 I'm on. I stood outside the doors. Please sit down. I stood outside the door. I wasn't about to interrupt Jim Water. He'd make my ranch into a national park. I can arrange it. Well welcome and I'm delighted that you're here for this briefing on the initiative that are being undertaken by the administration and I know you've had briefings on several subjects. Social security, transportation, defense, and the land and water issues. It doesn't leave an awful lot for me but let me focus on the economy and the federalism initiative that we've transmitted at the Congress. We know that last year was a period of painful economic readjustment for every level of government. State and local governments were particularly hard hit. I realize your job isn't made any easier by the recession and the unemployment that accompanies it. These problems have been a long time in the making and will take some time to correct. We wouldn't serve you well if we turned to the same quick fixes that have been used in the past and seven previous recessions since World War II. Artificial answers that mask the economic problems for a while and then after a couple of years made them worse because we have a chart of all the recessions since World War II and it's a climbing chart or declining whichever would be the most appropriate in that every recession has ended with greater unemployment and greater inflation as we've gone on through the years. Each one I mean is worse than the one before. The policies of the 70s they'll often well intentioned at a very damaging cumulative effect while gross national product increased only 70 percent between 1976 and 1981 federal spending jumped 80 percent and federal taxes more than doubled. We chose an economic program to restore long term non-inflationary economic growth and since 1970 we've had but two periods of sustained economic growth and in both cases the inflation shot up followed almost immediately by a new recession as I said. As a consequence much of the gains from the growth were wiped out. The only way to prevent this from happening in the 80s is to make sure that the economic growth is for real is stable and is non-inflationary and last year inflation was 3.9 percent which was the lowest in 10 years and in the past six months inflation has been at four tenths of 1 percent the lowest six months of any time in 22 years. The economic recovery that will create new jobs is now taking place. Almost all economists are now agreed on that. The index of leading economic indicators climbed three and a half percent in January that was the largest increase since July 1950 33 years and they were up again in February. In January and February construction spending soared 13 percent over the same period last year US auto production was more than 50 percent higher than the levels of a year ago and to maintain this progress we have to continue to slow the growth of federal spending. We must also do nothing that will impede recovery or worse stop it in its tracks. The federalism initiative recently sent to Congress remains a very high priority. It builds on the work of the federalism advisory committee or commission and the federalism negotiations of last year. The package incorporates four major megablock grants to state and local governments. It is not a vehicle for budget savings. We will take whatever funding levels Congress enacts for fiscal year 84 and lock those numbers in through fiscal year 88. The legislation provides for stability and certainty of funding which you have long called for and it requires mandatory pass-throughs to local governments and consultation by the states on any major program or policy change. The proposal also includes preservation of general revenue sharing. General revenue sharing is consistent with the basic philosophy of this administration that we should provide maximum flexibility to state and local officials. And that's as far as I'll go now in a briefing because I didn't come over for a monologue but for a dialogue and I'm sure you must have some questions that Jim didn't get answered. Yes, sir. Well, thank you very much. That was a pleasant question. It's been pretty frustrating a long time but then all negotiations are and I still remain optimistic. The goal has to be there is peace. In other words, more Egypt's created with more treaties and recognition in the part of the Arab states that Israel does have a right to exist as a nation and not as an armed camp. And we'll keep right on trying. Well, now I can't remember all the details in the package that we sent up there. I think we have a number of programs. Rich, could you speak to that? The federal local block grant the president sent up about six weeks ago is an expanded body of the CDBG plus revenue sharing that goes directly from Washington to local government. So actually that is an expanded program with respect to non-entitlement cities. And in the area of the state federal block grant, there is a mandatory pass-through provision with a limitation on what money can be taken away for administrative costs. So after the discussions we held last year with many mayors around the country, what the president went forward with really was almost designed by them with respect to what went forward. May I come over this side once and then I'll come back. Well, let me say that we realize that the next two deficits, there's a limit to what we can reduce in those. Then our projections show that after the 85 budget there is a steady consistent decline then in the deficits. About 50% of those budgets or those deficits are better are brought about by the recession. And the rate of recovery and as you know, I'm happy to say we had to readjust our own conservative estimates upward because the growth in gross national product and all was far above what we had thought. And we believe that we're going to see a greater growth and a faster growth than we had conservatively estimated. That could also have an effect on those deficits. We know the problem of the deficits and the psychological effect on the money markets. They're not too concerned with these immediate ones. They know that we're up here and that we have to come down. We believe and all the evidence we've had from our conversations with people out there in those markets, that when they see that steady decline, that that psychologically will be the evidence they want. Right now, I have to tell you there's a little thing that's caused a pause in the decline of the interest rates, a little uncertainty, and it isn't over the deficits. We've, you know, the measurement of M1, the money measurement as to whether the Fed has loosened the strings too much is very difficult right at the moment to pin down because of the bank deregulations. They led to such a great transfer from the money funds into the new savings accounts that it has distorted the picture of the money supply. And the plain truth is they just don't know how to read it. But to some people in the money markets, it looks like maybe there's been an upsurge, such as we saw back in 1980 when they did increase the money supply drastically. That has them a little on edge that if that's true, then there will, there'll be a tightening down the road a little ways, which will then have an effect on interest rates. So there's some caution out there. We are convinced and so is the Fed that it is just that distortion of the transfer of, of money into these savings accounts, which was a sudden surge. And I am convinced that the Fed is determined that they're not going to contribute to the volatility with the ups and downs that they're going to try and hold a line that they have been of increase that they've been holding throughout the balance of the year. And I think when that becomes evident, we're going to see some more reduction in interest rates. Yes, ma'am. Will we, will we what? We're sure going to try it will be extremely difficult, I grant you, but we shall do our best because we're not going to desert this, this policy. I, I was out on the mashed potato circuit for too many years talking about the need for more autonomy at the local and state level in government. Now, I'm just enjoying these questions more and more. Thank you very much. Thank you. Yes, we're going to try to keep maintain that relationship. I can understand their, their reaction on this and perhaps a feeling of loss of face. It's a lack of understanding also of what America is all about. Someone asked political asylum here on the basis of possible personal persecution or threats if they are not allowed. I think it was foregone. My own feeling was that the young lady if the immigration service hadn't found themselves able to do that, I would have adopted her. But, but we'll continue and we'll try our best to get past this, this hurdle. Obviously, there's a little tension constantly between us based on the, our feeling with regard to Taiwan. But again, that is a problem both the Taiwanese government and the government of the mainland of China, both of them claim that they are China and that they are the government of China. Well, that's for them to work out and settle and settle peacefully. We've made that plane to them. In the meantime, we're not going to abandon the people in Taiwan who have been a long time loyal friend and ally of the United States. And I have told the leaders personally and face to face of the People's Republic that we want to be friends with them too. We've, we've got a history of friendship with China. But I said, I would think I told them that they would recognize that they could depend on us as a friend better if they didn't see us cast aside another friend in order to gain a new one. And we're not going to do it. He says, last question. My wife's been telling me that I had called on you. Yes, right there. This has to be the last one. Yes. Yes, yes. And I don't know. I can see understand with the mainland of China hanging over them where maybe they need repeated assurances. And I have I've tried to do that. But yes, we feel that the investment of America and American industry and business has been part of the great success of the Republic of China on Taiwan. And we want to see that continue. As a matter of fact, in all of the programs that we deal with and our allies and our friends about how we can help the the developing nations, I have been preaching that we should be more energetic in going to those developing nations and using Taiwan and Singapore and Hong Kong and South Korea as examples. The bulk of the developing nations in the world have turned the other way toward socialism or authoritarianism. And those few countries that have gone the other way, our way of individual freedom and free enterprise, the contrast between them, one African state in contrast to the others I can name that has gone free enterprise has more than doubled its per capita income in just the last couple of years. And we what I have been touting among all of our friends and to the third world, the organization of the nonaligned states is that we want to help them create economies in their own country where they don't have to have a hand held out for a grant that they can become self-sufficient. We have sent agricultural teams of experts, our farmers, the volunteers to some of these countries to help them and show them how they can begin to produce more food and have to import less in order to have a better standard of living for their people. And this is what we want to do. So no, we encourage this with regard to Taiwan. And there's going to be no change in our position. So don't believe everything you read in the favors. Well, again, I know we've used up the time and I have to get back over as the little girl in the letter told me, wrote me a letter about all the major issues. Only 11 years old. I've told this maybe to some of you before, but I treasured it because she went on and I was amazed this little girl, international affairs and the recession and everything else. And she told me all about what I should be doing about him and then added a PS and said, now get back to the Oval Office and get to work.