The President. Welcome. Thank you for the welcome, and welcome to all of you. Roger Porter told me he'd had a chance to visit with you all, and I'm just delighted to be with you again. I think I've met three times with this group over the last 8 years. As far as I'm concerned, at least, every meeting has been, for me, helpful, either from garnering what's on your mind from the question or, in one or two more kinder and gentler meetings, we had a chance to visit around a little bit.
But among the friends -- I think many friends -- that I have in this organization, I want to single out your former Vice Chairman, now the Secretary of Commerce, Bob Mosbacher. And like everyone in this room, he knows what it means to take risks, start a business, make it grow, and keep competitive. And I am just delighted that he is here in Washington with us, giving up his private enterprise, for a while at least, to be Secretary of Commerce. He's on the cutting edge of our national effort to build a better America. And for those of you who were with him in this organization -- that's most in the room -- he's really doing a superb job.
To be sitting in this room today, you've had to keep your earnings at three times the growth of the economy, I'm told -- three times the growth of the economy plus inflation -- a tremendous goal. I hope that last category will not make it more difficult for you to achieve -- [laughter] -- but we can talk about that later on. But now we're relying on Mosbacher to make that happen not just for ABC but for every business in America. And so, in a time where the United States creates positions of czar -- something that escapes me as to why we turn to that nomenclature to solve our problems -- we have a drug czar -- we will anoint Bob Mosbacher as the business czar, and then the rest of us can all pursue our favorite pastimes. Mine is fishing, and you guys can speak for yourselves. [Laughter]
I don't know -- Mike, have you talked to this distinguished group yet?
Dr. Boskin. Tomorrow morning.
The President. Tomorrow morning. I see Dr. Michael Boskin [Chairman of the Council of Economic Advisers] here, and I am very proud to have him on our team. He and I have a very direct relationship, a personal relationship. And he calls them as he sees them, as the umpires over in Baltimore said yesterday. And he's very knowledgeable on how the private sector works. So, he combines that knowledge and the gut instincts that come from that with his enormously good credentials in academia. And so, I think here in this CEA, with him heading it, we have a sensible approach to economics. And I can just tell you that I already have valued the advice and experience we're getting from him. And I'm glad that tomorrow you can have a give-and-take.
Now, you run these high-growth businesses that do represent the most dynamic entrepreneurial segment of our economy. And we know better than to try to fix that which is not broken. So, this afternoon, let me just mention a couple of areas: the economics of enterprise and then the need for education reform.
You know the same lessons that I learned as a businessman. You've got to have capital to grow. And what you don't need, in my view, is higher taxes on the earnings or higher taxes on the workers or higher taxes on those who invest money in the businesses. And right now the Government is making too big a claim on America's capital to cover our deficit. And that capital should be invested in American businesses. And the best way to channel more capital into productive investment is not through higher taxes.
And we're going through a real struggle right now: trying to have enacted a budget which I sent to the Hill a while back that did hold the line on taxes. And it's tough; it's a difficult negotiation. But I can tell you, I have been pleased with the way the budget document was received by the Congress. Nobody jumped up and seconded the motion and agreed that it ought to be passed exactly as it was presented by me and then by Dick Darman. But the response has been good. And I think that signifies that the Congress, as well as the executive branch, are listening to the American people -- people saying we've got to do something about the deficit.
So, the answer: spending restraint. And again, I would readily tell you that it's very, very difficult. The working paper that you released last month was another reminder that the deficit ought to be brought under control. Accountability in government demands that we put an end to the spending spiral.
You know, when George Kaufman, that famous wit from the Algonquin Round Table, was at a party, he heard a self-made millionaire boasting to a circle of people, ``I wish I was born into the world without a single penny.'' And Kaufman answered, ``Oh really? When I was born, I owed .'' [Laughter]
Well, we don't have to let the deficit play a cruel joke on future generations. Next year alone, fiscal year 1990 -- and most of you are familiar with this figure -- but Federal revenues will rise by more than billion with no tax increase -- billion more coming into the Government just under the existing tax structure. And so, what we're going to do is meet or beat the Gramm-Rudman targets.
Our budget consultations with Congress so far have been going well. We're determined to work with the Congress, as I said, and we're going to continue to approach the matter in one of cooperation. There will be some tough, you know, dividing points along the way. But I think Dick Darman [Director of the Office of Management and Budget] would tell you that so far we've been pleased.
To spur greater investment, there is one area where we need to bring taxation down -- and I remain convinced that'll mean more revenues to the Federal Government -- and this is our proposal to bring down the rate on capital gains. We've got to get it more in line with our trading partners. In the budget we've proposed, we want to restore the differential to 15 percent on long-held assets.
And I think many of you know, as you built your businesses, that you could not walk up to a bank and automatically get startup costs. You can't do that -- or at least, you couldn't when I started a small business. Most of you probably raise capital by offering people a share of the business, a stake in the outcome.
And cutting the capital gains rate means more of that can happen. It'll give businesses much more of the capital they need to grow, and it'll bring in .8 billion -- this is the estimate now, with no arm-twisting, I might add, of the Treasury -- this is their estimate -- that'll bring in .8 billion more in tax revenues in 1990. It will in the process -- and this is preaching to the choir -- create new jobs. And that is no tax break for the rich. That's a fair shake for every American. And they all come after me, saying this is a tax break for the rich. And I'm going back saying, Steiger amendment, 19 -- what was it, '78 -- worked just the opposite: it brought in more revenues to the Federal Government and created more jobs.
We want to build on the energy and the initiative of American business without burdensome mandates that only enforce solutions of uniform mediocrity. Now, we don't want to limit the flexibility of managers and workers, who are trying to find their own best solutions. Many are already succeeding, as you know.
The Chamber of Commerce estimates suggest that workers are receiving more fringe benefits than ever before. Total benefits in 1987 were up 163 percent in a decade. And it is the market, in our system -- it is the market, not government, that is responsible for most of this growth. Nearly 70 percent of growth in benefits is due to voluntary action by employers, only 30 percent mandated government requirements. And I want to keep it that way. Our friends in Europe have tried mandated benefits, and they haven't had much success. And I've talked to the political leaders, and I'm sure you've talked to many of the business leaders. And I expect almost to a person, man or woman in business, they agree with that. They're now looking for ways over there to free up enterprise American-style and make it more flexible, not less. And for us to go toward mandated benefits would be, as Yogi Berra put it, ``Like deja vu all over again.'' [Laughter]
America is going to be more competitive if we continue to resist the temptation to heap burdensome mandates on the productive private sector. And so, they go after me for an unwillingness to support a wide menu of mandated benefits. But I don't think there is anything kinder and gentler about rendering businesses noncompetitive in world markets, because that will mean fewer jobs. And that is the worst thing that we need in economic times such as these.
A hallmark of this administration, I hope, will be our focus on the future: the importance we attach to making the right kinds of investment. There can be no investment more urgent than education. And in this, all of us have a stake. So, a word about that.
As labor markets continue to get tighter in the coming years, many of you are going to be facing shortages of skilled people. Some managers are already worried about a scarcity of science and engineering graduates. And you've all read the surveys that show many foreign students outperforming our own. Although our best students can compete with anyone in the world, the challenge we face is to adapt our educational system so that all of our students receive the skills they need to share in that prosperity.
My administration has made, rhetorically, and now wants to make in terms of action, education a national priority. Our program is based on four principles: rewards excellence; helps those most in need; demands accountability; and supports greater flexibility in parental choice. And tomorrow, we're going to send to the Congress our education package. We want to reward merit schools that make progress in terms of raising student achievement and reducing drug use and dropout rates. We're promoting parental choice and educational quality through these magnet schools of excellence that some of you are familiar with in your own communities. We want to provide alternative certification of teachers and principals to broaden the pool of talent that's available, President's awards to outstanding teachers, urban emergency grants to provide comprehensive help in fighting drugs for school districts that are literally under siege today, and then a National Science Scholars program for high school seniors, and additional endowment matching grants for these historically black colleges and universities which do occupy -- I believe we would all agree -- a unique and vital position in American higher education.
We're committed to a program of reform that will give our young people a solid foundation for the future. But to make lasting improvements, we need to get all of the players -- administrators, school boards, local business leaders, parents, teachers' unions -- around the table working together, and this will demand accountability from all of us. It's going to require the best kind of collective effort from all directions, but it holds the promise of real progress.
Many of you have been prime movers, spending a remarkable amount of your own time making good on that promise. More than a third of you serve on local school boards, public or private, on the board of a local college or a university. We talk about funds at the Federal level. The Federal Government puts up 7 percent of the total tab for educational funding, and the total -- I just came from lunch with Larry Cavazos, our Secretary of Education -- I believe the figure he used, the amount that's being spent on education today, is something like 0 billion.
So, it isn't necessarily a shortage of funds, and that's what some of these ideas that I'm talking about here take into consideration. Several of you have established a program with a local community college or you've adopted a school or taught part-time or promoted science education across a school district. And that is the kind of involvement that, while it isn't always easy, leads to the kind of educational reform that lasts. And it places you among the Thousand Points of Light that I talk about that do spread hope and opportunity. We're not going to whip the educational problem in this country by everybody running over to the Department of Education. It is a Thousand Points of Light. It is parents that care and school boards and PTA's and good administrators and teachers at the local level.
And so, I would simply encourage you to continue an active role in your communities. There isn't a better answer. By investing your time and talents towards the education of our young, you're helping to bring about something vital: a fundamental cultural shift that reasserts the value of learning in this country. You're breathing new life into an idea that's always been a testament to the American spirit: that doing well demands doing good. So, nothing I might tell you would say it better than your own mission statement, which says ABC executives ``believe their own business success carries with it a responsibility to help expand economic opportunity throughout the economy.'' As leaders not only in business but all across the board in every sector of our society, you know that the national interest requires us to invest in the future. Education is the best investment we can make if we really want to build a better America. And I want to do my part in all of that.
Thank you all for coming, and I'd be glad to take a few questions. Who is first?
Baltimore Orioles Opening Game
Q. Mr. President, Red Scott from southern California.
The President. Yes, sir?
Q. Was that pitch a curve or wasn't it, yesterday?
The President. That pitch -- you mean at the Baltimore game? [Laughter] I got into the locker room and warmed up with Mickey Nettleton [Tettleton], the catcher. Sixty-four -- your old arm gradually got a little looser. But it was high and outside. But here's my problem. [Laughter] He stepped in front of the plate before it could break down across the inside. That's my side of it, and I'm going to stick with it.
I'll tell you, there's a little Walter Mitty in me, and I've always loved sports. Walk out there, and you're always wondering about getting booed when -- any politician that goes to a ballgame. I don't want to get diverted here, but Reggie asked a good question. So, last year, I go to the All Star Game in Cincinnati -- and we're in the middle of the campaign -- saying this is suicide, man, what are you doing going out here? You know you're going to get booed. So, right there as I was about to walk out, I saw two little leaguers -- one 11-year-old kid, big, tall guy, you know, and a little 8-year-old blonde girl. And I said, ``Who are these?'' And they said, ``Well, these are the little leaguers. They're going out first.'' So, I got with them, and I said, ``You guys nervous?'' [Laughter] And I said, ``Well, why don't we all walk out together?'' [Laughter] There wasn't a boo in the house -- [laughter] -- it worked!
Minimum and Training Wages
Q. Mr. President, do you believe the training wage proposal will pass?
The President. For the first time, the training wage -- well, I refer to it also as a differential -- is getting strong support on both sides of the aisle. The problem I face as President is that I went up with a 6-months training wage and a .25 minimum wage. And we've talked about it, Michael Boskin and I and Roger Porter and others, and we wrestled with the economics of it. And we figured this is the best offer. And so, unlike the normal trading that goes on here, we said, let's -- and our Secretary of Labor wanted us to do it this way, too -- Liddy Dole, a very able woman -- let's go with our best shot, and let's make very clear in the testimony that that is our best shot. Now, what we saw in the Congress was a pretty good bipartisan support for our proposal -- not enough to get it through, but I've got to hold the line on the grounds of economics, on the grounds of making people understand that I was serious about that being the best offer.
And so, I think that if I do what I've just told you I will do, that there is a good chance to get a differential with a reasonable increase on the minimum wage. But I talked here about -- I don't want to see a proliferation of new mandated benefits. This is a -- you might say mandated, but I think we've got to be very concerned about the inflationary aspects. I think we have to be concerned about the counter-job aspects in some of these low-paying, labor-intensive businesses, particularly in the service sector.
And I think our proposal would make a necessary adjustment, but having the minimum wage would lessen the likelihood of more unemployment. So, I hope it works. I know we're going to have to go through some kind of a disagreement with Congress, because the House has passed a bill that frankly is unacceptable to me. But at least we told them the truth ahead of time: look, we can't go with that.
Relations With Congress
Q. Mr. President, it's been suggested by some of our meetings with Members of Congress that a far greater use of the Presidential veto might be exercised, particularly when spending plans are proposed that obviously are going to not meet either Gramm-Rudman or your own targets. Like, as I understand it, President Reagan only vetoed 5 bills out of 170 in 8 years.
The President. I'm not sure that's correct -- the numbers. I do know that -- as a member of the previous administration, a proud member -- that part of the problem was the size of the bill that comes down here. The one that comes to mind that he did veto was the defense appropriations bill. And there were all kinds of statements of concern that that would unravel the military and all of that. And it didn't; the Congress went back and made an adjustment.
So, we do not control -- my party -- either side of the Congress. And I think there will be times when we have to say, look, this is what I believe, and then rally our third to defend the President's position, and then go back.
I was using some rhetoric that was kinder and gentler than veto when I described my standing on the minimum wage just a minute -- but let the Congress not misunderstand my determination. And this one will be one where we have said, this is what we can do. And I, with respect, would recognize the position of other Members of Congress on it, but I've got to stay with this. And I'm going to stay with it. And I hope it'll send the kind of signal that will have an ameliorating effect on other pieces of legislation.
I'll tell you, there is an ingredient out there today that's quite different. There's a recognition on the part of Members -- both sides of the aisle -- that the deficit really has to be brought down and that some of the programs -- we're going to have to constrain the spending growth.
Now, I was in Congress 20 years ago, and I really see a different mood on the Hill. And the Secretary -- again, the Secretary of Education and I had lunch -- we talked about the propensity of Congress to add, you know -- if you're for education, you propose billion; if you're really for education, make it billion; you're for clean water, where you propose billion, make it billion. I mean, there's a tendency now on both sides to recognize we cannot go down that road. I will have to do some of what you suggest, I know, because they're not going to, obviously, want to do it just exactly my way. But if we demonstrate a fairness, in some areas, a place for compromise -- but when there is no room for compromise, be very frank about it, and be up front about it. I hope that we can get along together. But it's going to take doing some of what you talked about here.
Q. Mr. President, is there any chance that your administration might lead the way towards a tax on consumerism rather than taxes on savings, such as a value-added tax or something of that type?
The President. Well, I don't want to even discuss the tax on consumerism. There's a wide array of suggestions been made, including a horrendously prolific value-added tax, which kind of is painless at first, and then you wake up and realize that you've increased the cost of a lot of goods out there. You have the suggestion that people put a fuel tax on, or an import tax on oil coming into this country. But I really don't believe we should do that.
I have got to get this 1990 budget down without increasing taxes. There's a lot at stake. I think, in fairness, most Members of Congress, whether they agree with me or not, recognize that; and thus they'll understand my fighting for a budget that does not include a consumer tax or a tax on investment-saving capital or anything else. If you want to have a philosophical discussion, I take your point, because I think it is important that if you presented me a hypothesis -- you've got to do that, or you've got to do that -- and I would accept it and understand the political risk I'd be involved if I showed any flexibility at all in even discussing it. [Laughter]
I would have to say that you make a very valid point in your question, because as I tried to indicate in my remarks, it's job creation -- and that is subtraction of capital -- that is really the best antidote to poverty. The best poverty program is a job in the private sector, where a family can hold their heads up with a certain dignity.
And so, I have got -- and that's why when these mandated benefits come down here they have good titles on them, they have things we're concerned about: parental leave or child care, whatever it is. And I'm sympathetic with many of the objectives. But as I weigh them, I have a responsibility to say what kind of an effect are they going to have on this best antidote to poverty, and that's a job. And so, we've got to resist some of the call for these good things that have good titles if they undermine the fundamental thing, which is our ability to create jobs. So, I will keep trying, keep that philosophy in mind, as we try to answer these pressing social problems.
One word on child care, and then I promise to go peacefully, Bobbie [Bobbie G. Kilberg, Deputy Assistant to the President for Public Liaison]. [Laughter] But you know, business and religious groups and family groupings and communities have started moving pretty actively into the child-care business. And you have a different family structure now. You have many two-parent workforce people there -- husband and wife at work. And so, I recognize this, and I recognize the demand for child care. But as we formulated our policy, we wanted to get something that would fit within the budget, but we wanted to get something that would not rule out the diverse answers that I mentioned in the beginning: crowd businesses out because they had to turn to highly regulated, centralized child-care centers. Say to a religious group, you can't do this any more; that violates the ABC child care act. Say to a cluster of parents in a neighborhood that alternate taking care of the kids, you can't do any of that because you're not subject to our regulation. And so, what I want to do on something -- a mandated benefit of this nature, if you will, is keep it as flexible as possible, preserve parental choice, and recognize this genius of diversity that is our American way.
And it's not just child care; there's a whole array of other mandated benefits that are coming down the pike that we have to address ourselves to. Some we just say, look, we can't do it; we can't afford that. And others we're going to have to say, well, we can do a little here, but it's got to preserve this diversity, and it's got to strengthen family. I am tremendously concerned about the erosion of the family unit in this day and age. And when you look at some of the troubles we have on dropouts or look at some of the troubles we have in keeping our kids out of the grips of these crack pushers, you really have to go right back to the fundamentals in terms of the family unit.
And you know, people say, well, you're privileged; you're blessed in that area. I am. And so, I can't profess to know what it is just from firsthand experience in the inner city, when a family is divided and there's only one parent. But whatever we do at the government level has got to see that we don't diminish family units and, frankly, find a way to strengthen them. And that's why this concept of parental choice, I think, is absolutely essential, that it be woven into everything we do, wherever possible.
Listen, thank you all very much. Didn't mean to end with a sermon, but thanks a lot for coming.
Note: The President spoke at 2:10 p.m. in Room 450 of the Old Executive Office Building. In his opening remarks, he referred to Roger B. Porter, Assistant to the President for Economic and Domestic Policy. The President also referred to the Algonquin Round Table, an informal literary circle that met at the Algonquin Hotel in New York City. Charles R. (Red) Scott, president and chief executive officer of the Intermark Corp., in La Jolla, CA, asked the first question.