The President. Good morning, good morning. Well, as you know, I'll soon present my budget to the Congress. And as I prepare to do so, it strikes me that our nation faces challenges on many fronts, so let's give each the attention it deserves. Tomorrow I'm going to announce the second phase of our strategy to fight drugs in the schools and the streets of America. The future of this country depends on whether we can give our children a chance to grow up drug-free.
And secondly, I will soon present our plan to restructure America's defenses in the wake of the dramatic changes that are taking place abroad. And I'm proposing a defense budget that begins the transition to a restructured military -- a new strategy that is more flexible, more geared to contingencies outside of Europe while continuing to meet our inescapable responsibility to NATO and to maintaining the global balance.
And finally, Secretary Brady and Director Darman and Chairman Boskin will put the details of our budget before the American people. And as that occurs, other members of the administration, the Cabinet, key agencies will provide an in-depth outline of their efforts to address the many challenges of caring for the afflicted and uplifting the poor, cleaning the environment, educating our kids, as well as other important issues. All of this is a preparatory to the State of the Union, 1 week from today, in which I will speak to the broader issues that we face as a nation.
There are two items that I want to mention here today, and then take some questions. First, I've decided that the environmental challenges that face America and the world are so important that they must be addressed from the highest level of our government. And at the beginning of this century, President Theodore Roosevelt helped pave the way for the establishment of the National Park System. Twenty years ago, President Nixon established the EPA, Environmental Protection Agency, by Executive order. That is now one of the largest and most important regulatory agencies in the Government. And today I'd like to announce another step forward in this important tradition of support for conservation and environmental protection.
Many countries have environmental ministers with Cabinet status. And I'm convinced that that Cabinet status will help influence the world's environmental policies. So, with so many difficult decisions ahead I'll need Bill Reilly's counsel; I'll need him sitting at my side in the Cabinet. And I'm pleased to endorse the elevation of the EPA to Cabinet status by creating a Department of the Environment.
Senators Glenn and Bill Roth, chairman and ranking members of the Senate Governmental Affairs Committee, have introduced legislation that would create this Department. Congressmen Conyers and Horton are working on similar legislation, and I look forward to working with them and other interested Members of the House and Senate to enact legislation that would bring EPA to the Cabinet table, where it now belongs.
And now I'd like to address one other issue that I know is foremost on your minds. Every American should know -- I want to take this opportunity to state this as strongly as I can -- that I will not break faith with the Chinese students here. I've made that very clear from the very beginning. And right after Tiananmen, I moved to protect the Chinese students in this country. Not one was sent back. They were safe then, and they are safe now, and they will be safe in the future.
And when Congress passed the Pelosi bill last fall, I was faced with a choice. If I signed the bill, the students would still be safe, but China would retaliate and cut off future student exchanges. You see, I think the exchanges have brought forward the reforms that have taken place in China, if you look back over your shoulders for a starting point and compare it to the Cultural Revolution days. Some of the reforms have taken place; steps have been taken forward. And regrettably Tiananmen was a gigantic step back. But I want to keep contact; I do not want isolation.
If I vetoed the bill, I could take action to provide the students with even greater protection while keeping the door open for more Chinese scholars to study here. And the price of the Pelosi bill is lost opportunity for the Chinese scholars of tomorrow, and people should understand that very, very clearly. The bill is totally unnecessary, the long-term policy consequences are potentially great, and Congress, in my view, will have only itself to blame. I can understand their emotion, but we've got to look at policy, and we've got to be fair in what has already been accomplished by the Executive order. It's a strong message. I want it to be seen exactly that way.
And now I'd be delighted to take any questions.
Soviet Civil Unrest
Q. Mr. President, how serious a crisis is the nationalist rebellion in Azerbaijan for President Gorbachev, and what are the chances that he'll survive this test and the challenge from the Baltics?
The President. Well, I think the answer to your question unfolds every day. We don't really know. And it is serious. Gorbachev has always indicated a desire for peaceful change inside the Soviet Union, and I refer to what he said on the Baltics. He's faced with an ethnic problem here and an internal problem of enormous dimensions. But I don't know, Terry [Terence Hunt, Associated Press]. I can't make predictions about that, but I know that I hope that he not only survives but stays strong, because I think it is in our interest that perestroika succeed and go forward.
Q. Could I just follow up on that? Do you think that he's gone too far in the crackdown in Baku?
The President. Anytime you have a use of force and the loss of life, we are concerned. But I don't believe I can judge that question right now.
Q. Mr. President, you're very concerned with drugs, and drugs are intimately connected now to guns. What do you tell your grandchildren on why you would ban semiautomatic foreign-made guns and not domestically produced? There were two students who were killed in the last 10 days -- high school students here. Aren't you deeply concerned? I mean, where's the lethal legal justification?
The President. Yes, I am concerned. And I just don't happen to believe that banning of weapons will take them out of the hands of the criminals. And we've seen State law after State law violated by the bad guys getting the weapons, so I don't want to go for more Federal gun control. I'm not going to do it. We've taken some steps that I think are helpful.
Q. Well, we are sending weapons, though, to Colombia and so forth, that are made in this country. How do you stop that?
The President. To Colombia?
Q. And to other places where they're getting into -- --
The President. Well, if they're going to the Colombian Government, I wouldn't stop it, and if they're going to the bad guys, we would follow every possible avenue to stop it.
Chinese Student Relief Legislation
Q. Mr. President, back on China for a moment. It appears your veto will be overridden in the House today. That would require Senate actions for the job to be complete. I know you met with Senate leaders this morning.
The President. I did.
Q. Are you confident that just these remarks you've made out here today and whatever else you may have said will be enough; or do you really feel that the Chinese leadership, with whom you've dealt with so long, kind of let you down here and didn't give you a strong enough hand?
The President. Well, what I did to try to -- in talking with the Senate leaders this morning, the Republicans -- is to cite certain steps that China has taken. They've accepted the Peace Corps volunteers. You see, I think that's good. People will say, well, in the face of Tiananmen that's not good. I think it is good because I think cultural contacts, educational contacts will benefit, in the long run, democracy and reform in China. They've accredited a VOA correspondent -- as you know, who were kicked out. They've muted the hostile propaganda against Americans and stopped harassing the U.S. Embassy. That's good. That's important to me, as President, who feels a certain responsibility for the people there. They've given some assurances on missile sales -- want to see them follow up, but I think that's positive. They've reopened the Fulbright [student] exchanges. I think that's good, and I think that's positive.
And I think if we let Congress have its head and do what is emotionally popular, these things would be changed. They've lifted martial law. I don't know a single Member of Congress that if I'd have said to them, look, we think by sending General Scowcroft [Assistant to the President for National Security Affairs] and Larry Eagleburger [Deputy Secretary of State] over there we can get martial law lifted; do you think it's worth it -- I think most would have said sure, that would be a good step. It happens, and we see a lot of criticism of it. They've released 573 people that were detained after last June's events.
You can argue about any one of these points, but I ask the Senate and the House -- it may be a little late for that one -- the Senate to take a look at these things and put it in the totality of a policy. And you see, I think there are some real reasons -- Asian reasons, if you will, Cambodia and Japan -- that we should retain relations with China. That doesn't mean we endorse the lack of human rights.
I tell you, one of the criticisms that gets to me a little, and I vowed -- I didn't tell you my New Year's resolution was not to let it get to me -- but is the idea I don't care about human rights. That is absolutely ridiculous. I want to see China move forward. And some think isolation, some think a railroad up there in the Congress is going to do it. And I don't think so. I think we're handling it pretty well, Brit [Brit Hume, ABC News].
Q. Just to follow up, Mr. President: Did you in any way convey to the Chinese leaders the idea that these steps taken so far would be enough to head off this action taken by Congress, which they must find as unfavorable as you?
The President. No, we didn't give a timetable, but we've encouraged in every way we can these and more. But I'm just asking that people look at them. I have not seen them -- maybe it's my fault -- one account, on whatever media, of these steps put together as a package. I haven't seen one. So, I'd like to suggest to the Congress that are debating this to take a hard look at this and see whether it's progress, whether it adds up to anything or, as some of our critics would say, is pure boilerplate.
Q. Mr. President, in voting, in the House particularly -- you seem to be conceding that that's gone for you -- do you think that there's a problem of trust here with you? Are they saying they don't trust you to go forward on this student thing? After all, you told them you weren't going to have high-level exchanges, and while you were telling them that, you were sending a high-level delegation. Do you have a credibility problem?
The President. Where was the exchange in that? What the exchange was, Lesley [Lesley Stahl, CBS News], was when the Secretary of Commerce was going to go to China in an exchange visit arranged by their Commerce Minister. That was canceled.
Q. Yes, but they obviously thought it included high-level contacts. The question is -- --
The President. Who were they?
Q. -- -- do you think you have a problem with them not trusting you because of that?
The President. No, I don't think it's a question of trust. I think the students have done a very good job presenting their case to the Congress. I think there are some politics involved -- crass politics. When you hear name calling, when you hear people saying ``kowtow'', that is not the kindest word to say we have an honest policy difference with this President. And so, there's some politics involved in this as well.
But I think there's some genuine feeling that these students have a very good case. And what I want to do is make the case that the way to continue reforms and have reform go forward is not through isolation and unilateral congressional action but through the kinds of contacts that I foresee and encouraging the kinds of steps that have already been taken.
Q. You talk about the lifting of martial law. What about the situation as it exists without the gesture? Are you at all disturbed that the repression goes on? Could you be -- --
The President. Yes, I'm very much concerned about the status quo. And I was terribly concerned at the time of the Cultural Revolution, when we made the original contact with China. And it was a good thing we did because you began, through contacts with the West, to see China pull out of this Middle Kingdom syndrome and move forward.
And I think I know enough about it: that in China you get a couple of steps forward and then somebody steps back. And a look at Deng Xiaoping's own history -- I think he was out three times and in four. And some will argue, well, he's part of the problem. He's now retired. But the reforms, particularly on the economic side, that brought a new level of prosperity to the Chinese people really was started by him.
So, I'm not giving up -- I mean, I'm not accepting the status quo at all, and China knows my position on this. But I do think that there's some indignation about students. There is some feeling -- I'm talking about the Congress now -- there's a lot of empathy with the students right here. But I think there's also a dose of political rhetoric up there that certainly has diminished the other side. And I will readily concede: Maybe I could have done better and sooner in presenting the facts of this case. The Attorney General's doing a good job showing the differences between the Pelosi bill and what we've already accomplished. I don't know where we'll come out, but I'm going to keep on working the policy.
The Nation's Economy
Q. Mr. President, given the weakness of the dollar and the turmoil in the financial markets and the recent poor economic indicators, what are you going to do to calm the markets and keep the economy from sliding into a recession?
The President. Well, one thing I'm not going to do is comment on levels of the market, except to say that there's been a substantial increase over the last year. And some are reading the recent couple of days as corrections, although I gather it recovered a little bit yesterday. And the market has always been an indicator, and it's been one that's been read quite positively. But I don't want to get into market levels. What I do want to do is establish sound policies. And I'm convinced that if we can get the cooperation of Congress that we need on reducing the deficit, that that will go a long way not in market prices but in terms of the fundamentals on the economy.
It's slowed down a little. There's a lot of prediction that it'll be slow for awhile and then have a rather robust step up, come summer. But I don't know. All I know is that we've got to not bash anybody but get out there and try to enact policies that will help keep the longest recovery in modern history going.
Q. You've said that you felt that there was room for further reduction of interest rates. Given the need to attract foreign investment from overseas where rates are high, how do you square that with your call for lower interest rates?
The President. You mean, to attract -- --
Q. Attract foreign investment to cover the U.S. deficit -- and yet we're competing against the foreign investment.
The President. I think people see the U.S. still, regardless of what's temporary out there, as the safest haven for investment anywhere in the world. And I want to conduct the fiscal policies of this government so they will continue to see it that way.
Q. Going back to the vote on the Chinese student visas, you and your people have been trying to get that vote delayed. Is that because you have some indication from the Chinese that they may soon release Fang Lizhi [Chinese dissident] -- --
The President. No.
Q. -- -- and if this vote goes against you, it could hurt his chances?
The President. No, it is not, but I don't think it will help his chances. But I would love to see that step taken by the Chinese. I think we're reconciled to the fact that the vote will go forward tomorrow in the Senate.
Q. When you try to defend your China policy, one thing you never do is talk about the ``China card.'' You seem to hate that expression, even though when Kissinger and Nixon were doing it, it was considered a master stroke of foreign policy, playing the Chinese off against the Soviets. If Gorbachev does fall from power and is succeeded by men whose role model is Joe Stalin, aren't you going to have to play the China card, too?
The President. I don't think you play a card. I think that's gratuitously offensive to the Soviets and to the Chinese. But one of the reasons I want to stay engaged is that there are geopolitical reasons to have good relations -- or improved relations, even under these unsatisfactory conditions. And it's going to be hard to do because of the human rights setback, but I want to have some contact. I want to retain contact because, as you look around the world -- take a look at Cambodia, take a look at Japan, take a look at a lot of countries in the Pacific -- China is a key player. And I'd like to think that our representations will have them move forward on the human rights side so we can have a more normalized relationship with them.
Soviet Civil Unrest
Q. Mr. President, regarding the Soviet Union, have you in the course of these events going on in Baku, or any of your senior people -- I see General Scowcroft is here -- been in touch with Mr. Gorbachev or his people to discuss how severe it is?
The President. Well, we've had contact with him. I don't remember when my last contact was with Mr. Gorbachev, but it didn't relate specifically to the Baku -- --
Q. Could I then follow, sir, to ask you to reconcile, if you can, the position that you've taken: that you say you want Mr. Gorbachev to survive and succeed; and on the other hand, you have areas of the Soviet Union, such as the Baltics, that you do not recognize as being part of the Soviet Union and where you say you favor independent pursuit of their own destiny. Does he succeed if they secede?
The President. Again, at this juncture the U.S. position is well-known, and you've stated it correctly: that we have not recognized the status of the Baltics. However, what I say that we want to do is to encourage Mr. Gorbachev's stand that peaceful change is the order of the day. And he's sorting out some very difficult internal problems in these three Baltic countries. And I don't think it helps facilitate things for us to fine-tune all that. They know our position. I talked to him about this, incidentally, at Malta. And the thing, I think, is that -- in looking at the Soviet scene there -- that he is still adhering as best he can to the concept of peaceful change in the Baltics. And that's got to dominate.
Q. Mr. President, President Jaruzelski of Poland recently suggested that the four big powers reaffirm the frontiers of Poland irrespective of whatever happens to Germany. Would the United States join such a reconfirmation of the frontier?
The President. Well, we have recognized under Helsinki [accords] existing borders, and I have no problem reiterating that. But whether that requires some kind of an international action on it -- I just have no judgment on that.
Czechoslovak Summit Proposal
Q. Mr. President, Havel, of Czechoslovakia, proposed yesterday a summit [in] Prague between Mr. Gorbachev and you. Do you think it's a good idea?
The President. Listen, I respect him so much, and I don't just give him the back of my hand. But we've got a summit set, and we have a very critical agenda that I want to see met -- goals that I want to see met. And so, I think at this time that suggestion is not going to work out the way he suggests. But I was rather moved by the suggestion and by the conditions that make the suggestion possible. Who would have dreamed this a year ago, that the conditions inside Czechoslovakia would give them the freedom to make this kind of suggestion? I was rather moved by it. But I don't believe it's going to work for this summit.
Q. Mr. President, you've opposed the Moynihan Social Security bill strongly. Would you endorse or work for or support a Republican alternative proposed by Congressman Porter that would take the Social Security increases for this next year and allow people to keep those tax increases and put them in a separate account?
The President. The Porter proposal has some interesting ingredients to it. I am not prepared to endorse it. We don't have provision for that in our budget proposals. It's worthy, though, of consideration, of some study. But I'm not prepared to endorse that; no, I'm not.
Q. Is that not the first step to privatizing Social Security?
The President. Well, I don't think he would say that that's the inevitable goal, but it has certain aspects there. But the people are concerned about Social Security. So, when you have innovative thinking of that nature, I don't want to just gun it down. I am not going to support it.
Q. Mr. President, over the last few years there have been large increases in the Social Security tax. And even though it's a regressive tax, people supported it, or swallowed it, because they were told that that was necessary to make the system solvent for the next generation. But now everyone is finding out that, in fact, that money isn't there any longer, that it's been used for debt reduction. Given the fact that people are now realizing that this is happening, do you think it's fair to ask them to continue to pay this increased tax for even 1 month later?
The President. The Commission that reformed Social Security was well-aware of what you've just talked about. They considered it. I think the Commission included Mr. Moynihan -- I may be mistaken, but I think it did. And they considered this point. And we will have some innovative suggestions as we go along here as to how to compensate for this understandable concern on the part of some. But for now, for this year, we will not alter the recommendations of that bipartisan commission.
Q. Could I just briefly -- do you feel that this increase was sold to people under false premises?
The President. No, because I think these were intelligent people wrestling with a very, very difficult problem, and I can't accuse them of selling the Commission conclusions as under false cover.
Q. Well, as you know, the budget deficit has been coming down over the past few years solely because the Social Security surplus has been rising. In fact, your own budget projections show 0 billion a year deficits in the indefinite future when you remove the Social Security surplus. Given the fact that you have such a large deficit in every other program, when will you and the Congress stop both bickering and accountant gimmicks and deal with this problem that the American public has said for a decade -- --
The President. Thank you for the endorsement of our approach, Owen [Owen Ullman, Knight-Ridder Newspapers]. We would urge that we stop bickering and go forward with the proposal that we come out with, that I think will begin to address itself to Maureen's [Maureen Dowd, New York Times] question, that is very sound. And nobody's trying to conceal the fact that the Social Security Trust Fund is operating at a surplus. There wasn't any concealment by the Speaker of the House Tip O'Neill and others that entered into this bipartisan agreement.
Q. Well, wait. If I could follow, sir: Your own budget proposal that you will unveil on Monday, which shows a billion deficit, in fact, if you remove Social Security, would be closer to 0 billion. Is that not correct?
The President. But you're making the old argument of taking the Social Security Trust Fund off budget. And at this juncture we're not prepared to do that. But wait until you see the detail, and I hope the American people will see something here that begins to address itself to these fundamentals that I think are properly being asked about.
Q. Mr. President, could you confirm this week's published report that there are divisions within your own immediate family on the issue of abortion? And in particular, could you confirm the widely held view that your own wife supports abortion rights?
The President. No, I couldn't confirm that. And the meeting that I read about in one of the most respected publications was pure, unadulterated -- [laughter] -- malarkey is the word I like to use. It just wasn't there.
Q. Mr. President, if I could follow up: As I understand your position, you now say that the question of abortion is one of personal choice, one on which Republicans can have diverse views and still be good Republicans?
The President. I've always said that. I've campaigned for people that disagree with me on abortion.
Q. But my question is: You say it's an issue of personal choice and a question of conscience, and yet you support a constitutional amendment which would remove that choice for all Americans. How do you reconcile those two?
The President. I reconcile that I was elected to try to fulfill the platform and the programs that I believe in. And so, that's my personal choice, but that doesn't mean I have lack of respect for others and that I'm going to go out and not campaign for people that disagree with me on this issue, on foreign policy, or whatever it is. And so, that's how I explain it.
U.S. Military Action in Panama
Q. Mr. President, last time you took questions here, you were claiming success for the capture of Noriega and also that you had protected American lives in Panama. But what do you have to say to the Panamanians about more than 200 civilian Panamanians that were killed as a result of this invasion? And also, in your aid package to Panama, which hasn't been announced yet, do you plan to offer any compensation to the families of these people?
The President. Well, I'm not sure of the details on the aid package because I haven't signed off on it yet. But what I say to them is: Look, you lost some Panamanian lives. Innocent life was lost. And yet, 92 percent of the people in Panama strongly supported the action of the United States. Isn't that significant? And I mourn the loss of innocent civilians in Panama or anywhere else, and certainly mourn the loss of Americans. But you have to feel concerned about that, but you have to look at the broad picture, and then you have to -- and I'm very pleased with the strong support from the Panamanian people -- and then you've got to do what's right. You have to try to help repair the wounds, repair the damage.
We've got to go to the -- I know most of you are very anxious to be at the arrival ceremony out there. And I have to be there.
Q. Mr. President, another question that's been raised about the Moynihan proposal is the fairness of the tax system. Over the past decade, even as income tax has come down for high-paid people, Social Security taxes have gone up, mostly for lower and middle-income people. Do you think that's fair?
The President. Well, look, if we were all starting over, I think we could fine-tune the entire tax system. We're not starting over. And I think that system has been, in and out over the years, basically a pretty fair system. And while I'm here, don't think I've lost because of some political arguments on the Hill that capital gains reduction is only for the rich. I support it. But the reason I do is that in my view it increases jobs for people. So, you have to look at what individual -- somebody has an idea that some individual deduction that encourages, say, drilling, when we are in an increasingly negative oil supply situation. And some would say, hey, that favors those who go out and drill. And I say, wait a minute. That's true. And that may not be fair to some taxpayer here, but the national interest is best served by the encouragement and development of domestic resources. We're all fat, dumb, and happy about our energy situation today -- and I'm not. So, there's all kinds of provisions that some will argue are fair or unfair.
Q. But, sir, some of your favorite economists in think tanks say that the Social Security tax acts as a great disincentive to work and to employing people.
The President. Yes.
Q. Doesn't that serve the same end?
The President. Well, I think that's a legitimate complaint about some of it, and that's one of the reasons I favor holding the line on taxes. And one of the reasons I oppose Moynihan is I think it's a disguise for increased taxes around the corner. And I don't want to see the benefits of Social Security cut. It is odd that a Republican President, often accused by political opponents in an election year, is the one that is protecting the sanctity of the Social Security benefits. And I would say to those out around the country: Take a hard look now -- don't let that rabbit be pulled out of the hat by 1 hand and 25 other rabbits dumped on you in another. This is a very complicated situation, and this is a sleight-of-hand operation here. And the very day Moynihan proposed it -- or the next day, what do we get? We get the call from another prominent, respected Democratic Senator saying raise the sales tax on everybody.
Before we go making a lot of changes, let's know exactly where everybody's coming from in this. And I think Mr. Moynihan of a few years back ought to go out and discuss it with Mr. Moynihan of today, because he was a part, I believe, of a Social Security compromise that didn't correct some of the injustices.
Hey, listen, I've got to be out there looking very strict here at 10 a.m., and you guys have to be there.
Note: The President's 33d news conference began at 9:16 a.m. in the Briefing Room at the White House. In his opening remarks, he referred to Michael J. Boskin, Chairman of the Council of Economic Advisers.