And let’s begin by discussing how to maintain economic growth by controlling and eventually eliminating the problem of federal deficits. We have had a balanced budget only eight times in the last 57 years. For the first time in 14 years, the federal government spent less in real terms last year than the year before.
We took $73 billion off last year’s deficit compared to the year before. The deficit itself has moved from 6.3 percent of the Gross National Product to only 3.4 percent. And perhaps the most important sign of progress has been the change in our view of deficits.
You know, a few of us can remember when, not too many years ago, those who created the deficits said they would make us prosperous and not to worry about the debt because “we owe it to ourselves.” Well, at last there is agreement that we can’t spend ourselves rich.
Our recent budget agreement, designed to reduce federal deficits by $76 billion over the next two years, builds on this consensus. But this agreement must be adhered to without slipping into the errors of the past — more broken promises and more unchecked spending.
As I indicated in my first State of the Union, what ails us can be simply put: The federal government is too big and it spends too much money.
I would like to ask the President, why is it inflationary to let the people keep more of their money and spend it they way they would like and it isn’t inflationary to let him take that money and spend it the way he wants?
It’s morning again in America. Today more men and women will go to work than ever before in our country’s history. With interest rates at about half the record highs of 1980, nearly 2,000 families today will buy new homes, more than at any time in the past four years. This afternoon 6,500 young men and women will be married, and with inflation at less than half of what it was just four years ago, they can look forward with confidence to the future. It’s morning again in America, and under the leadership of President Reagan, our country is prouder and stronger and better. Why would we ever want to return to where we were less than four short years ago?
In 1981 our critics charged that letting you keep more of your earnings would trigger an inflationary explosion, send interest rates soaring, and destroy our economy. Well, we cut your tax rates anyway by nearly 25 percent. And what that helped trigger was falling inflation, falling interest rates, and the strongest economic expansion in 30 years.
Over the course of this century, our tax system has been modified dozens of times and in hundreds of ways, yet most of those changes didn’t improve the system. They made it more like Washington itself—complicated, unfair, cluttered with gobbledygook and loopholes designed for those with the power and influence to hire high-priced legal and tax advisers.
But there’s more to it than that. Some years ago an historian, I believe, said that every time in the past when a government began taxing above a certain level of the people’s earnings, trust in government began to erode. He said it would begin with efforts to avoid paying the full tax. This would become outright cheating and, eventually, a distrust and contempt of government itself until there would be a breakdown in law and order.
Well, how many times have we heard people brag about clever schemes to avoid paying taxes or watched luxuries casually written off to be paid for by somebody else—that somebody being you. I believe that, in both spirit and substance, our tax system has come to be un-American.
How would the proposal work? The present tax system has 14 different brackets of tax rates ranging from 11 to 50 percent. We would take a giant step toward an ideal system by replacing all that with a simple three-bracket system—with tax rates of 15, 25, and 35 percent.
By lowering everyone’s tax rates all the way up the income scale, each of us will have a greater incentive to climb higher, to excel, to help America grow.
The power of these incentives would send one simple, straightforward message to an entire nation: America, go for it!
To young Americans wondering tonight, where will I go, what will I do with my future, I have a suggestion: Why not set out with your friends on the path of adventure and try to start up your own business? Follow in the footsteps of those two college students who launched one of America’s great computer firms from the garage behind their house. You, too, can help us unlock the doors to a golden future. You, too, can become leaders in this great new era of progress—the age of the entrepreneur.
Above all, we must realize that no arsenal, or no weapon in the arsenals of the world, is so formidable as the will and moral courage of free men and women. It is a weapon our adversaries in today’s world do not have. It is weapon that we as Americans do have