 We're all proud of a strong dollar, and it helps to keep inflation down, as you noted last night. But there is such a thing as the dollar being too strong, at least for certain industries and exports and so forth. Are you worried now that we've really reached the point, given the escalation of the dollar in recent weeks, that the dollar really is overvalued now? Well, what I'm more concerned about is that, of course, it's overvalued if you compare it to other currencies, but I think where we should be looking are to those other currencies. And obviously, our recovery is way ahead of theirs, and obviously they're still burdened by some rigidities in their ways of doing business and so forth that I think are going to have to be corrected, and what we're hopeful of is an increase in the value of theirs. I think the danger of trying artificially in some way to force the value of our dollar down puts you back, as I said last night, in the inflation spiral. But we did intervene a little while ago, too. Yes, and we've done that from time to time, where we think there's disorder threatening the marketplace, and so that has been done. That could be done again. Yes, yeah. But not primarily to drive the dollar down. No. Just to... Do you think that the Federal Reserve should ease monetary policy to allow the dollar to decline? No, I think the Federal Reserve right now is doing what we believe is proper, and that is to see that the money supply and the growth in it is commensurate with the growth in our economy, and so that growth will continue without inflation. Chairman Volcker says that the Fed has stopped easing monetary policy, at least for the time being. How would you respond if interest rates...if the Fed lets interest rates start rising by say the spring? Well, I would not like to see them do something to encourage their rising, and the tendency has been, as you know now, for a period back to drop, and I'd like to see them drop further. And that, too, would help, I think, in the balancing more of the currencies of our trading partners. You'll be going to Bonn in May for the Economic Summit. What do you expect the main issue is going to be there? Well, I think it'll be a continuation of what we've been talking for the last couple of those summits. Some of it will be, I'm sure, a discussion of how we can institute another round of trade talks to come closer to a free market place and get rid of protectionism wherever possible. I think that's as vital to them as it is to us, but again it's going to make them look at some of their own structure and some of their government practices just as we have looked at ours in the last four years and look what the changes have brought us. But the strong dollar is likely to increase protectionist pressures in the United States, isn't it? It might, but it would be the wrong way to go. Are you growing at all impatient with the Japanese government on trade concessions from them? Well, this is the wrong time to ask me that now because we are entered into ongoing discussions with them about making the market open in both directions. And I have to say that Prime Minister Nakasone has been most cooperative, like me. He has a government structure in which he can't just give orders and have things happen. So he'll be running into confrontations about what he wants to do, but I know that he believes very much that as the two economic powers that we are, that there is a risk in the imbalance of trade that we have between us, and we have made some sizable progress with them on trade matters and on the basis of opening their markets or making them more open to our own exports. What do you think is the most substantial concession they've given us? Well I would have to say in agriculture the opening to beef and citrus was very definite. The voluntary restraint that they themselves adopted on their own about automobile imports when that industry was so hard hit here. Are you inclined to have that expire? Well, it's voluntary in their part. And as I say, I'm not ready to discuss that yet, but we'll have to treat with it and deal with it in the context of the ongoing overall talks that we're having with them. Which includes telecommunications and financial services and the whole. I'd like to ask you a domestic question. Just named Barrel Sprinkle to head the CEA. I'd like to know what your thinking was. Why did you choose a rigid monitorist, especially since Mr. Sprinkle has been a very harsh critic of Fed policy. So doesn't this move raise the specter of some renewed turbulence between the White House and the Central Bank? Well no, I don't think so. He's taking a position to be my economic advisor. And I think that's what his function will be. On the other hand, I've had criticisms of past performance when the money supply has either gone one way or the other or held, for example, too tightly for a time. And I've been willing to speak my mind on that. I recognize at the same time, however, that the tools the Fed has to work with are not very accurate. I mean they're not that precise and you can't look at the fluctuations, you have to look at a kind of a long-term trend in which way they're going and, as I say, I'm satisfied with what they're doing. Well, there's still a question of why a supply side president would have a monitorist CEA chairman and a follow-up. Do you want to change the role of the CEA in any way from the Feldstein era? Well I won't discuss it with relation to what any other era has been. I'll only say that I want it to be an advisory group to me. I want their advice and I want it given to me. I don't want to just have to read about it someplace. Why a monitorist? Why a monitorist? No, I think that there's a place for that also. On another personnel matter, Ray Donovan has been on leave of absence from the Labor Department since October and it now appears that he faces the prospect of a protracted criminal trial on corruption charges. Isn't it time that the Labor Department had a full-time secretary? I just don't think you can walk away from someone who has been as unjustly treated as he has and I have every confidence in him and I'm not going to do anything that would indicate that I don't. The budget battle was underway on Capitol Hill and the Senate appears to be moving toward adoption of a budget freeze that would include a one-year hold on cost of living adjustments for Social Security recipients. Now, in light of your campaign statements on this subject, will you work to kill that provision? Well, I'm going to see what happens there. I have said on occasion and I don't mean to say this to be taken in any way that I'm retracting or trying to prepare the ground for drawing back. The pledge that I made during the campaign, in my mind, was aimed at repudiating the charges that I was out to reduce the benefits that Social Security recipients received. I frankly had not thought about whether it had anything to do with the increases. Actually, I don't think that's such an important thing. If you look at it honestly, first of all, inflation is so low that that isn't what it has been in the past with double-digit inflation. But the second thing is all this dwelling on Social Security ignores the fact that Social Security is not contributing to the deficit. It is funded by a payroll tax which can only be used for that purpose. And if you lower the cost of Social Security or the outgoal, it just simply reverts to the trust fund. Actually, I don't know why Congress ever put it in a unitary way in the budget and made it unitary with the budget. If ever there was anything that belonged out here on its own, it is that program. In question about taxes, in 1981, you were personally down in the political trenches fighting for your tax bill. The administration's new tax reform proposal has been public since November. And so far, the White House hasn't taken the lead in forming a pro-reform coalition. Why are you hanging back and how do you expect this bill to pass without that kind of personal involvement? We don't and we're going to be that personally involved. What we haven't been able to convince anyone of is the fact that our first requirement was the budget. And there's no way to describe the hours that we have put in in the meetings on that subject alone until we were ready with a budget proposal which we have now submitted to the Congress. But said over and over again that then we go to work because it is a dual track thing that this whole problem of the deficit and government overspending. Now we will do the same thing that we did with the budget. We have not had time or had a single meeting on the Treasury proposal. Now overall, from what I know of the overall view of that proposal, I've said that I think it's the best tax study I've ever seen. But it also contains a number of options and just like the budget when we went over them point by point. We're going to have to look at these and there may be some things that we believe are not wise and that shouldn't be in there. But we're not ready to go to bat with that until we stop talking about the generalization of the plan and come down to specifics and say, all right, here is that proposal and here is how we want it passed. Well, on the plan, you assert that you can slash corporate tax rates and still keep the plan revenue neutral by making companies that currently don't pay taxes start to pay them. But since the Treasury's tax plan raises business taxes by $165 billion over five years, isn't it a little implausible to assume that sums of this magnitude will only be raised by making a few industries pay more taxes? Well, the truth of the matter is the figure is somewhere around $100 billion a year of tax that we believe legitimately should be collected and isn't being paid. Now that wouldn't all be business tax, but it is a sizable amount. There are in addition to the rates being cut, however, remember also that there are going to be changes not only for business but for individuals with regard to cutting off exemptions, but we find that for the individuals, for example, they still come out with a tax rate reduction. We think that in addition there is another thing that we have seen in the past that will happen. We think that this proposal and the lowering of the rates will make the whole business of tax shelters not as attractive. There just won't be the reason to go out searching for them. The final tax question, and I think we'd like to move to foreign policy for a bit. Treasury Secretary Baker says it will be four to six weeks before he decides on whether to draft a specific tax bill or send Congress a general statement of principles or opt to work informally with the Congressional Tax Writing Committees. With that kind of a slower track, aren't you running the risk that Congress will turn to tax reform too late to pass it this year? No, because there's nothing in that that's going to be retroactive. There is another plus, too. We've had an experience of having taxes and budget cuts both at the same time and seeing people on the Hill that then wanted to start trading from one to the other. We didn't want that and don't want it, but it isn't a case of deliberately holding back. What he's going by is our experience with the budget and how long it's going to take us now to sit down and really work out what in what form that Treasury proposal we want to send up there. Mr. President, shifting to foreign affairs and specifically Nicaragua, whether you wanted to or not, you made some news at your recent press conference by suggesting that the U.S. was broadening the political objectives in Nicaragua by keeping the pressure on until the Marxist government there, while it was dissolved, agreed to power sharing with the dissident movements. My question is, how can we justify helping to what appears to be overthrow a government merely because we don't like its political coloration? Well, because here again we always find ourselves, because they call themselves a government accepting that, all right, this is the government of the country and of the people. This is one faction of a revolution that overthrew a dictatorship. And while we weren't around then, this country made it very plain that we had no objection to that overthrow. In fact, we immediately, and this was before my administration came here, this country started to provide sizable financial aid to the revolutionary government. But then it developed that Justice Castro had done in Cuba, as I said last night. One faction got in and muscled the others out. Some of them were jailed, some were driven into exile, some are up there leading the freedom fighters now. And there is the fact of the promise they made to the Organization of American States that in return for their help, this would be a legitimate democracy. I think we have to ignore this pretense of an election that they just held. This is not an elected government. This is a faction of the revolution that is taken over at the point of a gun. And the people haven't had anything to say about it. And I think that under the UN Charter, under the OAS Charter, there's every reason for us to be helping the people that have indicated they want the original goals of the revolution to be instituted. And sir, if you're frustrated by not getting Congress to go along with you on aid to the Contras, we still do a fair amount of trade with Nicaragua. Would you go along with the idea of imposing economic sanctions on Nicaragua? You have the authority to do that without Congress's approval. Well, I'd rather not discuss anything in the line of tactics of what we might or might not do as this continues. Moving then to El Salvador, there's the war there. It seems to be grinding on with no clear victory on either side. How much longer will the United States begin supporting the Duarte government until before something positive seems to be coming out of it? Are you getting impatient with the pace down there? No, and we wish it could be faster than it is, but actually there has been improvement. There has been improvement in this government and in the El Salvador military. They have been making more progress than they have in the past against the guerrillas. And what I'd like to see also happen is Congress join now and support a multi-year imposition of the, well, I call it the Scoop Jackson plan that Commission came back with, aimed not just at a particular country, but aimed at, in the whole area, making those countries more economically sound, more self-sufficient, give them economies that can begin to improve the scale of living of their people. And just as it's with us in the past, we have tried to, our aid has been about three to one social and economic compared to military, and that's the same ratio pertains to this other plan, but the idea of having an extended plan, just as we did with the Caribbean initiative, in which someone doesn't just say, well, they're doing this today, but what are they going to do tomorrow? They can look ahead and plan ahead. I apologize for jumping around the world so much, but moving to the Mideast, partly in response to U.S. pressure, the Israelis have begun their withdrawal from southern Lebanon, and in the ensuing vacuum there, the Shiite Muslims are moving in and people are saying southern Lebanon is going to become another Iran. Does this bother you and what does it mean, would it be a major setback for our Mideast policy? Well, it has to bother anyone because that's a quite radical faction that is moving, and we have to remember though that the very thing that we set, went in there originally hoping could be resolved was the differences between factions. That radical faction is matched by the Sunni Muslims and they have their own forces and then there is of course the Christian militia and the others, but it has been our hope that the government of Lebanon can somehow bring a reconciliation between these various forces and begin to have a government where, like in our own country, people live together in peace regardless of their religious differences. In switching rapidly to the Southern Pacific, the U.S. is considering severe retaliatory measures against the New Zealand government in response to that country's refusal to allow our Navy ships to come into harbour. Are we overreacting or are we worried more about the severity of this response and the impact it may have, say, if the Japanese follow suit? Well no, what we're doing is more in sorrow than in anger. How can you have an alliance, the Anzis alliance that we have, if then one of them chooses not to participate or to cooperate when a part of your alliance is based on maneuvers and practice about ensuring the security of the area? So what we've simply done is just cancelled out any, mainly what we're doing is canceling out any of the joint maneuvers that we were going to hold with them, because if we can't go into their harbors it's a little ridiculous, so we've just set that aside. We are continuing with the Anzis, with Australia. And you're not concerned about the impact that the Japanese may perhaps do the same thing because they have a ban against nuclear weapons being in their ports, too? But I think we have a better relationship now with them and they have even increased their own military defense capacity because they recognize the need for full cooperation. Absolutely. Let me do one more. Lee, why don't you... Well, I can't let you go without a political question or two. You've restrained from endorsing Vice President Bush for the 88 presidential nomination, but many of your top staffers seem to be voting with their feet and moving to the Bush camp. Doesn't this amount to a sort of powerful, unofficial signal by your White House that Bush is your man? Well, you'll have to ask the people who are moving and all I can tell you is that we have a very healthy relationship, more so I believe, than has been customary in the past between Presidents and Vice Presidents. And I just... I don't feel that this is the time to be getting involved in anything of that kind. That's a long way away and we've got an awful lot of important things to do in these next four years. But aren't you worried about the prospect of some very bloody inter-party conflict between possibly Mr. Bush's establishment backers and the so-called conservative populist followers of Congressman Jack Kemp? Well, I'll tell you, back in California, we had a very successful program that worked and I believe in it even at the national level. And that is, obviously, you're going to have contests, obviously you're going to have primary challenges against each other. But in California, we tried a thing that was called the 11th Commandment. And I would like to see it instituted in the coming elections, 86 and 88, at a national level. And the 11th Commandment is, Thou shalt not speak ill of another Republican. Now it's possible to run and you run on what you believe and you run by not attacking someone else. And it actually worked in California. There you go, bringing the Bible as a policy. Thank you very much. It's not like you're missing a good party next door. Yes. Well, I'm supposed to drop in there. I'm a little hard. That's all right. Great to see you again. Thanks a lot. Oh, that's great.