Here is a partial transcript of President Reagan's news conference:
. . . Let me make a few points now that might anticipate some questions. Clearly we're facing very big deficits unless we take action. And we will take action because the deficits are unacceptably large in the out-years.
The federal budget must not become a roadblock on the path to long-term economic recovery. I'm consulting now with a wide variety of people, and I look forward to working with Congress this year on the issues.
The choices we face as a people are difficult. But in the long run, I believe the budget should have three fundamental objectives:
It must meet our basic human and defense needs, it must treat the people fairly, it must move toward balance, helping lower the interest rates and providing a basis for sustained economic growth . . . .
Q. . . . How high does unemployment have to go and how much does the economy have to deteriorate before you are willing to accept cuts in the defense budget?
A. . . . I don't think the economy is deteriorating further. . . . All of the signs for seven of the last eight months . . . that are taken as indicators have been up. Retail sales are up 6 percent over last year. Home sales are up 66. Building of houses is up 66 percent over last year. Sale of new homes is up 47 percent over last year.
We have brought interest rates down to the point that inflation is . . . the lowest it's been in 10 years--4.5 percent . . . all the indicators are there to indicate that the economy is getting better . . . .
. . . Employment . . . is the most grievous problem . . . that's always the last to get well. And, yet, for the last several weeks the numbers of people who are applying for unemployment insurance are fewer than they have been. But also greater numbers than those applying are at the same time each week leaving unemployment.
. . . Some of those may leave because they've come to the end of their payments, but also a great many of them are leaving because they've found employment. There may be some fluctuations in the tenths of percentage points in the present rate, but I believe that we're on the road to the kind of recovery we've been talking about.
Q. Would you back off on defense spending, increases in military spending?
A. . . . You're trying to get me into the details that I've said there are no decisions that have been made . . . I don't question the fact that the people are concerned because they have been receiving through much of the media a constant drumbeat that somehow there is a needless extravagance and that we're overboard on this particular subject.
On the chart you will find that in constant dollars the defense budget is just about the same as it's been all the way back to 1962. You will also find that as a percentage of gross national product, it is smaller than it was in the Eisenhower and Kennedy years.
We repeatedly see the figure over a five-year period of $1.5 trillion or $1.6 trillion. We're still spending more than $2 trillion in that five years on the social programs.
. . . In February of 1981, when we presented the five-year plan to try and refurbish our military because it was in desperate straits, we certainly could not claim that we were meeting the first priority of government . . . to provide the national security.
. . . Since that time, we have cut our original program by $41 billion . . . by reason of inflation coming down, which lowered the cost of some things . . . by improved management procedures and improved procurement. And we're still looking at that and have just had a . . . task force of outside volunteers, all skilled and knowledgeable in business, who have been reviewing and examining the whole Defense Department. And their recommendations will be coming to us shortly.
So if it can be cut, it will be cut. But . . . not if it means reducing our ability below the level at which we can declare ourselves safe.
Q. . . . How ironclad is that opposition to higher taxes and your commitment not to raise taxes, particularly in view of the fact that a year ago you voiced such a commitment and then again in September . . . and we did have two different sorts of tax increases last year?
A. The one tax that I know many of you have portrayed as in keeping with my saying it would take a palace coup--when I said that, the gasoline tax was being proposed as just a part of general revenues . . . it was a year ago that Secretary Drew Lewis presented the plan . . . And I asked him more than a year ago if he would wait a year and bring that back again, and he did.
And the proposal was . . . "a users fee" . . . not a tax for general revenues. This is a tax to do this particular task . . . .
With regard to taxes now, I think it's . . . a common rule and an accepted fact that increasing taxes is not the way out of a recession. The tax cuts . . . were supposed to, and have, helped stimulate savings. With the additional cut . . . in July, we believe that this can also increase consumption.
And we must realize that . . . more than half of the deficit is due to the recession, to the fact that people are not working . . . and instead are . . . being a cost item to the government because of the need to help them . . . .
The other part of the deficit that must be met . . . and solved . . . is structural. It is built-in increase . . . over which no one government has any control, unless they go back and change the basic legislation, that just has in what are called "the entitlement programs" an automatic increase . . . .
And this is the line on the chart that is going up at the steepest pitch of any spending of government . . . .
But the real answer to the deficit is recovery of the economy and therefore whatever we do, we must not be tempted into some temporary treatment of a deficit . . . We want them reduced, but what we must do is get the economy restored on a longtime, permanent basis, and everything we do must be directed toward that.
Q. Will that include higher taxes in the coming year?
A. I just said that a tax is the wrong thing to do when you're trying to come out of a recession.
Q. Speaker O'Neill said . . . you'll be lucky to get any cuts in the social programs. He said $30 billion . . . was out of the question . . . . Do you agree, or do you think there is some sizable amount that can be cut from that area of the budget?
A. . . . I heard . . . the speaker say that, and I thought to myself, I assume that from now on he will have nothing to say about us being responsible for the deficit since he has made it plain that he will refuse to approve any reductions in spending.
Now, you've got a deficit, you want to cut it down, obviously you've got to spend less, and I hope that he'll rethink his position on that. I'm sure there are others that do not feel the same way.
Q.He was not, apparently, talking about any reduction in spending. He was talking about in the social programs--the controllable social programs.
A. . . . You would be getting me into the details that I am not prepared to talk about now . . . no decisions have been made . . . .
Q. . . . Today, the Warsaw Pact proposed a nonaggression pact with NATO. And two weeks ago . . . Mr. Andropov raised the idea of a summit with you. What is your reaction . . . ?
A. This is something . . . certainly to be considered if that is what he is proposing . . . a nonaggression pact. But with regard to a summit, I am, in principle, in favor. . . . I proposed meeting Mr. Brezhnev in New York at the time of the United Nations Disarmament Conference, believing that he would be there . . . .
. . . A summit . . . requires some planning. I do not think you just say let's get together . . . , and then say, well, what do we talk about? I think you have to plan. And you have to know and believe that you can accomplish something. And when we can be sure of that, no, I would welcome a summit just as I welcomed his suggestion about continuing the talks on the reducing of arms.
Q. What about today's proposal for a nonaggression pact between NATO and the Warsaw Pact?
A. . . . This is something that would require consultation with all of our allies in NATO.
Q. Republicans and Democrats on your Social Security Commission seem to have indicated . . . that they can go no further in their deliberations until they get some kind of guidance from you. Are you prepared . . . to personally recommend some balance between the raising of Social Security taxes and the lowering of benefits or the growth rate of benefits . . . ?
A. Our people have been in touch with the commission. But . . . Social Security was made a political football and not by us and not by me to the place where there was no serious consideration given to any effort to try and meet its problems . . . .
. . . Those who were making it a political football . . . more than a year ago denied that it was facing that kind of problem. When we said that it couldn't get by July of 1983 without a correction . . . , they denied that . . . the Commission has . . . verified that we were right and it is in that kind of desperate strait. And the fact that we've already had to borrow some money to send the checks is there.
But the appointment of the bipartisan commission was to get it out of the arena of politics and let a bipartisan group come back with . . . at least with some alternatives, and then I think is the time that we join together and seek to work out a compromise.
I believe that for me to now impose myself, I don't care how much they ask for it . . . , and say, "Hey, fellows, this is the way I want you to go," I would then . . . cock my ear and wait for the loud outcry from Capitol Hill and the same old political football would be seen going up in the air like a punt on third down.
Q. If that's what it takes to get this thing going, are you willing to do it?
A. . . . If they cannot come to a conclusion, then let them submit to us what they have proposed and . . . their differences . . . , and then it will be up to us.
I do know that Chairman Rostenkowski of Ways and Means has made it known to me that he is going to begin hearings and he is ready to cooperate with us and knows that we must have a solution.
Q. There have been many allegations that the Bulgarian intelligence service was behind the attempt to assassinate the pope and that the . . . KGB may have ordered the whole thing. What do you believe? Do you believe the Russians and the Bulgarians were behind it?
A. I know that the Italians are investigating and in view of their procedures and their handling of the Gen. Dozier case, I have great confidence in their abilities. But as long as they are investigating, I don't think it would be proper for me to make a comment . . . because I would have no information except the same things that all of us know . . . .
Q. If it turns out that the Bulgarians and Russians were behind it, what impact would that have on Soviet-American relations?
A. I think that it certainly would have an effect . . . worldwide, and I'd meet that problem when we got to it. But until we do, well . . . .
Q. During the lame-duck session of Congress, the House and the Senate . . . approved the jobs program. They subsequently reviewed them at your request and your threatened veto. Yet at the same time they asked you to include a jobs program in your budget. Will you do so in your budget? Will you offer any kind of a detailed job-creating program?
A. We think that we've done several things along that line. And then I would answer as to why the threat of a veto for the customary job type of program.
First . . . , we have a billion-dollar program that's going to train a million people a year. And part of our unemployment . . . is structural. There are jobs that people have been laid off from that will not exist again. There is a structural change in our work force . . . .
. . . On the weekend again, I was looking at some of the help-wanted ads, and the ads are becoming really desperate in companies that are advertising for people with certain skills, which indicates that . . . the workers aren't out there with those skills. That's one.
We have twice extended the unemployment insurance payments to help . . . . I have signed the Trade Export Bill, which we think is going to increase the number of businesses in this country . . . in the export field. And each billion dollars of export makes about 40,000 jobs.
Also, I think while it was not for jobs, the program was really designed to meet an emergency in our transportation system . . . to provide 300,000 to 350,000 jobs.
But . . . the housing subsidy bill that I vetoed last summer . . . had it been signed, would probably just begin now or in the near future to be operative. But suddenly in this same period of time, by depending on the market forces, housing starts are up 66 percent. General construction is also up.
The trouble with those so-called job bills--one . . . that I . . . said I wouldn't sign, wasn't slated to go into operation until 1985. That's a long time to wait . . . .
Most of them have the fault that they create maybe some employment over here in the public sector. But no one ever turns around to see what the spending over here did to create some unemployment over here in a different sector. So I just don't think it's the answer. I think that most job bills come down to being pork-barrel.
Q. . . . Do you agree with Sen. Laxalt that there are ways to stretch out the defense buildup over the next six or seven years without hurting national security?
A. . . . A stretchout sounds as if it might not be too serious but . . . we don't have the military-industrial complex that we once had . . . .
You can't say to someone who has gone into business purely to provide us with what we have ordered . . . everybody go home and wait a while . . . we're not going to take these things.
. . . Seventy-five percent of the defense budget is payroll for the troops, readiness and maintenance. And only a fourth of the budget has to do with weapons systems.
Q. . . . The chairman of your Social Security Commission, Mr. Greenspan, says . . . there is a consensus that the solution revolves around a speeding up of payroll taxes and slowing down future benefit growth. Does that mean that the White House has indicated it is willing to support some kind of payroll tax speedup . . . ?
A. . . . There is a limit with regard to how far you can go on the tax . . . caused by the fact that a big proportion of our working people today are paying a greater tax in Social Security than they are in the income tax.