to under 4 for the last 12 months. We've seen 54 straight months of economic growth and the creation of more than 13 million jobs -- more jobs than Western Europe and Japan put together have created in the past 10 years. You know, I could tell it was working -- that whole idea -- when they stopped calling it Reaganomics. [Laughter]
Then in our second term, we enacted an historic tax reform, one that simplified the tax system, eliminated many loopholes and tax shelters, lowered most Americans' tax rates even further, and made the whole system more fair. In particular, this tax reform eliminated the complicated system of 14 tax brackets and replaced it with just 2. And under this new system, the individual income tax burden is being cut by an average 6 percent in 1988. In plain language, that works out to an average of about $200 in savings for everybody.
You remember the old formula that donated -- or dominated, I should say -- the Government doesn't donate anything -- [laughter] -- dominated Government for so many years, the formula that led to high inflation and economic stagnation: ``tax and tax, spend and spend.'' Well, the good news is that because of the economic reforms that I've just described ``tax and tax'' has become a thing of the past. We can take great pride in that, because it testifies to a fundamental fact about America: the ability of the people to make their own will prevail over that of big government. But there's some bad news, and that's why I am here today. You see, I'm afraid we still have our work cut out for us when it comes to ``spend and spend.'' Last year we got the special interests out of the tax code. Now it's time to get them out of the budget.
In this bicentennial year of our Constitution, I'm reminded that the Bill of Rights was adopted by our forefathers to protect the people from the threat posed by government of that age to our basic political liberties. Now, over 200 years later, the chief danger of big government is the threat to our economic liberties, to our basic right to earn our own keep and keep what we earn. Here the problem is a bloated Federal Government that overtaxes, overspends, overborrows, and overregulates. In this day and time, what Americans need is an economic bill of rights, and I'll talk more specifically about that next month.
For now, it's enough to say that the Federal budget process just plain isn't working, as your Governor has told you. Earlier this year I sent Congress a responsible budget -- I'm called upon to do that -- one that met our deficit reduction targets, preserved a strong defense, and added funds for critical domestic needs like AIDS research. But that budget was ignored. Instead, some in Congress want a budget that will, as a percentage of gross national product, put defense spending back on the path leading to the dangerous levels of the previous administration.
On the domestic side -- you guessed it -- Congress wants to spend more, $41 billion more. And they have even more spending in the pipeline for welfare and other programs, that we've only begun to get control of. We need to reduce spending, not increase it. And to pay for all of this, your taxes would be raised by $19 billion next year and $64 billion over the next 3 years. Raise taxes, cut vital defense programs, and increase domestic spending by tens of billions of dollars -- if you'll permit me, there they go again. [Laughter] Now, the amazing thing is that some in Congress seem to believe that spending more and more on behalf of this or that special interest group is actually good politics. But sooner or later, the answer will come not from the special interests but from you, the people.
This attitude in Congress reminds me of a lazy student who was flunking math. ``Teacher,'' he said, ``Dad told me that if my grades don't improve somebody's going to get a spanking. So, I'd watch out if I were you.'' [Laughter] Yet, just as together we conquered ``tax and tax,'' so too we can control ``spend and spend.'' I've agreed to have members of my administration sit down with Congress and talk about the budget process. Congress needs a way of ensuring that it will honor budget decisions once it agrees to them. I propose just three simple budget reforms -- and you've heard them mentioned already here today -- three simple reforms with the power to put the big spenders out of business forever.
First, we must force Congress to reform the budget process itself, to stop all the delays and the missed deadlines. We can do this by forcing Congress to vote, yes or no, up or down, on an amendment to the Constitution that will put a stop to the flood of red ink. Just as your Governor told you, Thomas Jefferson was the first to criticize the Constitution. And almost immediately he said its one glaring lack was that it did not prohibit the Government from borrowing. You know, there's a little story that comes to mind here. It seems back in 1981 one Congressman was out talking to one of his constituents, and he asked him how he stood on the tax cuts that I wanted. Well, the Congressman went on for some length about the great complexity of the issue and the enormous difficulties of public expenditures and revenues. And the farmer just kind of shifted around, and then he said, ``Well, let me ask it this way: Are you for him or agin' him?'' [Laughter]
Well, today a majority of States have already passed resolutions calling for a constitutional convention to propose a balanced budget amendment to the Constitution. Now, if Congress goes on refusing to take action, I won't hesitate to take the case for this constitutional amendment directly to the State legislatures. But my friends, isn't it about time that Congress did the right thing and finally enacted the balanced budget amendment? [Applause] The polls all show that some 80 percent of the American people want it. Well, isn't that what representative government is for: to do what the people feel is right? [Applause]
And second, I need your help in getting Congress to agree to a responsible budget deficit reduction package this year and to stay with it. I've already shown that when Congress passes budget-busting boondoggles, the kind that give me heartburn -- well, let me just put it like this: How do I spell relief? -- V-E-T-O. [Laughter] And we need to go beyond that, to build a consensus in Congress to hold spending down. And make no mistake: This is an issue that transcends party. Responsible Democrats, like your own Congressman Bill Nelson, have shown that for the good of the country they're willing to join forces with those who believe in limiting deficit spending. The only thing that makes me uneasy about him being here with me today is that -- who's tending the store while we're gone? [Laughter] But, we need many more Senators and Representatives to take this responsible position, and this is where you, the people, come in. As I said before, if we can't make them see the light, let's make them feel the heat.
And third, and once again, saying and repeating what the Governor said, there's something else I hope you'll ask for: the line-item veto. The line-item veto is simple; it would enable the President to go over those huge expenditure bills and just draw a line through the items that represent waste. Now, the Governors of 43 States already have the line-item veto. I had it myself as Governor of California and used it no fewer than 943 times without being overridden.
Now, how could that be? Well, in our State, two-thirds of the legislature has to pass the budget to begin with, and when it comes to me they can add things in. I can veto those things out -- as Governor of California, not as President -- and those same two-thirds majority that would vote the entire budget to send it to me, when faced with voting again to override the veto by two-thirds vote on those individual items -- no, they wouldn't stand up and vote for those. So, we had a clean record on that. I think you'll agree with what the Governor said: It's high time we gave the line-item veto to the President.
And incidentally -- I may stand corrected on this one -- I think that it's 44 of the States that have the balanced budget in their constitutions. And there are a host of other reforms Congress should undertake to improve the enforceability and credibility of the budget process: a 2-year budget, for example, as you do here; credit reform; firm limits on the amount of nondefense spending; tougher rules to prevent bills that bust the budget. I know that Congress is currently considering some of these changes, and I encourage them to move on with deliberation and come up with a package of reforms that will begin to correct the glaring deficiencies of the current process.
Now, I've just mentioned serving as Governor of California. I had a couple of experiences out there that I think shed light on this whole problem of government spending. When I took office, I found it was very similar to what I then later ran into when I took office as President. In spite of the balanced budget requirement in the Constitution, you come in in the middle of the fiscal year. I found that my predecessor had left me with a sizeable deficit that would have to be cleaned up under the Constitution in the 6 months remaining of that fiscal year. I had to ask the people for more money to do this, but I promised the people that if and when we could give it back, that's what we'd do. Well, we cleaned up the place. And came a time when we showed that we were going to have a surplus, and my finance director came to me and said, ``I know there may have been things that you wanted to do as Governor and couldn't because of the money situation, but now, before the legislature finds out, you're going to have this amount.'' And he told me the surplus. And he said, ``I thought you might have some program of your own that you'd like to put in effect.'' And I said, ``I do.'' Well, he said, ``What is it?'' I said, ``Let's give it back.'' Well, he said, ``That's never been done before.'' And I said, ``Well, you never had an actor up here before, either.'' [Laughter]
So, we did give the money back. And two or three times we didn't get into the clear enough that we could say, hey, look, we can actually now cut the tax rates somewhere. But in those few times that we got another surplus, I would go to the people first, before the legislature found out, and tell them that I was going give it back. And we did. And the last one was almost 10 times as much as the first one had been that we were going to give back.
The way we gave it back the first time was in the income tax. We figured out that the surplus was just about 10 percent of what the income tax would bring in. So, we told the people to figure out their income tax and then just send us 90 percent of it -- keep the other 10 percent. Well, when we got to the final one, which as I say was considerably bigger, I had the experience of one of our State senators striding into my office one day, and he said, ``Governor, I think giving that money back to the people is an unnecessary expenditure of public funds.'' [Laughter] You know, he really believed that money belongs to the Government and what you and I get to keep out of what we earn is just what they allow us to keep. Well, all I can say is: Government had darn well better remember where its money comes from in the first place.
With these three measures -- a balanced budget amendment, a firm commitment to hold deficit spending down this very year, and the line-item veto -- and with these three simple but powerful measures, we can see to it that the Federal Government begins to live within its means once and for all. Now, I know that the special interests and big spenders are opposed to all this, just as they were opposed to cutting your taxes. But sooner or later, they're going to have to answer to you, the American people.
Come to think of it, the idea of having the big spenders answer to the people reminds me of -- say, you wouldn't mind if I told you just one more story, would you? This was a joke about a fellow from up North, a Yankee who came driving down into the South as a tourist, and he had a collision with one of the natives. And the two cars were pretty well messed up, but both drivers happened to get out without too much personal damage. And the southerner, with true southern hospitality, took a look at the Yankee, and said, ``Hey, wait a minute.'' And he went back to his car, and he brought back a bottle, and he said, ``Here, you look pretty shaken up. You better take a swig of this.'' So he did, and had a swallow of whiskey. And the southerner -- again his hospitality -- said, ``Take another one. Go ahead.'' And he did. This happened for a couple of more times, and finally the Yankee did recover his manners a little bit and said, ``Well, wait a minute here.'' He said, ``Why don't you have a drink?'' And the southerner said, ``No, I'm just going to stand here and wait until the police get here.'' [Laughter]
Well, the time has come for me to leave the good town of Melbourne and head back to Washington. But in closing, let me just say this: In these past few years, we've come so far together, restoring our nation to greatness. For love of liberty, let us work together once again to enact these budget reforms, to leave to our children a nation in which the people, and not the Government, truly rule. And then we will all have done our job. Because there are three of us alone that I know sitting here -- the Governor, the Congressman, and myself -- you know, you're really the boss. We work for you. And let's keep it that way.
Thank you. God bless you all.
Note: The President spoke at 1:20 p.m. at Melbourne Auditorium. In his opening remarks, he referred to Gov. Robert Martinez, Representative Bill Nelson, and Maxine Nohrr, president of the Greater South Brevard Area Chamber of Commerce. Following the luncheon, the President returned to Washington, DC.