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PLEASE CREDIT ANY QUOTES OR EXCERPTS FROM THIS ABC NEWS RADIO AND TELEVISION PROGRAM TO "ABC NEWS' ISSUES AND ANSWERS ." ABC NEWS ISSUES AND ANSWERS Sunday, February 22, 1981 A half hour interview program produced and broadcast over ABC-TV and ABC Radio 12:00 Noon - 12:30 PM, EST GUEST : EDWIN MEESE III Counselor to the Preaident CORRESPONDENTS: PRODUCER: Sam Donaldson - ABC News James ~.~ooten - ABC News Peggy Whedon Copyright: 1981 RLS Reporting Associates, Inc. 850 Sligo Avenue Silver Spring, Maryland 20910 (301) 587-9235 IS334 TI04.230880

1 MR. DONALDSON: Welcome to ISSUES AND ANSWERS, Mr. Meese. MR. MEESE: Thank you. MR. DONALDSON: The Democratic leaders in Congress have now declared themselves. They're going to oppose the President's tax cut plan on the grounds that it is inflationary. How worried are you by their opposition? Do you think they ~epresent the rank and file, or you're just going to roll over them? MR. MEESE: Well, Sam, I think that there is a real need for the tax cut and I think this will be recognized. In order to have the kind of economic recovery that this nation needs we need a combination of all of the components of the plan which include not only the tax cut, of course, but the spending controls, the regulatory relief, and the development of monetary stability. It's really a comprehensive package that we need all of the different parts of it. And I'm sure that as the diys and weeks go along that all the members of Congress will realize that. We're very hopeful. MR. DONALDSON: Well do you think the Democratic leaders are sort of out of step with the rank and file? Afterall the Republicans control the Senate and in the House you have 41 conser- vative Democrats that you're wooing. Or do you think that this is gonna be very much difficult at all to pass the bill? MR. MEESE: Well I think it's too early to predict. The leaders have indicated their cooperation, that they would listen to the President, that they would talk with us, and I don't think it's yet gotten to the point where positions nave hardened. I'm T!04230881

2 still optimistic that the need to recover industrially, business- wise, for labor,to increase employment, that all of these objec- tives of the plan will be sufficiently clear, that we will have support'on both sides of the aisle. MR. WOOTEN: But your Budget Director, Dave Stockman, is n~w threatening to recommend seriously to President Reagan a veto of the entire package if it doesn't match what the President sent to Congress in terms of the tax cuts, Is that -- Is that a serious threat? Is the President really going to veto it? MR. MEESE: Well I think that Dave was un¢[o~tedly-t~ik-- ing about the va2ious options that a President would ~se. At this point, as I say, we're still optimistic that we will get the total recovery package, not necessarily in precisely the same form as it was introduced, but in substantially the same form suffi- ciently to cope with the economic problems we face. MR. WOOTEN: But is the veto something that you know that Mr. Stockman and Mr. Reagan have discussed as "a -- as a serious possibility? MR. MEESE: Well we've discussed a lot of options that could be used at some future time. And at this -- It's way too early to start talking about what ultimate weapons might be used in order to get this through. I really think that you've had such a tremendous response from the public, from most members of Congress, favorable response from governors, from mayors, even when their own programs are being cut to some extent, they T!04230882

3 recognize the tremendous need that we have to spur the economic recovery of the country. And so they're willing to make those sacrifices, to make those changes in what we have been doing. You see: what is really involved in this economic recovery program is a break with the past. For many years now we've been going down the wrong road. I think most people in Congress ~ in the public, in government elsewhere recognize this. And that's why the total package, the whole economic recovery, program is so impor- tant and why you can't just take one part out or -- or diminish another part. It really is a comprehensive plan. MR. DONALDSON: Well Jim's question raises the point about compromise. If you don't get the full 10-10-10 tax cut over three years that you've requested, at what point does it become something that you'd rather not have at all because there's not enough of that generation of new investment that you say is going to. produce a bigger economy? MR. MEESE: Well, Sam, I don't believe that the Congress of the United States is so unsensitive to the need for jobs, to the need for economic recovery in this country that we're going to get to that point. If there's anything that they've learned from labor leaders, from business leaders, from the dozens of groups that we've had in to see us and that have also been on the" Hill in the last few weeks, it's that we must stimulate this recovery. We can no longer be unproductive. We can no longer have a productivity negative from year to year. We can no longer be uncompetitive with T!04230883

4 other nations of the world. So we've got to do this. And I think that that message is coming along strong. I really don't believe that Congress is just going t¢ turn its back° The Democratic majority in the House, certainly the Republican majority in the Senate is favorable to these ideas. And so I just think we are going to get the program. MR. DONALDSON: Well is it really turning its back, because your plan is a gamble. It's never really been tested in any major nation before. You say you can't go along as we have gone along; that's what the President said the other night. That you're really gambling that this plan will work. MR. MEESE: Sam, we're not~-- It's not really a gamble in the sense that this is something totally untried. As President Reagan has said many times, every time that we have tried tax cuts in this country as a means of stimulating the economy, they have worked. As recently in the 1960s with John F. Kennedy's tax cut at that time, actually the economy expanded, the government actually received more revenue even though the rates had been cut because of the prosperity that it brought to the people. And that's exactly what this plan is. It's not a gamble. It's been put together very carefully by the President, by a number of experts, and then it's been checked byexpert- economists from various schools of economic thought. So I think you have here a compre- hensive plan that will work. And I think that will be proven in the weeks and months ahead. T!04230884

5 MR. WOOTEN : But it's also been put together by politicians. For example, you cut -- In your budget recommendations, you've out dairy price supports drastically, but at the same time you've maintained support for the tobacco industry. And how -- How is that sort of thing work out? Do you personally approve of the -- of keeping price supports under tobacco but taking them away from milk? MR. MEESE: Well, Jim, part of that is a technical differ- ence in the way in which the supports work. And whereas changing the tobacco supports would not make much of a chans:e in the reven- ue and expenditure situation in Congress -- in the budget. On the other hand, the .dairy supports which have gotten considerably ~out of hand is a different story. MR. WOOTEN: But it would have nothing to do with Senator Jesse Helms' influence and persuasion at the ~ite House? MR. MEESE: No. As a matter of fact, I don't know that Senator Helms had anything to say about this or talked to the President or any of us about it. MR. WOOTEN: But you could -- You might well imagine that Mr. Helms would be dead set against removing any supports for the tobacco industry. MR. MEESE: I imagine he probably would. And that's why I say it's not -- We have not done this on the basis of whose ox is being gored. As a matter of fact, the President has said many times that everybody is going to have to assume some of the budget T!04230885

6 c~tso And so it's been done really on the basis of getting the maximum revenue savings or spending controls for the minimum of cuts in terms of program. And I think that has been done. The only thing that we have not cut at all, as you know, is what we call the. social safety net° Those critical programs for the truly deserving needy: Social Security, the -- certain retirement programs, Medicare, that sort of thing. But everything else has been subjected to careful scrutiny. And where there would be valuable savings made, then those cuts have been imposed. MR. DONALDSON~ Mr. Meese, the President has now asked for direct budget cuts for the ~82 Budget, fiscal '82, of 41.4 billion. But it's said that you're still looking for more, and you'd like to request more. Can you clear up for us when that will qo to the Hill, the additional requests for cuts? And also, when a second tax bill with tax reform, such as modification of the marriage penalty, will go to the Hill? MR. MEESE: Well~ as far as -- We have 41.7 in savings already indicated. There's an additional $7 or $8 billion that needs to be found. We have these already indicated. They're already mapped out in what might be called relatively small sav- ings. Anytime you get into the federal budget, you're really talk- ing about big dollars. I still can't think of millions of dollars as being small savings. But relatively they are from various agencies and departments within the federal government. These will all be included in the final revisions, that it will be to Congress Ti04230886

7 by the 10th of March, which is the deadline. And there will also be about $2.5 billion in that which also has to do with some user fees for various services that are not shared generally by the public, but in which case certain users will be paying fees for services, instead of having them cast on the general taxpayers. MR. DONALDSON: This is what you outlined in the message the other day, is it not? MR. MEESE: That's right. And it amounts to approximately $50 billion in savings. MR. DON?./LDSON: Is there any more than that? Is there any more that you're looking for? MR. MEESE: Well we think that more can be found as our department heads and they're subordinates get going in their departments. And with our special task forces that we've already started, we think a great deal more can be found in fraud, waste, abuse and mismanagement. And of course, this will also add to the total. MR. DONALDSON: But that won't ~o up in March? That will not go up in March. MR. MEESE: That -- Well, ac~ually these are savings that will be found during the year. And money that is saved in the pro- grams will, of course, just not De spent and this will add to the total spending savings that we will have in the course of the year. MR. DONALDSON: Well when will the tax reform bill go up T!04230887

then? MR. MEESE: Yeah. In answer to your second question there on the tax reform bill, I would estimate that we would try to have this ready by about the middle of the year, perhaps as early as the end of May, beginning of June. And this bill has to do with the number of different ideas that people have come up with. Some of them will save federal funds. Others will provide the correction and remedy of inequities such as the marriage penalty, so-called at the present time, and other things that people have talked about. The whole idea was to have these set forth in a separate bill so that they would not confuse the issue as far as the econo- mic recovery program. MR. WOOTEN: Would those inequities that you're discussing, would the reform of those be retroactive? In other words, if you're sending, going up say in June, or July, or August to the Hill, are you suggesting that they apply to the entire tax year of 19817 MR. MEESE: Well one of the things that I wouldn't want to pre~ict when they would apply because we're not exactly sure when this program will go up. A lot of this will result from our con- sultations with the members of the Congress, find out when they're ready for it. And a lot also will depend on how quickly the Cong- ress is able to work on the measures presently before them which are part of the economic recovery program. MR. WOOTEN: Well one of the things the President has always discussed in terms of an option in response to a recalcitrant T104230888

9 Congress is, quote, "going to the people." Is -- How do you plan to do that? If Congress, for instance, does net give the President what the President wants, what are you going to do? MR. MEESE: Well, Jim, one of the things that is best in carrying out any plan is to wait till it's time to use that plan before you say exactly what you're going to do. I think it's only clear, however, that from the first speech on the economy to the speech last week on the specific economic recovery program, Ronald Reagan has demonstrated that here is a President that not only has new ideas for the country, but also is able to communicate those ideas to the public. And as a result, can gain great public support.The election showed that also, of course. And I think that if it becomes necessary, the President can take his case to the -- to the country very effectively, as .he did when he was governor of California, and when he had very crucial issues that he was debating there with a legislature that was in the hands of the other party. However, again, I think that with what we've seen so far, with the recognition on the part of members of Congress of the terrific economic problems that we have in this country. I cer- tainly would hope we wouldn't come to that. MR. DONALDSON: Well Mr. Meese, do you agree with the strategy of some conservative groups which have already threat- ened to defeat liberal congressmen at the polls if they oppose your economic program? T!04230889