 Mr. Reagan, why do you think the Soviets would negotiate with you on arms control after the way you've denounced them as liars and cheats who run an evil empire? Well, now, as long as you added that last line there about denouncing them as liars and cheats and so forth, let me go back and recall to your memory. In the first press conference that I held was when those words were spoken, and they were an answer to a direct question, and they weren't my words. The question had to do with, could we trust the Russians? And I called attention to their own words, that they themselves down through the years have repeatedly stated that their morality is based on what will bring about the world's socialist revolution, that they have reserved for themselves and said that anything they do that furthers socialism is moral, is not immoral. Therefore, lying and things of that kind are perfectly all right. And I was only reciting what they had said, somehow by about the second day it was being hailed that I had called them liars, they've called themselves that. I don't think there's been any denouncing that's been any worse than the things they've said about us, but frankly, I think it was a part of realism. I thought that it was time that our relationship, that they recognized that we're viewing them realistically, that we're not looking through some rose-colored glasses or anything. At the same time, however, we made it plain and did in the negotiations at all that we are not out to change their system. We're certainly not going to let them change ours, but we have to live in the world together. Are you prepared to make a significant concession to the Soviets on arms control, Mr. President, such as a mutual moratorium on testing of anti-satellite weapons? We've told them that we would discuss any of these things and we set no preconditions for it, but they wouldn't accept yes for an answer. Now, I had made it plain also in my conversation with Mr. Gromyko that they have talked of arms reductions. He spoke of it in his speech to the UN and I said, we both want the same thing then. And I told him, let us meet and particularly start the reduction of the nuclear weapons. But let me call to your attention that I made a proposal that we see if we could not eliminate totally on both sides, intermediate-range weapons in Europe. And in the start talks, the strategic weapons, our proposal was that for it to simplify things, let's start and negotiate the weapons that are the most destabilizing, the ones that cause the nightmares, that is the idea of a person pushing a button and 20 minutes later somebody blows up and then proceed to the submarine launched in the airborne nuclear weapons. Well, they expressed themselves very frankly as not wanting to do that because they placed a greater emphasis on the land-based, not so much a three-legged stool as ours is. And we immediately said, all right, we just thought it would be easier to talk about it that way. Fine, we'll talk about it to all of them. And they still walked away from the negotiations. So I think we made between the two treaties at least seven, met seven at least proposals of theirs and agreed to talk on those to show that we were flexible. Some people still say that you're re-elected though, that you will immediately move to a hard-on-yielding line. No, no way, because I happen to believe that if there's any common sense in the world at all, we not only should reduce nuclear weapons, we should eliminate them. Mr. President, your Star Wars proposal has been challenged by some defense experts as unrealistic and possibly dangerous. Do you still think it is feasible to develop an effective protection against the Soviet attack? Yes, and I think it would be a marvelous thing. Let me say, you know that I never called it Star Wars or I never even suggested it might involve space. I simply said that here is the first weapon that man has ever created that he did not also create a defensive weapon against it. And the only defense we have is deterrence, to say, if you yours, yours, we'll use ours and we'll blow each other up. And it just seemed to me that if we could find a defensive weapon, that would be the most forward step instead of threatening to kill other people or their people if they try to kill ours, if we could actually produce such a weapon. And I would believe that that could be the means of actually getting rid of those weapons once and for all. Now, I don't know. I haven't inquired as to all the various areas that are being investigated with regard to what form such a weapon would take. I know that the research is going forward and I happen to think that it's a worthwhile thing. Mr. President, switching to another part of the world, do the repeated bombings of American installations in Lebanon and the failure to find or punish those responsible mean your anti-terrorist measures have failed and that we have no clear purpose in that part of the world? Well, failure would be in a sense that we haven't done anything. We have appealed, when this first began to raise its ugly head to the extent that it has, we appealed to our friends and allies to get together just as we did with regard to skyjacking, which has been vastly reduced when the nations got together and decided that something should be done about it. We think the same thing can happen as we all get together with regard to terrorism. And we know the great numbers there are some 27 countries that have had such things happen in their countries, now about 30 major terrorist acts. And we are continuing to work along that line and I have also sent up to the Congress about five pieces of legislation asking for things that could be helpful. So far we don't have them yet. For example, if we could offer rewards of up to a half a million dollars for information that leading to the stopping of a terrorist act, intercepting information that could tell us who was planning something and what they were planning, the only real defense against those kind of acts is infiltrating, having people who can give you information from the inside. And this was what I meant when I suggested that, and I wasn't aiming at any administration, when I suggested that over recent years there had been a great reduction in our capacity to have that kind of information. Now I was one on the Rockefeller Commission appointed by President Ford to investigate the CIA. You will remember there were great many charges that they somehow had been violating human rights and they were doing things that were beyond the pale. I remember one incident during that investigation when a Senate committee announced that it too was going to investigate the CIA and it informed us and publicly that our commission, that they wanted any information we could give them. We were notified that within 48 hours several hundred agents worldwide not a typical CIA informants, I should say, worldwide had suddenly packed their tents and walked away. They were not going to take a chance on exposure. They did not trust a congressional committee to keep the information private and they knew it could mean their lives. Mr. Mondale recently has become more and more critical of security at Lebanon at the facilities there and even seeming to blame the personally of the administration for what's happened there. How do you respond to his comments? Well, I respond to it that I think he's looking for anything that might be politically advantageous to him. As I've said before, unless you can know in advance the particular thing, the one element of terrorism of the suicide attack, how do you really make it foolproof if you've got to have an embassy doing business? It isn't like building a bunker, something where you say, well, if I make it strong enough they can't bomb it. What took place there? Yes, we had heard rumbles and warnings that there was going to be some kind of an attack and because the annex in West Beirut was so vulnerable since our first explosion of an embassy there, that we advanced the date for moving into the building in East Beirut. They had not completely finished the work, the defensive work, the precautions around the building, but about 75 percent, but it was therefore a safer place than the one that we had moved the people from. Well, the attack came and some of the precautions worked enough that the suicide truck or van never got to the building. Its goal was obviously the ramp down to beneath the building in which then you would have had the type of thing that you had in the Marine tragedy. President, are you prepared to press Israel to end the establishment of settlements on the West Bank in order to get Middle East peace talks restarted? We have not pressed them to end or not, but I have in my conversations with Prime Minister Perez and his visit just here have talked about the West Bank and the part that it plays in getting peace talks going. And we had very frank discussions and I'm very optimistic and his views about and his desire to get something going piecewise. Right now, he honestly wants to get out of Lebanon, but he can't do it until there is a provision that will protect Israel's northern border. If we can turn now to the Central America, are there any conditions under which you would accept the Marxist government of Nicaragua? What we want from Nicaragua is that they keep the promises they made in 1979 to the Organization of American States. This is a repeat of what Castro did. The elements of the revolution against Samosa consisted of people who wanted democracy as we know it, and the Sandinistas one group which we know were completely Marxist in their philosophy and having one they did as Castro did, they eliminated from any voice in government their allies in the revolution. Some of them were jailed, some of them were exiled, some of them now are leaders of the Contras, and they had given in writing these promises to the OAS of democracy, human rights, elections, free labor unions, free press, all of these things, and we think that they have made it so apparent in their buildup. First of all, they have a totalitarian government, but they've also made it apparent as a kind of surrogate of Cuba and the Soviet Union that they are a launching pad for further revolution in Central America and maybe even beyond. As a matter of fact, they made the statement that the revolution was not bound by their borders. So we feel that the people of Nicaragua who thought they were going to have a revolution that brought them a less dictatorial government just found that they'd exchanged one ruler for another set of rulers. Nicaragua now, though, has accepted the settlement proposed by the Contradora group of Latin American countries. What's wrong with that settlement? Well, it's a good first step. It isn't complete. There are some things that still need to be added in that statement. Well, I think there has to be more with regard to the reduction of arms. There has to be more to be done with regard to outside influence and the elimination of outside influence. And we, as I say, we held it as a first step, but we don't think it's a finished document to be signed yet. How do you intend to keep on providing support for the contrast when the Congress apparently is refusing to go along with it? That's giving us quite a problem, and I think it's very irresponsible and short-sighted in the part of the Congress. Mr. President, how far are you prepared to go to prevent the Communists from taking over another country in Central America or to prevent the opening of a Soviet Cuban military base in Nicaragua? Is it intervention by the U.S. military base in Nicaragua? Well, now let it know. Know, and I think that would be the worst thing in the world that we could do. We have no plans for such. But let me get back to one thing in Nicaragua here, and I guess my own answer to your question would contribute to what I think is wrong. Let's get back to the fact that it was not just us sticking our nose in to say, let's change the Nicaraguan government. This present totalitarian government is already exporting its revolution to Salvador. And here is a country that has asked our help that has a duly elected democratic government has proven it with three elections so far. And the headquarters of the guerrillas are virtually in Managua. They're being supplied from Managua, and basically we think that most of it comes from the Communist bloc. Well, we have evidence that it does, and for Cuba, the arms and so forth. But what we have been after from the very beginning is that the Sandinista government stopped interfering with a neighboring country. Are you supportive of Guarte's overture in the United Nations yesterday, sir, to the rebels? All I know is, I haven't had much time, I was a little bit on the road there, all I know is that apparently he has suggested that he is willing to grant an amnesty in order to have meetings with them. So far, so good. I've never quarreled with talking to someone, but I do know that previously, and what his position has been, and I assume it's the same thing, is to offer them amnesty, and that's been offered before, and a participation in the democratic processes. I don't think that he meant, and although as I said, I have not seen his remarks in full, I don't think he meant the kind of coalition that they have asked for, where they want to shoot their way into being part of the government and having part of the authority, not submitting themselves to the democratic processes. I don't think he would go that far. I think he means to participate democratically. We'd like to ask, if we may, two defense questions, related, of course, to foreign policy. And one is, in view of the pressures to reduce the deficit in the federal budget, how long and by how much do you intend to increase military spending? Well, now, first of all, I've said many times, and I said it back when I was running, so this is a kept promise. I was asked many times during the campaign if it came to a choice between reducing the deficit or reducing the deficit or defense spending. Which side would I come down on, would I have to come down on the side of defense spending? Because we're trying to catch up with a great deterioration of our military strength. So if you look at our defense budget, it is less in percentage of the budget and less in percentage of gross national product than has been customary back through the years, except with the administration just before us. Eisenhower was spending about 8% of the gross national product on national defense. Kennedy, wait a minute, Eisenhower was spending about... Don't hold me to this. All right. But also Kennedy was spending in that same neighborhood 8 or 9% of the gross national product. Under Carter it got down to 5%, but even there, before he was through in his next last year of office, he recognized and started asking for more. As a matter of fact, he was asking for 250 MX missiles and we're only asking for 100. We are to about 6.5% of gross national product in what we're spending. We have made tens of billions of dollars in reductions of our own estimates of what the budgets would be, defense budgets, simply through management improvements that have taken place, and we make the cuts. As a matter of fact, I have, let's say with a certain amount of humor, suggested a number of times to Cap Weinberger when we've done that, that maybe we should leave them where they were and let the Congress reduce them because whatever we submitted to the Congress was going to try to reduce further. How do you respond to your opponents who say though that your focus on major weapons systems is hurting our conventional forces and the ability to fight a smaller conventional war? Because it isn't. We are up to a force that we think is adequate and remember that two-thirds of the budget, defense budget, is pay and pensions and operational maintenance, the operational things. The smallest percentage of all is for the weapons systems. But the weapons systems for conventional warfare are a much bigger part than the strategic system. The MX is virtually, that's all for that, compared to the B-1 bomber, the M-1 tank, the weapons of that kind. So no, we have not neglected conventional warfare at all, but for the first time in a great many years we are equipped to meet emergencies that might confront us in the world with conventional forces. Could we turn to a few domestic questions? You've probably heard a few of these in Louisville the other night so they may sound a little bit familiar. But your critics say that your tax policies have helped only the rich. Is that true? And what do you intend to do for the taxpayer during the second term in office? It is not true. And I said that several times in the debate the other night and we can prove it by figures and one simple figure. The people from $50,000 down paid two-thirds of the tax. They got two-thirds of the tax relief. The people above $50,000 are paying a bigger percentage today of the overall tax than they were paying before our tax cut. The tax cut that is hurting the people in the lower earning levels is the payroll tax that was passed by the previous administration in 1977 which now is taxing every... Remember when you only paid a tax on a few thousand dollars of your earnings for Social Security? Well today the tax is applied to every dollar all the way up to $38,000 or so of earnings and it is slated in the next couple of years. Two more percentage in the rate tax increases. It is slated to go up to more than $60,000 subject to tax. So today the person that is up there earning enough money let's say $70,000 they're only paying on half their income but the fellow from there on down through the middle and the lower income rates they're paying on every dollar they earn and they're also paying an income tax on those same dollars. Remember that Social Security is not deductible. How would you reduce the federal deficit without a tax increase? How would you cut the red ink? Well the very thing that I answered again and that we're doing we have a recovery going. We have proven that reducing inflation reducing the tax rates stimulated the economy even those things that my opponent wants to sneer at the giving faster depreciation to business and industry has led to the biggest increase in industrial investment in plant and productivity in industrial growth since 1949. And so therefore even the argument about the deficit using up the capital funds to place so that there isn't money out there for private investment doesn't hold true today. We've done all those things it is the most solid recovery the best that we've known in all the seven or eight recessions since World War II. Now that alone has already this year reduced the deficit $21 billion less than last year's deficit. As the economy grows the revenues increase not by increasing the tax rates in the individual but by building a bigger economic pie for everybody including government. At the same time we continue to try and bring government spending down and we have reduced the rate of increase from 17.5% which it was in 1980 the rate of increase in federal spending to 6.1% if we can bring it down to 5% maintain that for these next four or five years by 1989 that alone could bring the budget deficit down to around 30 or 40 billion dollars but when you see also that if we can keep economic growth at 4% and we've been better than that in the recovery so far granted that it can't go on at the rate that it first started in the first surge but at 4% by 1989 we'll have $400 billion more in revenues. What would you do in a second term to prevent another recession this one is to what to prevent another recession this one is going on for a bit of time well, four more years would be very unusual by preventing Mr. Mondale from having his tax increase that he wants that would set the recovery back that would put us right back where we were and we're not going to stand for it and the things that we're looking for we have Mr. Grace's 2,478 recommendations as to where savings can be found in government now we have a task force working on these we've implemented 17% of them already the Defense Department has implemented some we know that there are some things that probably will not be possible out of all those recommendations but we're going forward with those let me just give another suggestion as we keep on doing things over the objections of Congress we took 62 specific categorical grants and we molded them into 10 block grants and immediately the administration at our level of those specific grants went from 3,000 people down to 600 and at the same time it tore up red tape and regulations that took up 885 pages of regulations that were imposed on the local and state governments for those grants has come down to 30 pages now this type of thing this is what we're doing we've had a meeting today on some other things that we're doing with regard to further government regulation and regulating agencies that can be reduced Mr. President in a general context if you win reelection what would be your first priority of any type in the second term peace there's nothing more important in the world today that means arms talks as quickly as possible yes, we always have wanted them we're ready to sit down at the table anytime they'll come back we can ask one last domestic question how do you intend to help revive lagging U.S. exports in the loss of jobs to foreign manufacturers well how can you see that being a great threat to jobs when we have created 6 million new jobs in the last 21 months this country between 1790 and about 1840 was the fastest most amazing growing industrial power in world history and we were importing like crazy we had to import we were built buying from the old country and we made ourselves out of that into the great power that we are the today in the trade imbalance there are two or three things that aren't counted in that imbalance services are not counted the money that is or the export that we're making of services of designing of water programs and so forth all throughout the world things of that kind the other thing is to that trade imbalance the billions of dollars of capital that is being imported into our country for investment in this industrial productivity so I don't see the trade balance as actually militating all that much against employment in this country Mr. President, I promise one final question will you do anything different differently in your preparation for your second debate with Mr. Mondale? No I realize that I had never I had never been a debater before as an incumbent and I recognize the advantage that I had previously then as a challenger because the challenger can throw things at you about what you're doing and I had to have my mind completely filled with all the responses and may I point out that if you read the transcript I think you'll find that I was able to rebut any of the facts and figures that I gave and I did rebut many of his figures which had no substantiation in fact Did I take that to mean that you feel comfortable with your performance in Louisville? No I thought it could have been better as I say I realized that under those difficulties that the only chance that an incumbent has to triumph in that kind of a debate is to have some kind of momentary thing that really demolishes your opponent if he stays alive through the 90 minutes he's won Thank you very much Sorry I'm a Philly's man and we've lost a few We'll come back next year Well yes I have to tell you that with mine it went all the way back