A Call to Put the Economy in Order

OUR nation needs a new direction. Tonight, I present to you a comprehensive plan to set our nation on that new course....

The plan I offer you has four fundamental components:

First, it shifts our emphasis in public and private spending from consumption to investment, initially by jump-starting the economy in the short term and investing in our people, their jobs and their incomes in the long term.

Second, it changes the rhetoric of the past into the actions of the present, by honoring work and families in every part of our public decisionmaking.

Third, it substantially reduces the federal deficit, honestly and credibly, by using in the beginning the most conservative estimates of government revenues, not as the executive branch has done so often in the past using the most optimistic ones.

And finally, it seeks to earn the trust of the American people by paying for these plans first with cuts in government waste and inefficiency; second, with cuts, not gimmicks, in government spending; and by fairness, for a change, in the way the additional burdens are borne....

Our immediate priority is to create jobs, create jobs now.... To create jobs and guarantee a strong recovery, I call on Congress to enact an immediate package of jobs investment of over $30 billion, to put people to work now, to create half a million jobs: jobs to rebuild our highways and airports, to renovate housing, to bring new life to rural communities, and spread hope and opportunity among our nation's youth....

To revolutionize government, we have to ensure that we live within our means, and that should start at the top and with the White House.

In the last few days, I have announced a cut in the White House staff of 25 percent, saving approximately $10 million. I have ordered administrative cuts in budgets of agencies and departments, I have cut the federal bureaucracy, or will over the next four years, by approximately 100,000 positions, for a combined savings of $9 billion.

It is time for government to demonstrate, in the condition we're in, that we can be as frugal as any household in America.... Tonight I call for an across-the-board freeze in federal government salaries for one year. And thereafter during this four-year period, I recommend that salaries rise at one point lower than the cost-of-living allowance normally involved in federal pay increases....

This budget plan ... will by 1997 cut $140 billion in that year alone from the deficit, a real spending cut, a real revenue increase, a real deficit reduction, using the independent numbers of the Congressional Budget Office....

My recommendation makes more than 150 difficult reductions, to cut the federal spending by a total of $246 billion. We're eliminating programs that are no longer needed, such as nuclear power research and development.

We're slashing subsidies and canceling wasteful projects. But many of these programs were justified in their time and a lot of them were difficult for me to recommend reductions in - some really tough ones for me personally. I recommend that we reduce interest subsidies to the Rural Electric Administration. That's a difficult thing for me to recommend, but I think that I cannot exempt the things that exist in my state or in my experience if I ask you to deal with things that are difficult for you to deal

with. We're going to have to have no sacred cows except the fundamental, abiding interest of the American people.

I have to say that we all know our government has been just great at building programs. The time has come to show the American people that we can limit them, too, that we cannot only start things, but we can actually stop things.

About the defense budget, I raise a hope and a caution. As we restructure our military forces to meet the new threats of the post-cold-war world, it is true that we can responsibly reduce our defense budget. And we may all doubt what that range of reductions is, but let me say that as long as I am president, I will do everything I can to make sure that the men and women who serve under the American flag will remain the best trained, the best prepared, the best equipped fighting force in the world, and ev ery one of you should make that solemn pledge....

I know this economic plan is ambitious, but I honestly believe it is necessary for the continued greatness of the United States. And I think it is paid for fairly, first by cutting government, then by asking the most of those who benefited the most in the past and by asking more Americans to contribute today so that all of us can prosper tomorrow.

For the wealthiest - those earning more than $180,000 per year - I ask you all who are listening tonight to support a raise in the top rate for federal income taxes from 31 to 36 percent. We recommend a 10 percent surtax on incomes over $250,000 a year and we recommend closing some loopholes that some people get away without paying any tax at all.

For businesses with taxable incomes in excess of $10 million, we recommend a raise in the corporate rate, also to 36 percent, as well as a cut in the deduction for business entertainment expenses.

Our plan seeks to attack tax subsides that actually reward companies more for shutting their operations down here and moving them overseas than for staying here and reinvesting in America. I say that as someone who believes that American companies should be free to invest around the world and as a former governor who actively sought investment of foreign companies in my state. But the tax code should not express a preference to American companies for moving somewhere else and it does in particular cases today.

We will seek to insure that through effective tax enforcement foreign corporations who do make money in America simply pay the same taxes that American companies make [sic] on the same income.

To middle class Americans who have paid a great deal for the last 12 years and from whom I ask a contribution tonight, I will say again, as I did on Monday, you're not going alone any more - you're certainly not going first, and you're not going to pay more for less as you have too often in the past.

I want to emphasize the facts about this plan: 98.8 percent of America's families will have no increase in their income tax rates, only 1.2 percent at the top.

Let me be clear. There will also be no new cuts in benefits for Medicare.

As we move toward the fourth year with the explosion in health care costs, as I said, projected to account for 50 percent of the growth of the deficit between now and the year 2000, there must be planned cuts in payments to providers - to doctors, to hospitals, to labs - as a way of controlling health care costs, but I see these only as a stopgap until we can reform the entire health care system. If you'll help me do that, we can be fair to the providers and to the consumers of health care....

Our plan does include a broad-based tax on energy.... I recommend that we adopt a Btu [British thermal unit] tax on the heat content of energy as the best way to provide us with revenue to lower the deficit, because it also combats pollution, promotes energy efficiency, promotes the independence economically of this country as well as helping to reduce the debt, and because it does not discriminate against any area....

Taken together, these measures will cost an American family with an income of about $40,000 a year less than $17 a month. It will cost American families with incomes under $30,000 nothing because of other programs we propose, principally those raising the earned income tax credit.

Because of our publicly stated determination to reduce the deficit, if we do these things, we will see the continuation of what's happened just since the election. Just since the election, since the secretary of the Treasury, the director of the Office of Management and Budget and others have begun to speak out publicly in favor of a tough deficit reduction plan, interest rates have continued to fall, long-term. That means that for the middle class, who will pay something more each month, if they have an y credit needs or demands, their increased energy costs will be more than offset by lower interest costs for mortgages, consumer loans, credit cards. This can be a wise investment for them and their country now....

After so many years of gridlock and indecision, after so many hopeful beginnings and so few promising results, the American people are going to be harsh in their judgments of all of us if we fail to seize this moment. This economic plan can't please everybody. If the package is picked apart, there will be something that will anger each of us and won't please anybody. But if it taken as a whole, it will help all of us....

My fellow Americans, the test of this plan cannot be: What is in it for me? It has got to be: What is in it for us?

If we work hard and if we work together, if we rededicate ourselves to creating jobs, to rewarding work, to strengthening our families, to reinvesting our government, we can lift our country's fortunes again....

There is so much good, so much possibility, so much excitement in this country now that if we act boldly and honestly, as leaders should, our legacy will be one of prosperity and progress. This must be America's new direction. Let us summon the courage to seize it.