 President of the United States hello there please seated good morning and welcome it's a pleasure to have you here today and a pleasure to have the opportunity to speak through you to the America that lies beyond the Potomac I mean good to get to your questions but first let me just speak for a moment about three topics of vital importance first the Venice son of it if I may I'd like to highlight the accomplishments of this just completed summit by harkening back for a moment to the first summit I attended that was in Ottawa 1981 and I'm sure you'll recall when I left for that summit our own economy and that of virtually all the world stood in great danger we had inflation running at 10 percent in the industrialized countries not to mention high interest rates excessive tax burdens and too much government regulation and interference perhaps worse there was virtually no agreement among world leaders on how to deal with this crisis we've come a long way since then the American economy leading the way we started an international movement toward lower taxes and less government interference toward more economic growth and greater individual opportunity last week in Venice I saw overwhelming evidence that this consensus for less government and more individual opportunity continues to grow throughout the world regarding the sometimes difficult issue of world trade we made substantial progress in Venice in terms of both the commitment to remove barriers to trade to work toward removing agricultural subsidies and of an equally strong commitment to coordinate economic policies to remove some of the imbalances that have troubled the trading system in recent years this represents further progress on the trade policy that I announced more than a year and a half ago policy that's beginning to turn our trade deficit around this profound movement in recent years toward more limited government freer trade has not only kept the global economy moving along at a steady pace it's made it possible for the democratic nations to stand together and keep our defense is strong while we promote the growth of democratic institutions and the world's spread of freedom and peace this brings me to the second point I'd like to discuss the vitally important matter of arms control or more exactly and more importantly arms reduction as I said last night with the support of our allies the United States will also formally propose to the Soviet Union a global elimination of all us and Soviet land-based shorter range INF missiles along with the deep reductions in and we hope the ultimate elimination of longer-range INF missiles I am now directing our INF negotiator to present this new proposal to the Soviet Union as an integral element of the INF treaty which the United States has already put forward in Geneva finally I'd like to address a matter that involves domestic politics but that has worldwide implications the federal budget as you know I discussed the budget in my address on Monday night last night including the way in which an unreliable and inconsistent budget process here in the United States can damage the economy of the entire globe so for now let me just reduce to three simple sentences what the whole budget issue comes down to some in Congress want to bust the budget I won't let them the American people won't either thank you and now I'd be happy to answer your questions in New Jersey Republican representative Willis Grattison says the budget reform is an attempt to correct a problem which is basically caused by policy disagreements not process weakness also House Budget Chairman William Gray says your appeal for budget reform is a slope stream to avoid dealing with the policies created two questions first it's not the problem of balancing the budget is disagreement over policy you favoring no tax increases and more defense spending while many in Congress opposed that favor tax increases and also how would you respond to critics that say the budget deficit is caused by a lack of leadership well the need for budget reform is very evident to anyone who's ever been a governor as I was for eight years and looking at that and knowing about the rat the other states and the manner in which their budgets are presented I don't think there's a state that would put up with his Mickey Mouse and affairs we have at the federal level now for example in state of California the governor presents the budget why is this done and why is the president required to submit a budget if no one's going to pay any attention to it well the chief executive officer is the head of all the heads of the departments who must run the programs that have been adopted by the legislature in the Congress they pass a program that they with some and they say they want to achieve the following goals and so forth now we sit around for long hours here day after day and over a period of months every year in the cabinet room with the people who are going to have to run the programs passed by the Congress to say that a deficit is the responsibility of the president president can't spend a nickel the programs are passed the money is appropriated by Congress but now the people that have to run the programs come in with the figures that they say they can achieve the goal of the program passed by Congress for the following amount that's put together and finally set up to the Congress and the Congress who don't have a thing to do with running the program who aren't the managers of those programs who don't know what the administrative problems are or anything the Congress says why we're not going to pay any attention to this this is dead on arrival and they then sit down and without any knowledge or experience in running the programs they set down the figures that they say should make up the budget and when it comes back down the president in this case has only one choice he can veto the entire budget and the government grinds to a halt and the checks stop going out no one's paid and so forth or he can as he has to accept it let me contrast that if I can take a minute to tell you what happened when you were governor of California same thing happened the governor presenting the budget and it had to be a balanced budget within the figures that were projected for the revenues of the coming year by a combination of private individuals and public and never in 25 years had that group ever missed by more than 1% on their estimate of what the revenues in the following year would be now the governor sends the budget up the legislature must approve it by a two-thirds majority they can take out things that the president that the governor has put in they can add in things of their own two-thirds majority passes it on and as of a certain date and they never can miss the date it comes back to the governor the governor cannot put back in anything they have taken out but the governor can line item vetoes of those things they have put in and then if they feel strongly enough about it by a two-thirds vote they can override his veto in 8 years I vetoed line item vetoed 943 such items and never once did the legislature that had passed those budgets by a two-thirds majority ever put a two-thirds majority together to override my veto why because they could beat they could vote for things that were buried pork items buried in the whole budget when they were revealed and stood out there all by themselves and they had to vote for them they couldn't get two-thirds that would do it this is what I'd say is why there's there just is no process here we need first of all the constitutional amendment that just like most of the states have that the federal government cannot deficit spend and we need the line item veto that 43 governors in this country have that's what's wrong with the system senator Baker is told us you are about to take this issue on the road but the budget deficit and the budget how can you take it on the road without not having to blunt the political skeptics who say the president has to take an issue somewhere that will get the spotlight off the Iran counter hearings here in Washington he has to take a significant issue to get the spotlight out of here I think that spotlight has been growing so dim in recent days that when you get a mile and a half away from them from the Potomac River there are an awful lot of people that have gone back to their favorite television shows and I don't blame them I've never heard so much hearsay in all my life that wouldn't be permitted in the courtroom for a minute and a half and it's taken as gospel by those who want to go farther with this but I I shouldn't get lost in that no the budget has been one of the most important things in my mind in the moment I came here I inherited a situation in California when I became governor pretty similar to what I inherited here with regard to the economy only there the deficit had been hidden by bookkeeping tricks because the Constitution of the state of California said there couldn't be a deficit but you come in as a new governor in the middle of the year and you're you've got six months before the end of the year and because of the Constitution I had six months in which I had to do something about that tremendous deficit that was hanging over the budget the Constitution said come the end of the deficit here it's got to be balanced well from the experience that we had there the things that we did I came here with some ideas that I thought would be beneficial we have been deficit spending for more than a half a century and for 46 out of 50 years the Democrats have had a majority in both houses of the Congress and when some of us out on the mashed potato circuit complained about the deficit year after year after year we were told that it didn't matter we owed the money to ourselves and deficit spending was necessary to maintain prosperity well I'd be kind of being and I told you so if I told you that I made speeches 30 years ago in which I said they could not go on without one day the deficit going out of control well in the 15 years from 1965 to 1980 the budget of the United States multiplied to five times what it had been and the deficit multiplied to 38 times what it had been and it is out of control and it's structurally built in I'm talking too much on some of these yes this lady in there Katie man from Milwaukee Mr. President of Channel 6 Milwaukee many people Milwaukee are concerned because there are folks in Congress including Republicans who believe that excise taxes on products like cigarettes and beer and wine and other goods would be an effective way of fighting the deficit are you willing to fight excise taxes in particular I'm interested in beer because beer as you know is produced in Milwaukee yes I'm opposed to taxing on this for this problem or the solution of this problem because if you look back in history every major tax decrease has resulted in more revenues for the government at the lower rates because of the stimulate of the economy I believe the 54 months of recovery that we have had now from the mess we inherited is based more on the changes we made in the in the tax policies when John F. Kennedy's tax program that he recommended which was not too dissimilar to ours when it was passed the same thing happened more revenues at lower rates it happened back in Coolidge's administration and they cut the taxes several times in that period I can show you again we're tax increases have resulted in lower revenues for the government because of the harmful effect they have on the economy by reducing the incentive and so forth so what I have said about taxes is that no now to when less we do the job of cutting the spending that has to be cut and getting government back to the point in which we can say now there is no way that you can cut beyond this point these are the legitimate functions government must perform then if you find that the revenues do not equal a percentage of gross national product that the spending does then would be time to look at a tax so that you are even we're taxing it about the same level that has always been been normal in this country 19 percent of gross national product is spent on our tax revenues but we're spending 24 percent of the gross national product and that's what's wrong now to take Congress off the hook and give them more taxes they'll just do more spending you've got to force them and get back down to where we say this is it now government is economical as we can make it and then if it isn't the taxes aren't enough then you look at getting more revenue Democratic presidential hopefuls like Governor Dukakis in Massachusetts are going around the country campaigning on the issue of integrity implying that your administration doesn't have enough of them how do you defend yourself sir against these implications when many see patterns of deception in your administration against implications that the integrity of your administration is not what it should be well I don't think there's anyone that's ever been in his job ever that is not going to bed every night knowing that with the thousands of people are out there there can be somebody that's breaking the rules someplace and you you try to get at that and do something about it but I challenge that there's been no violation of integrity in our administration and I have tried to keep every promise that I made and have kept a lot of them and I don't see how they can go around denying what has actually happened since we've been here interest rates were over 20% the prime rate when we came double digit inflation was 13 or 14% we know what the what the tax structure was unemployment was high today we have a higher percentage of the employment pool potential employment pool employed than ever in our history we the interest rates we know are down inflation has come down to less than 4% after all of the years of of having this rate of inflation in fact it's come down to lower than that until just recently because of fuel prices I say that what they're doing is pure demagoguery members of your administration have left under some sort of cloud or scandal that's what they're campaigning against yeah yes I remember when Ray Donovan left and I remember his sizable plea the other day now how does he get back his reputation a number of people in our administration there have been things that have been uncovered by someone let's say that in the past before they ever came here but isn't it the very fact that we are uncovering if there's something going wrong and something being done about it we're not covering it up we're hiding John slack from Boston I don't really care to ask you if you stop feeding your wife but I would like to ask you an economic question we didn't hear much from the economic summit in Venice about whether the leaders of the free world are really concerned about the deep threat to democracy that's posed by the heavy debt burden that the LDCs are under is there any sense of urgency about this third world debt especially here in Latin America and doing something about it Allah a new marshal plan there was very much said about it and this and it will now proceed with the other people in our administrations and the people concerned with that finance ministers and so forth are going to go forward looking at the things we can do for example just one thing to throw out here that that was discussed and that should be looked at the inability of some of these developing countries to pay back the debt to private banks well some of those banks have already transferred the debt into equity now a number of those countries those emerging countries started out following statism they organized at the top and the government ran things and this meant that there were nationally owned businesses and industries and so forth well if a bank takes over and accepts equity in one of those nationalized industries or businesses this is much the same as just as outside capital coming in and no country has ever become great that didn't import capital and people then you suddenly have got a privatization and you've got enlightened leadership you're running it and this can begin to help them because a great many of those countries are beginning to realize the faults of statism and are trying to move more toward the private sector this is I just like tell you this is one of the ideas that came into the discussion it was discussed and we are proceeding now through our ministers you see the economic summit isn't a thing in three days this is why for seven years I've said last night seven years I've always heard the same story nothing happened to the summit a lot happens at the summit but it isn't as if you were going to say the summit with Gorbachev and a treaty on arms to be signed or not signed you go here and deal with all of these problems and then make decisions that will be followed up such as the one in agriculture and agricultural subsidies and we pass on now to the Uruguay meetings that are going to be held this problem that must be resolved and we can we can agree on what we want accomplished but there are a lot of technicalities involved that you now turn it over to the working staff for them to come up with how we can without pulling the rug instantly out from under farmers who have become used to this how we can get farming back to the marketplace and for the determination of prices and production she told me that I've taken the last question here how come there's so many hands left and I always would you permit one way back up over there I haven't gone very far into the back I've been down thank you sir Mark Freiberg WBTV Charlotte when you take your proposal for budget reform on the road if you come near Charlotte you'll see people have seen all these wonderful economic developments in five years and the deficit spending hasn't seemed to hurt them at the same time they're being told their local taxes are going up because federal spending is going down how are you going to persuade them well for one thing part of our whole reducing of the size and the power of the government under what we've called federalism actually was a case of returning tax retax resources to local and state government at the same time that we gave them back responsibilities that we don't think belong to the federal government now the federal government's whole history dating back to the New Deal and I was a new dealer then and out of the great depression the whole history was one of the federal government usurping functions that belong to the local level but they did it on the basis of first they usurped the money the federal government used to only take what about a third out of the tax dollar total tax dollar or less and then suddenly the federal government became the major taker of tax dollars leaving very little of the states and local governments and they in turn then had to turn to the federal government for help because they no longer had any sources they could go to for further taxing we've tried to reduce that and give things back to the state level and in turn to the local level that belong there and at the same time give back to them by the lowering of our taxes at the federal level the ability to if they need a local tax for some local function there to do that to raise that tax some figures that came up the other day and we used at the at the summit and that I used in the speech last night the one that I could remind you here our system of government differs so from the others that 1983 the deficit was 6.3 percent of gross national product it's now only 3.9 percent of gross national product but that's the federal government and you compare those percentages to European countries and they seem to see us as much heavier in debt than they are but they count differently than we do they count the total cost of government all government and all taxes and figure out their percentage well if we do that in the United States our deficit is only two and a half percent of gross national product because the states and the local communities are in a lot better shape generally than the federal government is well no they tell me I can't take anymore you'd like to write me a letter with the question I'll guarantee you an answer