Pres. Reagan's State of the Union speeches: on Budget & Economy

End "stagflation" with cuts to taxes and spending

Government's response to these recessions was to pump up the money supply and increase spending--while in the last 6 months of 1980, interest rates reached a staggering 21.5%. There were 8 million unemployed.

Late in 1981 we sank into the present recession, largely because continued high interest rates hurt the auto industry and construction. And there was a drop in productivity, and the already high unemployment increased.

This time, however, things are different. We have an economic program in place, completely different from the artificial quick fixes of the past. It calls for a reduction of the rate of increase in government spending, and a 3-year tax rate reduction designed to stimulate the economy and create jobs.

Reduce deficit by growth, lower interest, & spending control

Higher taxes would not mean lower deficits. Raising taxes won't balance the budget; it will encourage more government spending and less private investment.

We must cut out more nonessential government spending and rout out more waste, and we will continue our efforts to reduce the number of employees in the Federal work force by 75,000.

The budget plan I submit will realize major savings by dismantling the Departments of Energy & Education and by eliminating ineffective subsidies for business.

Double-digit inflation is no longer a way of life

The inflationary expectations that led to a 21% interest prime rate and soaring mortgage rates 2 years ago are now reduced by almost half. Lenders have started to realize that double-digit inflation is no longer a way of life. Interest rates have tumbled, paving the way for recovery in vital industries like housing and autos.

Federal spending freeze: limited to rate of inflation

1. I will recommend a Federal spending freeze. I know this is strong medicine, but so far, we have only cut the rate of increase in Federal spending. Taken as a whole, the budget I'm proposing for the fiscal year will increase no more than the rate of inflation.
2. I will ask the Congress to control the growth of the so-called uncontrollable spending programs. These are the automatic spending programs, such as food stamps, that cannot be simply frozen and that have grown by over 400% since 1970.
3. I will adjust our program to restore America's defenses by proposing $55 billion in defense savings over the next 5 years.
4. Because we must ensure reduction and eventual elimination of deficits, I will propose a standby tax, limited to no more than 1% of the GNP. It would last no more than 3 years, and it would start only if the Congress has first approved our spending freeze and budget control program.

Require the Federal Government to live within its means

How often we read of a husband and wife both working, struggling from paycheck to paycheck to raise a family, meet a mortgage, pay their taxes and bills. And yet some in Congress say taxes must be raised. Well, I'm sorry; they're asking the wrong people to tighten their belts. It's time we reduce the Federal budget and left the family budget alone. We do not face large deficits because American families are undertaxed; we face those deficits because the Federal Government overspends.

The detailed budget that we will submit will meet the Gramm-Rudman-Hollings target for deficit reductions, meet our commitment to ensure a strong national defense, meet our commitment to protect Social Security and the truly less fortunate, and, yes, meet our commitment to not raise taxes.