The MacNeil/Lehrer Report; Economic Speech Reaction

[Tease -- Conclusion of Pres. Reagan`s February 18 speech to joint session of Congress]

Pres. RONALD REAGAN: The people are watching and waiting. They don`t de- mand miracles; they do expect us to act. Let us act together. Thank you.

JIM LEHRER [voice-over]: Last night there were cheers; today, questions about fairness, about whether it will work, about the probability of Congress`s acting together.

[Titles]

LEHRER: Good evening. There were few surprises in the reactions to President Reagan`s economic speech. Republicans loved it; so did business and industry. Some Democrats, mostly conservatives and moderates, also liked it; others, mostly liberals, hated it, as did many representatives of labor, blacks, and other minorities. A mild surprise did come from Wall Street. Stock market prices were expected to jump today. They didn`t. They were down, in fact. 13 points on the Dow Jones Industrial Average. Market analysts were quick to say that this does not mean the financial community dislikes the Reagan economic recovery program of cutting nearly $50 billion out of the federal budget, and reducing the tax rate 30 percent over the next three years, among other things. It`s simply that it questions whether Congress will go along. Members of the Reagan cabinet were on Capitol Hill bright and early this morning plugging the program, and answering questions about it. That`s the kind of situation we have put together tonight as well. Murray Weiden-baum. Chairman of the President`s Council of Economic Advisors, is here to field ques-tions from two key members of Congress. Robert MacNeil is off; Charlayne Hunter-Gualt is with me here in New York. We`re both here because of a broadcast journalism function later this evening at Columbia University. Charlayne?

CHARLAYNE HUNTER-GAULT: The Republicans themselves have predicted that the House of Representatives is going to be the battleground. For some reaction from those quarters, we go first to Charles Rangel, Democrat of New York and a ranking member of the House Ways and Means Committee. Congressman Rangel, the President has said that his plan to solve the nation`s economic ills is even-handed. Is it?

Rep. CHARLES RANGEL: No, the President was eloquent in outlining the problem that the nation faces, and certainly, I think, received the support of many members of the Congress, and indeed citizens that are looking for some way out of it. But talking about inequities, the President said that the poor would be protected -- that they wouldn`t be hurt. But when we start taking a look at the number of people that are going to lose jobs in the CETA program, the health programs, child nutrition, Medicaid, and then to find out that the food stamp program is going to be assaulted, we`re talking about the poor and the near-poor sliding into a public assistance program that the projection there is going to be not only decreased, but the standards that we fought for over the years in the Congress are now going to become states` rights programs where with limited funds, the cities and states will decide who`s eligible for what medical benefits or public assistance benefits.

HUNTER-GAULT: Well, President Reagan went to great lengths to point out that the programs for the so-called "truly deserving." as he put it. have not been touched. Do you disagree with that?

Rep. RANGEL: There`s no question about it. I don`t know -- when you cut the Medicaid program it doesn`t mean that the sick are going to get well or go away, that the poor in New York and in rural communities are still going to be poor. To say that the federal government is removing itself from the responsibility in cutting back the federal dollar figure merely means that someone else has to pick it up. When you cut off unemployment compensation, it merely means that local government is going to find people on public- assistance or home relief so that these people are going to be affected. And when you talk about inequities, if you just take a look at the tax system, and look at the couple of hundred dollars a year someone making $5- or $ 10.000 would get. and then take a look at the other end of the high- income spectrum where several thousands of dollars will be made by people in the upper-income brackets, it`s just not fair. Just the debt that poor people owe means that we should be concerned in trying to take these poor people out of the income tax system. Instead, we`re rewarding those people who would not even be inconvenienced by inflation by some psychological standard that they are going to invest, that they are going to save, that they have more intelligence as to what`s in the national interest. And I think that it`s inequitable and it`s unfair. So if you talk about the tax cuts, the poor are not the beneficiaries. You start talking about the cuts in social services, you`re talking about people that may not be on public assistance now, but if you remove this help that they have, they will be going on public assistance. And here you have substantial cutbacks planned by the President. I think the Congress is going to reject it. We may go for cuts, and we certainly are going to go for tax cuts, and we`re going for budget cuts, but I think the priorities have to be rearranged to be more equitable.

HUNTER-GAULT: You listed a number of programs. As an urban Congressman from New York with a very large minority constituency for that matter, are any of your pet projects or programs specifically in jeopardy?

Rep. RANGEL: I would say that we`re not even talking about minority there. There are more poor white folks in this country than there are minority people, and even though there`s a larger number of minorities than there should be that`s caught in the category. But we`re talking about [the] Comprehensive Employment Training Program where 300,000 people are just going to be put out of work, and we`re not talking about a substitute for it. We`re saying down the line in two, three, or four years the economy will be improved and unemployment would be decreased. We`re talking about Medicaid. We designed that program to assist the poor, and now we`re talking about reducing the dollar amount, and not reducing the services. Well, somehow we have to make up for that difference. And so the educational programs that have been targeted to the poorer communities are being eliminated, and f would say that we`re not just talking about medical care for those that are locked into inner cities; we`re talking about rural clinics, and social service programs -- again designed for the poor. And so while it may sound like the minorities are screaming, it`s just because we`re in that economic bracket. But I think that when the American people actually review and see that even though the President said that they were protected, that when they take a look at the book that was distributed to the Congress -- A Program For Economic Recovery -- hundreds of thousands of Americans that are receiving a little bit of assistance to stay off the welfare rolls will be sliding into it.

HUNTER-GAULT: All right. Thank you. Congressman.

LEHRER: All right. Let`s see now how Mr. Reagan`s chief economist, Murray Weiden-baum, answers Congressman Rangel`s concerns. Mr. Weidenbaum, you heard what the Congressman said. He says it`s the poor and the low income people who are going to make the sacrifices under the President`s program.

MURRAY WEIDENBAUM: I`m afraid that that`s just not the case. I urge the Congress-man, and I urge all others, to keep an open mind, and to look at the details of our plan before they make any conclusions. For example, the central problems facing America are a high rate of unemployment simultaneous with a high rate of inflation. We will do more good for our cities, for our rural people all over the United States if we can succeed in our program of creating 12 million new jobs, reducing the rate of inflation by more than half between now and 1986. That is our goal. That is our intent, and take a look at those cuts that we are talking about. Look beyond the labels. I urge you. It is vital.

LEHRER: Well, let`s --

Mr. WEIDENBAUM: For example, the food stamp program. In 1982, a family making $11,000 a year will still be eligible for food stamps. Yes, people making above $11,000 a year will be expected to buy their own food. Take the school lunch program. Families making $15,630 a year or more will be expected to pay for their children`s lunch. Those earning less than that will still get the benefits of the school lunch program. Take the unemployment insurance program. There are now categories of workers who don`t receive -- unemployed workers -- who don`t receive one set of unemployment benefits, but simultaneously receive two sets of unemployment benefits. That sort of inequity is going to be eliminated. I assure you the safety net guarding, protecting the truly needy will be fully maintained. That is our total intent.

LEHRER: But what about the Congressman`s basic point that this approach is simply not fair, that the cuts in budget or the cuts in federal spending hit the low income people more; however, the cuts in taxes help the upper income people more.

Mr. WEIDENBAUM: I urge the Congressman to look at the large cuts affecting business programs. The largest proportional cut is in the Department of Commerce. Major cuts are in programs like the Export-Import Bank. We get lots of criticism from the business community. There`s criticism from the agricultural programs. We have seen no sacred cows in this budget restraint program. The entire idea is to bring down the inflation that afflicts us all --

LEHRER: But is it--

Mr. WEIDENBAUM: -- To bring down the unemployment that hits our central cities and hits our minorities especially hard.

LEHRER: But is it not so, Mr. Weidenbaum, that one of the basic principles of the President`s program is to help business expand and invest in a way that it will eventually help the people in terms of unemployment and that sort of thing? So in other words, the program is designed to help business in one way, is it not, sir?

Mr. WEIDENBAUM: It`s designed to help people. The creation of the three million additional new jobs will help the unemployed, I assure you, in a far more effective way than the continuation of the obviously unsuccessful galaxy of high overhead government spending programs that clearly don`t work. If you have question about that, look at the high unemployment in our central cities. I come from St. Louis which has one of the highest losses of population, one of the highest unemployment rates. Why? Because despite this galaxy of well-intended government programs, we haven`t seen the generation of productive jobs in the private sector, and we want to encourage productive employment in the private sector to benefit all our citizens.

LEHRER: I see. Thank you. Charlayne?

HUNTER-GAULT: Listening to the details as Mr. Weidenbaum outlined them. Congress-man Rangel, does that make the program more palatable for you?

Rep. RANGEL: It certainly would if I could take those words and just use the words and go back home and say that really you`re going to have more jobs because the administra-tion is going to eliminate 300.000 jobs from the Comprehensive Employment Training program. It would be good if I could say that the jobs will be created because we`re going to provide incentives to our sick corporate structure, knowing that the accelerated depreciation cannot be used by corporations that are not making a profit, cannot be used by small business people. And so we are hoping that somewhere down the line something`s going to happen in the future to create jobs while we`re cutting away jobs. There has been no economist in the Reagan administration or Republican or Democrat -- liberal or conserva-tive -- that has been able to say that [these] severe budget cuts will have any impact at all on inflation.

HUNTER-GAULT: Mr. Weidenbaum? Can I just get you to respond?

Mr. WEIDENBAUM: That`s just clearly not the case. We expect inflation to come down from 11 percent this year to 8 percent next year to 6 percent in 1983. Now. that is a far better assist to the hard-pressed working people of this country who have a great deal of difficulty in paying their bills than any additional government handouts.

HUNTER-GAULT: Would you buy that. Congressman?

Rep. RANGEL: I`m saying that no economist says that any budget cuts that we`re having now -- the $41 billion, and nobody disputes it -- is not going to have any impact on inflation. And the Reagan administration deficit is much higher than the Carter administra-tion`s projected deficit, so what we`re doing is throwing billions of dollars to the wealthy wage earners; we`re throwing billions of dollars to the corporate structure, and under some Republican type of theory, we are hoping that things will change and create jobs.

HUNTER-GAULT: Is that true, --

Rep. RANGEL: But if I can go back home and say that cutting the Comprehensive Employment Training program is creating jobs, I`m saying that it`s difficult to be able to do this with what we have to work with, and we have to reorganize the priorities.

HUNTER-GAULT: Throwing billions of dollars to the wealthy, Mr. Weidenbaum?

Mr. WEIDENBAUM: I would call those programs that the Congressman refers to as the hair of the dog that bit you. Quite clearly, despite all of these programs, we have the highest rates of unemployment in our central cities. These programs don`t work.

HUNTER-GAULT: What about that. Congressman? That all of the -- he referred to the unsuccessful galaxy of programs that don`t work. Do you buy that?

Rep. RANGEL: I certainly do, and would have joined with this administration or anyone else in saying let`s find a better way to do it. Don`t wipe away the economic development program that went into partnership with the private sector in creating jobs. Don`t do away with training that`s going to allow people without skills to gain those skills, and spin off in the private sector. If these programs have not worked -- and I have to agree with a lot of them have not worked -- we should join in partnership to find a better way. But I think what they`re saying in the administration is that the private sector is going to do it. Well, we can`t look to them for any degree of success. Chrysler`s crippled. General Motors and Ford are on the way down. If this is what we should expect in terms of creating jobs and productivity, and having economic growth. I`m afraid that at this time and place, govern-ment just can`t afford to say that we`ve made mistakes, and so we`re getting out of it completely. But my whole point is that when you identify the programs we advise that you shouldn`t look at the labels but look at the details, and I`m suggesting that Medicaid is a program designed to service the poor and the sick, and those people that don`t have private coverage. If you tell me you can cut the benefits and not hurt them. I`m saying that we`ll have hearings in the Congress; we`ll review the programs, and we`ll come back to the administration with alternatives.

HUNTER-GAULT: We`ll come back in a moment. Jim?

LEHRER: Mr. Weidenbaum, first did you want to respond to his last point?

Mr. WEIDENBAUM: Yes. We`re not cutting the benefits; we`re cutting out beneficiaries who can afford to pay for these programs themselves. The social safety net of vital programs for the needy -- we estimate $239 billion this year, rising to $264 billion next year. That is a very substantial federal contribution to the truly needy, and we`re de-termined to maintain that social safety net and strengthen it.

LEHRER: All right. Thank you. All right, next the concerns of a Senate Democrat. He`s Senator Bill Bradley of New Jersey, chairman of the new economic advisory group appointed by Minority Leader Robert Byrd, to advise Democratic senators. Senator, what are your major problems with the President`s plan?

Sen. BILL BRADLEY: Jim, first of all let me say that the President, Democrats, and Republicans alike want to get this country back on a path of economic growth. I think to do that, you`d have to say that reducing federal expenditures, cutting taxes, and coming to grips with regulation is a necessary part of that solution. I might disagree with specific tax measures or specific budget cuts, but I think you`d have to say that`s a necessary part of the solution. The problem is it`s not sufficient. It doesn`t address two very real vulnerabilities that we have in this country today in the economic area. One, it doesn`t address the vulnerability that we have to oil-supply interruption -- what happens if we lose eight million barrels of oil today in the Persian Gulf? What are we prepared to do? What does this budget say about that? Second, it doesn`t really get at the potential speculative attack on the value of the dollar. What happens if that occurs? What does this budget do about it? So what I`m afraid is that it`s been conveyed that these three things are the solution. I think that that`s a dangerous thing to do because we could get out six months and the war in the Middle East could be continuing; we could have the oil price go up $10; and I think the American people would have been prepared to see inflation come down when there are really other factors here that could cause it to go up. So that`s one concern. Another concern is the regional impact of the budget -- what it might -- how it might affect certain regions of the country. And third, is whether this budget is only a managerial budget -- whether it`s a managerial budget and therefore isn`t susceptible or open to new ideas, and to planning about our future. And I would analogize there to one of our major corporations -- General Motors -- who we know is well-managed and well run, and yet didn`t have enough foresight to anticipate the small-car influx because of the price increase in recent years. Therefore, a well-managed operation doesn`t mean that you`re thinking ahead to the future, and I think the budget reflects that as well. So those are my three concerns.

LEHRER: What, for instance -- you said that you had some disagreements about some of the budget cuts. What in particular bothers you there?

Sen. BRADLEY: Well, the thing that bothers me is perhaps -- let me go back and say that I think it`s important that you establish certain criteria for cutting the budget. One of them is, if you cut the budget, the cut has got to help the economy. The second is that if you cut the budget, it`s got to not cost more in the long run. And you`ve got to look how budget cuts are interrelated. One of the areas that concerns me is the cut in mass transit. Now, we supposedly have a national goal of reducing our dependency on insecure sources of foreign oil. If we have that, it doesn`t make a lot of sense to cut subsidies to mass transit thereby forcing people into automobiles on our roads to buy more foreign oil. It also has a kind of perverse effect because it affects a region of the country, I think, more than other regions -- the upper midwest, northeast region of the country. And I think that it affects that more adversely because that`s where most of the mass transit is. I think it also affects freight transportation, though, throughout the country. That leaves a region who has lost that subsidy with several prospects: one is, they just have terrible service which means that`s a slower movement to the automobile. Second, the prices for commuter rail transportation skyrocket three, four times what they are now which is another way of putting people in automobiles. Third, and more probable because that transportation is so essential to the economic well- being of the region, is that you got to raise state and local taxes. If you raise state and local taxes in certain regions, that further disadvantages those regions against other regions of the country. That`s an example of a budget cut that, I think, does not take into consideration the interrelated objectives of government today.

LEHRER: But. Senator. I would imagine that you could go around the House and Senate and find other people who would also single out different programs. If each person singled out a different program, how could you then cut the budget as severely as Mr. Reagan proposes, and as you say, should be done?

Sen. BRADLEY: Well, I think you can do that. I think that there clearly has to be some sacrifice. The point is you don`t want to make certain segments of the population or certain regions of the country victims of the budget. That`s not how you build a consensus for economic growth, for increased competitiveness, or for productivity which is what I think we all want.

LEHRER: I see. Charlayne?

HUNTER-GAULT: Mr. Weidenbaum. what about Senator Bradley`s first two points -- that you haven`t sufficiently addressed our vulnerability to foreign oil. or to speculative attacks on the value of the dollar?

Mr. WEIDENBAUM: What I very frankly find so interesting in so many of the Senator`s comments and questions is they go diametrically opposed to his colleague in the House. For example, about new ideas. I think it`s precisely the new ideas in the Reagan economic program that are at the heart of the issue. In other words, this is a bold departure from the status quo. This says government isn`t the solution to our problems whether you look at the automobile industry, the steel industry, so many of the industries where unemployment is the highest, you see that it has been government intervention that has been at fault time after time.

HUNTER-GAULT: What do you say to that. Senator?

Sen. BRADLEY: Well, again what`s the purpose of cutting the budget? It`s to help the economy. Look at some of the cuts. You mentioned the Export-Import Bank earlier. If you think that one of the ways that we`re going to get back on a path of economic growth is by increasing our exports in a growing world economy, one of the ways you don`t facilitate that is by cutting the mechanism that promotes those exports in this country.

HUNTER-GAULT: Mr Weidenbaum?

Mr. WEIDENBAUM: I`d like to deal with that because very frankly this is where the two gentlemen on either side of me really are in disagreement. Mr. Rangel obviously is concerned that business isn`t cut enough. The Senator is concerned that this business-oriented program is cut too much. Very frankly, there are no sacred cows. We have cut programs affecting each segment of the society for the greater good of a healthier econ-omy, and in terms specifically of the competitiveness of American industry which is at the heart of increasing jobs in this country`, our success in bringing down the unemployment, our success in bringing down the inflation, in bringing down interest rates, increasing productivity, will do far more to create jobs in this country, will increase our competitive" ness of American industry, than any of those government subsidies.

Sen, BRADLEY: If you look at where we`re going to get the maximum growth potential for our economy in the next decade, it`s in the world environment. This `budget cuts the Export-Import Bank, and makes significant cuts in foreign aid. Now, almost 38 percent of all our exports go to Third World countries. It` we`re going to cut that aid. we`re going to cut that market. And in addition, if you look at the Export-Import Bank, again, you`re cutting the method by which you facilitate exports. But beyond that, what you`re doing is you`re putting a cap on expectations that people can have for a better life because you`re saying that you`re not going to expand this economy through a growing world economy; you haven`t answered the question of what happens if we lose eight million barrels of oil tonight -- what does the budget say about that specifically?

HUNTER-GAULT: Well, briefly, let`s get Mr. Weidenbaum to answer that question before we move on.

Mr. WEIDENBAUM: First of all, there are many incentives in this budget to increase the domestic production of petroleum and other forms of energy, and to assist on conservation. Quite clearly, the rising economy we`re talking about, given the Reagan program, will generate -- will do more good for the average citizen -- urban and rural alike, northeast, southwest, or any other region alike -- than the host of special government palliatives, subsidies, and interventions. I think you do us a great disservice -- I think you do the American people a great disservice if you only look at the specific program being cut in isolation. You must look at the entire economic program recommended by the Reagan administration, and you will see that truly is an innovative program designed to do something never done before: simultaneously bring down high inflation and bring down high unemployment. I urge you -- both of you gentlemen -- to consider carefully the details of the program, and the failure of the status quo.

Rep. RANGEL: Let me just say that --

HUNTER-GAULT: Excuse me. Excuse me. Sorry, just a moment.

LEHRER: I just wanted in the couple of minutes left to pick up on Mr. Weidenbaum`s point, Congressman Rangel. First to you. The New York Times said just exactly what Mr. Weidenbaum said this morning in an editorial. The New York Times is not a newspaper known for its Reagan-like ideas -- it says that you in Congress should give President Reagan a chance to try it his way.

Rep. RANGEL: Well-

LEHRER: Were they wrong?

Rep. RANGEL: Well, if they`re talking about the details, they`re wrong. If he`s talking about a tax cut, I say it`s wrong to say that 10 percent across the board is equitable. If you`re making $5000 or $250,000, you don`t have to have a computer to find out that`s not equity. And again, when you talk about cutbacks, how you can say that I`m saying that it`s unequal when you talk about the private sector and people programs being cut. I never made any comment about what`s being cut in subsidies to the private sector. I`m saying that the sick, the aged, and the poor -- - when you talk about these programs -- should not be just thrown together in just saying, "we`re cutting." and (hat this is going to help the economy.

LEHRER: Senator Bradley, let me ask you. What do you think of that point, that the President has the right -- or should be given the chance, let`s put it that way -- to at least try his ideas, even those ideas that you think are wrong?

Sen. BRADLEY: I think the legislative and the executive branch [have] a joint responsi-bility. The budget is one area. Tax is another area. I think last night Mo Udall referred to the tax cut -- it`s as if you were diving into a swimming pool that was empty with the belief that by the time you got to the bottom, the water would be there. And the point is that the tax area -- there is a way to cut personal taxes, which I would like to do. There is a way to cut business taxes to stimulate investment and productivity. I would just say that there is a different alternative, and that will be brought forward in the course of this debate which will only happen if the Congress and the executive confront each other in a friendly debate to try to forge a better policy for American prosperity.

LEHRER: A friendly debate like we have just had tonight. Gentlemen, Congressman Rangel. Mr. Weidcnbaum. Senator Bradley, thank you all three for being with us tonight. And good night, Charlayne.

HUNTER-GAULT: Good night, Jim.

LEHRER: And we`ll see you tomorrow night. I`m Jim Lehrer. Thank you and good night.