 Good evening my fellow Americans as you know the most important goal that all of us share tonight is Economic recovery to see our factories reopening their gates to see the unemployed return to their jobs and every American enjoy the fruits of prosperity To get our economy moving again It's imperative that we enact a federal budget that will bring down deficits and bring down interest rates. I Had hoped that when I addressed you tonight It would be to give you the details of a bipartisan agreement on a budget and revenue plan for 1983 As you know yesterday marked the end of a long series of discussions to help reach such an agreement They ended despite our best efforts to achieve a fair compromise But before I discuss these talks and our plans for the future Let me give the background that led up to them In our budget proposal we had continued the process we started last year of trying to get control of runaway government spending Deficits over the last few decades have been literally built into the federal structure The rate of increase in spending was 17 percent when we took office There's no way that government can pay for increases at that rate Without gigantic tax increases each year or borrowing and adding to the national debt Now this latter course has been followed for so many years that we now have a trillion dollar debt To give you some idea of how much a trillion is if we started paying off the debt at a billion dollars a year It would take a thousand years to wipe it out now if I may Let me take you back a little in 1977 when the previous administration took office the inflation was 4.8 percent It rose steadily and in 1979 and 80 we had two years of back-to-back double-digit inflation Unemployment started to increase and by 1980 we were in a recession with nearly 8 million unemployed inflation at 12.4 percent and Interest rates at 21 and a half percent as Those interest rates continued home construction and automobiles were hard hit because few could afford to take out a mortgage or buy a car on time Unemployment continued to increase The 1981 budget was already in place when our administration began and while we managed to affect several billions of dollar savings during the balance of the fiscal year There was nothing we could do but set our sights on the 1982 budget, which would be our first We had to reduce the build-in rate of increase at the same time We had to reduce the share of the people's earnings the government was taking in taxes Now this may sound strange in view of the increased spending and it was contrary to the philosophy of the democratic leadership But high taxes destroying incentive had contributed to reduced productivity and a reduction in savings Which left us without the capital we needed for industrial expansion? And because government always finds a need for whatever money it gets the cost of government continued to go up Between 1976 and 1981 federal tax revenues increased by 300 billion dollars Deficits ran 318 billion There was no way we could get the rate of spending down to where it should be in one year But our economic recovery program did manage to reduce the rate of increase in spending to nearly half of what it had been We also proposed a three-year program of tax rate reduction for individuals and for business You helped us get both the reductions in spending and the tax reductions by letting your elected representatives know you wanted them During the debate on our economic program We stated many times that there would have to be a second installment of budget reductions in 1983 That built-in automatic spending increase. I spoke of would otherwise give us a budget of 827 billion in 83 918 billion in 1984 and more than a trillion in 1985 What is our situation how now and how well have we done with our economic recovery program? Well, we're still in a recession and Unemployment has continued to go up particularly in those areas affected by the troubles of the automobile and construction industries Farmers too are hurt by the high interest rates They borrow to plant and pay back at harvest, but that doesn't work when interest rates remain at too high a level It is true. However, that those rates are down about a fifth from that high of 21 and a half percent But they must come down some more and they have every reason to because that 12.4 percent inflation rate we inherited has been running at only 3.2 percent for the last six months and Last month for the first time in 17 years. It dropped below zero prices actually went down Now with all of this in mind We introduced a budget for 1983 of 758 billion dollars lower than the built-in spending by a considerable amount Still it represented an increase over the 82 budget of 300 and to her pardon me 32 a billion dollars Nevertheless, there were outraged screams of protest and you were led to believe that we were actually proposing less spending Than the present level There's been an insistent drumbeat aided by special interest groups charging that our budget Would deprive the needy the handicapped and the elderly of the necessities of life I'm sure many of these people were sincere well-intentioned But also Misinformed our original budget proposal would have funded 95 million meals a day for the needy Provided medical care for 47 million Americans subsidized housing for about 10 million people in In addition, there would be 7 million loans and grants for college students of which there are 11 million full-time Social security, which was a hundred and twenty-two billion in 1980 will be a hundred and eighty eight billion in 1983 But the drumbeat was too loud Many in Congress criticized that budget and demanded that we send up a new one Well, we worked many months with the cabinet on the one we submitted and believed it could fulfill Governments responsibility though those who through no fault of their own had to depend on their fellow citizens for help Besides I felt that some workable alternative to ours should have been suggested by our critics so we could begin Arriving at a consensus As the talk grew of stalemate I Asked my chief of staff Jim Baker to conduct the congressional leadership of both houses and see if some means couldn't be agreed upon in which The matter could be discussed with the idea of finding an area of agreement a Bipartisan arrangement was made whereby the Senate had five representatives the House of Representatives had seven and the administration had five This group which began to be called the gang of 17 held its first meeting on April 1st And it's 13th and last the day before yesterday April 27th The rule they followed was that nothing was binding on Speaker O'Neill Senate Majority Leader Howard Baker or myself They would simply see if they could find enough agreement that actual negotiations seemed possible and practical I In turn had told our representatives the areas. I felt were non-negotiable They were that any changes in defense spending must not interfere with or delay our rebuilding of national security and The spending must be significantly reduced and that our tax reductions adopted last year must be preserved. I Received regular progress reports and was greatly encouraged The gang of 17 worked long hard hours and deliberated in good faith What they were doing couldn't really be called Negotiation that would come later Speaker O'Neill referred to it once as dialogue Well, the projected deficits for the next three years continued to increase as the lower inflation rate reduced estimated revenues Continued unemployment which cost government about 25 billion dollars for every added one percentage point took its toll And the persistent high interest rates added to the cost of government borrowing While I don't believe in the accuracy of long-range projections. We're required to acknowledge them in our budgeting They stand at 182 billion dollars for 1983 216 billion in 84 and 233 billion in 1985 if we do nothing about reducing spending Not only must those deficits be reduced They must show a decline over the next three years not an increase our goal must be a balanced budget and Our budget would have set us on that road, but apparently there was no meeting of the minds There's no question, but that a difference in philosophy exists While the Democratic leadership Blumented about the deficit facing us committees in the House of Representatives controlled by them We're recommending increases above and beyond our proposed budget of more than 50 billion dollars in higher spending Apparently the philosophical difference between us is that they want more and more spending and more and more taxes I believe we should have less spending less taxes and more prosperity There hasn't been too much opportunity in the last 40 years to see what our philosophy can do But we know what theirs can do the longest sustained inflation in history The highest interest rates in a hundred years eight recessions since World War two and a trillion dollar debt Day before yesterday Jim Baker told me the group had decided they could come no closer to agreement than they were and There would be no more meetings So I called speaker O'Neill and suggested we meet to take up where the gang of 17 had left off That meeting took place for more than three hours yesterday The worksheets of the committee showed that on our side our Non-defense spending cuts had been reduced to about 60 percent of what we had originally proposed There were some areas such as estimated savings from improved management practices, which had been accepted On the Democratic side they'd expressed a willingness to accept some cuts Which they thought were a concession on their part in as much as they hadn't wanted any budget reductions except in defense on revenues We had originally proposed about 13 billion dollars for next year most of which could be obtained through changes in tax regulations Some regulations have been regulated or interpreted in such a way as to provide tax advantages, which were never intended The group was discussing a figure of 25 billion Which meant actually increasing some taxes or passing new ones now that figure would not have required Eliminating or reducing the tax cuts in our economic recovery program Still the 25 billion dollar figure was almost double our original proposal In yesterday afternoon's meeting on Capitol Hill speaker O'Neill senator Howard Baker myself and five of the gang of 17 participated as I say the figures on which the group had found some agreement were far from those we'd proposed in February But I decided against trying to start the negotiations on the basis of that original budget The most essential thing is to send a message to the money market that we Democrats and Republicans alike Can agree on reducing the deficit and continuing to hold down inflation Actually, the gang of 17 had come very close in their deliberations and I was encouraged to believe that we could arrive at a settlement our original cuts totaled 101 billion dollars They I can't make a big enough mark to show you but they were rejected believe me The our own representatives from the Congress proposed compromising at 60 billion dollars their counterparts from the Democratic side of the aisle proposed 35 In our meeting yesterday, which went on for more than three hours our compromise of 60 billion dollars was rejected Now my pen is working and then I swallowed hard and Volunteered to split the difference between our 60 and their 35 and settle for 48 and That Was rejected The meeting was over Now on this chart the red line is where we go In the next three years with regard to deficits if there is no compromise It'll reach a deficit of 233 billion dollars in 1985 alone and as you can see the line is still going up and So will interest rates The blue line is where we go if we settle on a reasonable compromise steadily down to a deficit by 1985 of only 44 billion dollars and you can see that a balanced budget is not far distant and This blue line will I'm convinced start interest rates down from the moment. There is agreement on the compromise It is essential That we have a prompt resolution of this budget debate It is of course up to the Congress to act now But I'll do everything I can to help in getting a prompt settlement If American workers can show the statesmanship they've shown in redrawing their contracts to restrain their own wages To help in this time of recession Surely we in Washington can show some statesmanship to I'm convinced. We're in the trough as it's called of this recession and that we'll begin to see recovery in the second half of the year There will be political pressure from some to turn on the printing presses and flood us with paper money That's been done before and the answer is always the same a Flush feeling for about five minutes then more inflation leading toward a plunge into an even worse recession There is another road that leads to permanent recovery It begins with a responsible budget now In the coming days, I will do everything I can to help the Congress achieve this vital goal and You can help too by letting your representatives know that you think this is no time for politics as usual That you too Want an end to runaway taxes spending government debt and high interest rates Tomorrow I will meet with Republican members of the gang of 17 to forge the beginnings of an acceptable budget initiative on Monday, I will meet with the full Republican leadership and with members of the Senate and House budget committees I will also consult with responsible members of the Democratic Party in the Congress to make this a truly bipartisan effort in the national interest But our efforts must not stop there Once we've achieved a balanced budget and we will Want to ensure that we keep it for many long years After I've left office and there's only one way to do that So tonight I am asking the Congress to pass as soon as possible a Constitutional amendment to require balanced federal budgets This amendment will of course have to be ratified by three-fourths of the states But I'm confident that the grassroots support for a balanced budget amendment is out there and will carry the day against the special interests most Americans understand the need for a balanced budget and Most Americans have seen how difficult it is for the Congress to withstand the pressures for more spending This amendment will force government to stay within the limit of its revenues Government will have to do what each of us does with our own family budgets Spend no more than we can afford Only a constitutional amendment will do the job We've tried the carrot and it failed With the stick of a balanced budget amendment we can stop government squandering overtaxing ways and save our economy Time and again the American people you have worked wonders that have astounded the world We've done it in war and peace in good times and bad Because we're a people who care and who know how to pull together Family by family community by community coast to coast to change things for the better The success story of America is neighbor helping neighbor So tonight I asked for your help Your voice at this turning point So often in history great causes have been one or lost at the last moment Because one side of the other lack that last reserve of character and stamina of faith and fortitude To see the way through to success Make your voice heard Let your representatives know that you support the kind of fair effective approach I have outlined for you tonight Let them know you stand behind our recovery program You did it once You can do it again Thank you and God bless you