 I'm sorry to be on the line. Yeah, I'll sit down here. That's why you're here. Good. Any last? Yes, thanks. See you, sir. See you. It's you, old guy. Hello there. To see you. Good to see you. Good to see you. Hi. I'm Greg Simpson. Hello there. George is Bill Fox. Hi. Hi. Hi. I'm Gregson. Hi. Gregson Dale is a financial client from Bob Dylan. I'm Paul. I'm Mark. Anybody's tape failed, those others are ours. That means there'll be a tape available to you if you miss anything out of this. Mr. President, although there is no career-range communicator, you must have one or two things you'd like to summit to take note of. What's a particular interest to you in the United States that you'd like to sort of include on that list? I don't think there are a number of things that we can talk about. We've found the extensive consultation that's been going on past year, OECD and IEA, the National Energy Program, and talks on COCOM and stuff and things of that kind. But the issues, I think number one on the list with the economy and how we can continue that convergence so as to speed the recovery and to make it worldwide, because it is a worldwide recession. I think we've got problems with exchange rates. What kind of a statement would you like to see on the economy? Well, I would like to see it reflect the optimism that from our personal contact with these other heads of state in advance of the meeting that I've heard them express as well as ourselves, that we are on the way out. I think the United States probably is a little ahead of several of them on their recovery, but that's to be expected. That sort of thing can vary. But I think a reasonably optimistic statement about our relief and our ability to handle this and to obtain a lasting recovery without any resort to the quick fixes of the past. What would that do? An optimistic statement. What would be the result of that? Well, I've always believed that there is a psychological factor in the things of this kind. If you have people feeling pessimistic, you're going to find a hold back on investment. You're going to find people basing and businesses basing actions on mistrust of the future residents. Mr. President, in taking this more free-form approach to these new transactions down there, aren't you running a risk of missing an opportunity? For instance, on the energy front at a time when oil is not in short supply, couldn't the U.S. and its allies be looking for more concrete things to do in unison that would help head off future energy shortages insofar as import duties or other measures? When you discuss the whole subject of energy, and as I say, there's just one of the number of issues that I think there that we've been discussing at the ministerial level over the year, I think yes. There are a number of facets to it, long range. The matter of nuclear nonproliferation, to see that we're all together on this and conscious of the threat that this could be to the other things we're trying to achieve and world stability and peace. And that's the idea of this, that you have some issues that we know our ministers meet on and talked about, but to put them out there without some pre-structured meeting that's going to follow a definite agenda and who knows, there may be someone that's got some particular questions that they think should be taken up by the group. It'll be that kind of a discussion. Do you have any of those specific? No, I would like to re-emphasize the importance of nonproliferation. Mr. President, in preparing for the summit, I'm told that you went to extraordinary lengths to brief yourself on the issues and to become well-versed in the complex questions of international economics. That being the case, I wonder whether in this whole process of preparing for Williamsburg you're thinking about any of these issues as undergone any change, any modification or new subtleties that you may not have had before? No, the much of the extensive preparation is because being the host, I'm going to be in charge. I'm going to be the, what do you call it, moderator or whatever. And this has been a case of talking to the people that have been in the various meetings, all the discussions that have been going on, so that I won't in the series of meetings overlook anything. Mr. President, you decided to put high tariff on imported motorcycle in April. Does it mean the change of this administration's free trade policy? Motorcycle. Motorcycle. No, this was a thing that's particularly under American law, where there is a particular industry in an emergency situation and that must have help in order to make itself able to be competitive. It is a temporary situation and our law provides for that and that's what that was all about. Mr. President, do you see any major differences with the European allies that need to be solved before you can come through to a successful conversion to the side? Lean. Major differences with the European allies that need to be resolved at the summit before you can have a successful conversion. I don't foresee anything really about the confrontational nature. I'm sure there are going to be differences of opinion and approaches and so forth. But I have been in communication with all of the participants. In fact, several exchanges between each one of us. I'm having individual meetings with each head of state as they arrive. One just later here this morning with Prime Minister Nakasone in Japan. Yesterday I met with the Fanfani of Italy. I will be meeting with the others individually and I have to say I would be very surprised if there is any... There's one particular point that some of the Europeans are very worried about, which is US attempts to put further controls on the onboard export of American technology to the Soviet Union. And I know of your administration the other day said very clearly that if the Europeans are not prepared to accept these American controls on their territory, that the US will have to cut off the flow of American technology to Europe in the first place. This is legislation that is presently before the conference. And it is undergoing changes and we've registered our feelings with it. The only matter that could possibly be considered in what you just asked about is nothing but our own provisions about national security. And I can't comment further because as I say this is legislation that has undergone a number of changes so far and is still in that process. You wouldn't envisage a situation in which your national security would mean that you needed to cut off American technology exports of certain goods to Europe. I can't see this getting to any of that point. I think early in the legislation there might have been some things that went further and we registered our protest about them. Mr. President, given the general concerns about protectionism, would you consider, as has been suggested by the former French president that she's called this time, that the summit here sign a formal communicate not to introduce in the next two years any new protectionist measure or any new trade restriction, sort of a formal document to that effect? I got distracted there with that movie. Given the general concerns of protectionists and you have stated that any bill from Congress, for example, you will veto. But would you be prepared, given the realities of higher employment here and the fact that next year is an election year, to sign a formal communicate saying, right, no more, no document with any further restrictions or trade tariffs will be signed? Well, now this is something that I'm sure is going to be a matter of discussion based on my own communication with all of them. I think from these conversations that all of us are going to be on the side of not only resisting protectionism but looking into where it presently exists, how much we can do to lessen it. In fact, I have found an agreement among everyone that this is not the way to go. The more we can go for a free trade, the better off it will be. Well, supplementary to that, given the interdependence of the Canadian and American economies, it's being discussed again in Canada. The question of totally open free trade between the two countries, no restrictions of any kind on anything. What do you think of that? Sort of a North American economy? You're asking me in advance of the discussion. I'm going to be very anxious to or interested in all of us laying out our views on this. Because as I say, I think that basically all of us are agreed that we're opposed to protectionism. Mr. President, I want to discuss the political issue, like INF deployment. And Soviet is saying that they will deploy INF in the far east after accepting withdrawal from Europe. Are you going to negotiate on this issue with Soviet rather than on a global basis, rather than a regional basis? We would like, of course, the original proposal we made, but the ultimate answer to this would be an end to those kind of missiles on both sides. If we have to take an interim step, we also would hope that it would be global, because many of the missiles we're talking about are mobile and just driving them over someplace else doesn't mean they can't be moved back. This may have to, as an interim solution, result in restriction on numbers, as we ourselves have said in an interim step we're going to go to. But we're very conscious of the threat to Asia in them being simply moved that way. And yes, this will be a consideration of ours. Can I follow up, Mr. President? This means you may not insist on not allowing those mobile missiles to be moved towards Asia. Lou, you're getting into George. Oh, I'm sorry, George. I'm sorry. I know that. I've known each other too long. Why did I make that mistake? Two powerful papers. Yes. I know why I did the first briefing that I had said that he was going to be in here. You're getting into an area that is very difficult for answers at this time, because we're getting into the area of what do you negotiate and how do you negotiate. And I don't think you can do this particularly when the people you're going to be negotiating with will have this information available to them. So strategy of negotiations, what you're going to demand, what you're going to try to do, that I can't talk about. Mr. President, on the economic issues, you are optimistic and I think most of your advisors are optimistic about this economy. And I think it's true that a lot of people from the other allies are optimistic that there is a recovery going on. But I think they're very worried about budget deficits here. Now, you all seem to be saying that, yes, you want to get the deficits down, and yes, it's Congress's fault because they're not cut in spending. But a lot of people think that if you, and you seem to be saying the deficits are really tolerable if you have to get them down by increasing taxes. The allies really don't care which way you get at it. I don't think, but they just want them down. Are you prepared to take a certain amount of pressure on that? And do you think you're going to get it there? No, I don't. I know that while I'm quite sure they're going to want to discuss that and what our plans are, there is no way that you can cut enough in spending or increase taxes enough to eliminate the deficits. You can certainly help, particularly with the cutting in spending, because there's no question, but that we have automatic built-in increases in our budgeting, which virtually have the budget out of control. The only way really is the recovery of the economy. And this is why we've followed the course that we've found. To those who suggest you do it by taxes, they are suggesting the thing that could kill the recovery before it gets underway. You don't raise taxes and reduce the money in the private sector as they would have us do without setting back the recovery. As for cutting, the budget proposal that we submitted to the Congress and which in both houses they refused to consider actually would, while we will have a large deficit this year and next year, actually would have put us on a declining deficit with a projection down in the future where you could see a balanced budget coming up. But do you think, I mean, if that still goes back to the fact, if you can't get the moderate Republicans because they're afraid of the 1984 election retaliation, if you can't get them to cut the spending the way you want it to, aren't you on dead center? And what does that say to the allies when they know that the longevity of the recovery here is what's going to have to be in place to bring them along? I mean, isn't that, you can't stay on dead center. Well, but the other thing is that since our plan is working, I don't care what the pessimists say and what the opponents say about it, let somebody explain to me why interest rates are going from 21.5 down to 10, why inflation has been cut to less than a third of what it was, why industrial production is up, why housing is up, why automobile production is up, why retail spending is up, real income for the first time in several years is up, and increased rate of savings. All of these things have taken place and they didn't just come like locusts because the seasons changed. Something must have been going, something was right. I think what this goes is continuing that and everybody, do you not believe that the deficits are going to cut that short if you don't have a plan in place this year to cut them short in the next two years? The plan isn't in place. First of all, our plan did ask for further cuts in spending. We did project out into the out years a contingency tax increase that they could pass now based on the economy meeting certain levels. In other words, the recovery would have had to be definitely established two years down the road from now so that a tax increase would not be counterproductive. We were willing to meet on those two issues, but the main thing about keeping the recovery going, and this was the last sentence I wanted to add to all those other things, is the recovered economy is the way to eliminate the deficits. If, for example, the growth rate in the economy should turn out to be just one percentage point higher than we've estimated, five years down the road that would mean a hundred billion dollars less in deficit. If it were two percentage points higher, it would mean a surplus. One fun question on that is that the other heads of state seem to be saying, and some of your own advisors seem to be saying, that you're going to have a slower growth rate if you don't get those deficits down. You're not going to get that extra boost from the higher growth rate. But we are doing, as I said, all three. We're preserving the tax policies that have brought about, in large part, the economic recovery. We're asking for further reductions in government spending. We do recognize the possibility of a tax increase once this recovery is out of solid footing. And if it should turn out to be necessary, all of this is going to result in reduced deficits in the economy. It's going to down the pattern of the deficits going down. And at the same time, the economic recovery is going to make banking the biggest contribution in eliminating the deficits, simply by the improved and restored economy. And so far, we're leading the world in the recovery that we've made. Mr. President, one economist for data resources pointed out in testimony to Congress yesterday that the structural deficit, which you've mentioned several times lately, is at some $90 billion this year. Even calculating at full employment of 6%, that structural deficit will grow to $180 billion in 1988. It will do primarily to increases in defense spending, to increases in entitlement outlays because of demographic factors, and because of the indexing that will go into place in 1985. In other words, this recovery, even if it were to get us to 6% full employment, it does not look strong enough to get at that deficit projection through those years. Well, that's one economist's voice on this. I challenge some of the points that he made. For example, defense spending as being a major factor already on our own. From our original February 1981 estimate of the five-year program of defense spending on our own by finding legitimate savings and so forth, we have reduced that once projected $116 billion increase over the projection of the Carter administration for the same period. We've reduced that down to about $50 billion. We've actually made savings of about $66 billion. The other thing they don't stop to figure is that defense cuts of the kind that some are advocating, you're only going to get $0.50 on the dollar because you're going to lose another $0.50, the other $0.50 in increased unemployment in the industries that would be affected. And the lack of tax revenues that brings about. Now, as to the figure on the structural part of the deficit, that's the structural part of the budget that I've been talking about. And the one where we've had the least success in getting cooperation from the Congress, they have been the most reluctant to make the changes those built-in increases. As for indexing, as a means of increasing revenue, then for this administration that has been referred to as unfair, more than three-fourths of that increased revenue will come from the middle and lower income earners in our society. And I don't think that's a way to bring about a recovery. The indexing will, the relief that will be provided to individuals, three-fourths of it will go to those middle and lower income earners. Mr. President, what for the question? Are you concerned that a failure to reach a budget resolution by this June on the first one and possibly a second resolution by fall might unsettle the financial markets and build in further inflation premium in the interest rates? I don't think so. I really don't. I think they understand. They have seen out of one house come a budget proposal that would increase deficits tremendously. Out of the other, they've seen something of an effort to compromise. If you envision the normal legislative process of trying to get together in those two, you come down to a budget resolution that does mean increase to the deficits. And yet it is not binding as far as the executive branch is concerned. And I think that the financial markets understand what I have said repeatedly, that I will use a veto on both appropriation bills or any proposals on tax bills. To prevent this extravagant budget busting or this wasteful spending to go on. Doesn't that mean, Mr. President, that effectively speaking for the balance of this term, your first term, a lot of us are assuming from your viewpoint, that you're not going to be able to make any kind of breakthroughs on entitlements or any other kinds of major changes for the next 18 months. It's just going to be this derailment warfare over this veto and that veto and that you will not be able to make a dent in deficit? No, I believe we can't make a dent in the deficit. With the veto process, I have had a letter from each house with pledges to me regarding the sustaining of some of my vetoes. And I think that the same process that led us to a bipartisan agreement on how to salvage the social security program, the same bipartisanship that is brought about, the victory with regard to the MX missile, I think there are enough people up there in both parties that want bipartisanship and that want to find a solution for these problems. Could I get back to the Williamsburg summit? Mr. Miserable, the French president, has said recently that he thinks he might just as well stay at home. He's also said that if he doesn't get satisfaction, particularly from the United States, on an exchange rates, intervention level of the dollar in the future, he doesn't think any further summits are worthwhile. And I wonder what you think you'll be able to do to persuade him that he isn't wasting his time at Williamsburg? I think you'll find out he isn't wasting his time and had every opportunity to express himself there. And I do know that at the ministerial level on this very subject, they've been meeting in great length. There's every intention that they go forward on this problem of exchange rates. This came up at the Versailles meeting and the result of the Versailles meeting was the increased level of consultation at ministerial levels on this subject as well as others. And I don't foresee a confrontation. What do you think you'll be able to say to him about the rate of the dollar, which does the level of the dollar, which really concerns him? Well, the level of the dollar really is because we have been so successful in reducing inflation. And this is not an unmixed blessing for the United States because we will probably have a 55 to 60 billion dollar trade imbalance this year because our dollar is so solid and so sound. It has made our export products expensive for the rest of the world. Now, if they can have the same success that we had with regard to inflation, there will be a better balance and we'll all be better off. That brings me to ask, Mr. President, whether in studying this whole thing, you've come to believe that these countries can, in fact, coordinate their national economic policies in some kind of rhythm that helps each other. Yes, I think it all comes with, and this we've talked about already, convergence. In other words, all of us recognizing that basically our economic structures are the same. And going forward in the same programs of helping recovery, stimulating incentive to investment, to increased productivity, eliminating inflation which then brings down big interest rates which are causing concern. This is the kind of, this is the thing that we're aiming for is this kind of convergence and we will find that many of the exchange rate problems will disappear as we get or attain that. I was going to ask, as far as the question on the exchange rates, isn't that going back again to the, you know, your advisors have been redefining what inflation is and they're now saying it's not inflation. I mean, interest rates are not too high because you really have interest rates minus the expectation of inflation. The expectation of inflation is there because you got the budget deficit. The interest rates are what keeps, you know, the money coming into this country from France and from other countries. Isn't that going back to the same collision of the deficits? No, and it is true that when you have a dollar as strong as ours and these interest rates remain there, yes, there's going to be a movement of currency. But the funny thing is they're not helping us pay our deficits because right now the level of foreign ownership of our bonds is lower than it has been for many, many years. The money that is being, that's coming in from outside the country, the United States, is being invested in our economy out there in the private sector. So they're not, as some of them have suggested, they're not funding our deficits. Still adorable. Yeah, I just, this first killing of a U.S. military advisor and El Salvador seems to be sort of a milestone, symbolic if not otherwise. And with the Soviets increasing their direct intervention and their arms, are we reaching a point where we may have to consider increasing our involvement there, perhaps even thinking about committing combat troops?