Typewritten Speech delivered at the Detroit Economic Club, in caps on large index cards, 63 pages, oblong octavo, Detroit, May 15, 1980. With 249 words corrected and revised in Ronald Reagan’s large “block print” hand (shown in italics).
Ronald Reagan delivered his speech in Detroit, one month before the Republican convention, which opened on July 14, 1980. He had announced his candidacy at the New York Hilton six months earlier on November 13, 1979. The present speech discusses at length the depressed automobile industry in Detroit. It then issues a call to fight inflation, unemployment, rising taxes and the deep recession, attacking Carter’s “latest economic policies, which amount to a recipe for recession.” Ronald Reagan seeks to restore vitality to the economy; asks for economic growth, higher productivity, and a cut in tax rates, adjusted for inflation; and attacks excessive federal spending. These are themes that would later appear in his acceptance speech: “ old themes of economy in government with old values of ‘family, work, neighborhood, peace and freedom. These values were intended to be the basis of a new consensus in which traditional Democrats would join with independents and Republicans to replace the mediocre leadership of Jimmy Carter with a President who would simultaneously balance the budget and reduce taxes” [Lou Cannon, Reagan].
Ronald Reagan writes: “On the way in today, a fellow stopped me and asked what I was going to talk about. ‘Optimism’, I told him. He said, ‘You sure picked a heckuva time and place to do it.’ At first glance he may seem right. Unemployment nationally is above seven percent and in Michigan it is nearly double-more than 12 percent. But [the] auto indus[try] nat[ion]wide [is a] shocking 51%. The very life of the U.S. auto industry seems threatened and its problems affect scores of related industries. Car sales [have] plummet[e]d more [than] 42%-[this] may [be] compar[e]d [to the] s[a]m[e] p[erio]d [a] y[ea]r ago. But we are told by the administration in Washington that this is not a real recession yet, since it is ‘merely confined to autos, rubber, steel and housing.’ That’s enough to cripple the entire Midwest-the heart of the nation’s most vital manufacturing industries: spill over into the northeast and have a serious effect on other areas of the country too.
“I can understand that fellow wondering why I picked Detroit to talk about optimism. The U.S. auto industry is virtually being regulated to death. Ever since auto design and engineering moved from Detroit to Washington our once-vibrant and creative auto industry has been forced to produce cars that meet the needs of politicians rather than consumers. After all who was it who gave us the seatbelt interlock system which cost Detroit a billion dollars to install, and then cost the consumers additional millions of $ to disconnect?
“You will remember the first crusade of the regulators was to force the industry to quickly add heavy bumpers and patchwork pollution control plumbing that dramatically dropped fuel economy. Then, they switched to pushing fuel economy, which implied tiny cars that couldn’t carry those heavy bumpers and were more vulnerable in accidents. To get the space they needed, many people bought vans, which used even more fuel and were largely exempt from the safety regulations. Other bought foreign diesels, which were held up in this country due to uncertainty as to how long the Environmental Protection Agency would permit them. U.S. auto manufacturers, buffeted by the changing fashions in regulation, were forced into massive annual changes in their products to meet the latest edicts-a game come companies can ill afford to play and a regulatory risk that makes long-term planning nearly impossible.
“What are we getting for all this expense to consumers? Well, among the results are loss of competitiveness internationally and a threat to the survival of the 10th largest industrial firm in the country. Incidentally the General Accounting Office finds no significant improvement in auto safety from all the equipment required since 1970. Research by Professor Sam Peltzman comes to the same conclusion. Cars are safer, but this is largely due to industry’s own initiative. When Ralph Nader charges that Detroit ignored safety-who thought of such things as headlights, tail lights, brake lights, wind-shield wipers, 4-wheel and disc brakes? Safety is far more dependent on the quality of our highways and getting drunk drivers off the road. These are legitimate functions of government, and they have not been well handled. As always, the more government tries to do, the less it ends up accomplishing.
“Air quality has doubtless been improved by the expensive catalytic converter, but energy regulations and allocations created a shortage of unleaded gasoline, so-many catalytic converters were destroyed by leaded fuel during last year’s gas lines. The lines themselves were another product of regulatory bungling. Foreign automakers, not under Washington’s thumb to adopt this particular technology, have the only new cars that can use leaded fuel. Naturally, people have rushed to buy them.
“By 1978, according to economist Murray Weidenbaum, federal regulations had added $666 to the price of a new car-out of reach of many families so people drive their older cars longer and fewer people enjoy the advantages of the newer cars-which are better in spite of and not because of, federal meddling. The nation’s cars are getting older. So although newer cars get better gas mileage, the average miles-per-gallon of all passenger cars, old and new was no higher in 1977 than it had been 10 years earlier-exactly 13.9.
“Mr. Carter’s first secretary of transportation declared that he wanted Detroit to ‘redesign the automobile’. Apparently, he wanted cars that will accelerate safely on the expressways, carry heavy bumpers and safety reinforcement, provide enough room for a family with three kids, dog and luggage, and get at least 50 miles-per-gallon. The truth is it can’t be done. Detroit is valiantly trying to come close at tremendous expense which on cost-per-vehicle basis is threatening to eat some of our auto companies alive.
“Mr. Carter tries to argue that the problem with this country is that gasoline isn’t expensive enough. So, he slaps an extra tax on gasoline, disguised as an import fee (though importers don’t pay it), and he demands authority to ration gasoline. Up go the sales of diesel Rabbits and Mercedes-Benzes!
“The hard truth is that passenger cars use only 15 per cent of the energy in this country. Gasoline use fell five percent last year and 8 or nine percent this year. If there were no cars at all, we’d still be importing oil for industry and for heating. The transportation of workers and goods in this very big country of ours is as vital as any other use of energy. Figures that show us using more than 25 percent of our energy for transportation don’t tell the whole story, for the figures include trains, planes, mass transit, the army, navy and air force. The entire brunt of efforts to use energy efficiently neither can nor should be borne by the U.S. motorist alone.
“It is fashionable in some Washington circles to be hostile to the automobile, especially the American automobile. After all, everything in Washington is close by and even those without limousines or Volvos can get around on the taxpayer-financed metro subway. But, those who must get from one place to another in such locales as Texas, Kansas or Los Angeles can’t afford the luxury of seeing cars taxed and regulated into oblivion.
“There is a mounting battle against the automobile itself. Indeed some would rule that individual freedom does not involve freedom to own and drive a car. The automobile met other forms [of] trans[portation] h[ea]d [to] h[ea]d [in a] conflict & won. [The] Am[erican] p[eople] found in it [their] l[a]st gr[ea]t fr[ee]d[o]m-from go[ing] wh[e]r[e] [they] want[e]d-wh[e]n [they] w[a]nt[e]d & by [whatever] route [they] chose. The U.S. auto industry pulled the economy out of stagnation virtually single-handedly after 1975. Today, the only thanks Detroit gets is to be shoved back into stagnation by means of political manipulation of credit, by political efforts to balance the budget on the back of the motorist and by Washington making the consumer bear the burden of its credit crunch while federal spending continues to flourish.
“Automobiles have been everyone’s favorite scapegoat for the failures of energy and economic policy. Yet the production of automobiles is vital to the health and well-being of this nation. The U.S. auto industry remains the best in the world. It simply needs the freedom to compete, unhindered by whimsical bureaucratic changes in energy, environmental and safety regulations. It needs a predictable and stable economic environment where people can make the sort of long-term commitment that an auto purchase entails. Automobiles are not the cause of our problems, but they can be an important part of the solution.
“This brings me to the optimism I said I was going to talk about. Despite the problems of rampant inflation, rising unemployment, rising taxes and a deep recession, I sense a strong consensus building in America. I am not talking about the kind of consensus or coalition that can be engineered by political lobbying, or one that gets its strength from any single interest group or issue. The day of appeals to group interests alone is fast disappearing. Instead, we are seeing a growing determination on the part of voters to be seen not just as members of this or that economic group or soc[ial] cl[a]ss-but as human beings with values they hold dear. On the farm, in labor unions, on the street corners of the cities, in offices, in the suburbs (where the values of the old neighborhoods have been preserved) and in the old neighborhoods themselves, there is a new coalition building. I hear it across America, voicing a consensus of disbelief in the prescription written for us by the Carter administration. This coalition refuses to accept the idea that our nation must tolerate four more years of raging inflation, declining productivity, rising unemployment and a lowered standard of living.
“Political experts used to tell us there were social issues and economic issues. Today, the economic issues are the primary social issue. The economic disaster facing this city, this state, this nat[ion]-hurts family values, destroys family savings and eats away at the very heart of a family’s hopes and dreams. We have economic problems because the Carter administration and some in positions of power in Congress have not faced the truth. I have a great deal of faith in the common sense of the American people and wherever I have gone in recent months I have heard this growing consensus from virtually every corner. It transcends party lines, race, ethnic background, even white collar/blue collar distinctions. It is a demonstration that the people of this nation are once again significantly ahead of their elected leaders in diagnosing our economic problems and where our priorities must be.
“Mr. Carter’s latest economic policies, which amount to a recipe for recession, in effect blame the working man and woman and the consumer for the administration’s short-sightedness and failures. You know, conventional wisdom has it that it is bad politics to try to appeal with the same message to different groups. I don’t believe that. Most Americans share the same hopes and, these days, the same fears. In state after state by saying the same thing to different groups I’ve seen the breakdown of artificial barriers that had kept Americans with shared values but different economic, social or geographical backgrounds away from each other in terms of political action. Perhaps the phenomenon of the crossover vote has been the best means of identifying the common denominator of shared values among people of otherwise different backgrounds. In this primary season we have seen the crossover of increasing numbers of blue-collar workers, ethnics, registered Democrats and independents with conservative values. I am happy to have these votes and I welcome them in Michigan. The Republican Party will need millions of them in November if it is to get the mandate it needs to start putting our country back on the right track.
“To all the people of this new coalition our m[e]s[sa]g[e] [is] simply this: for too long your values-the values of the family, neighborhood, work, peace-through-strength and freedom-through-vigilance-have been mocked and ignored and exploited. Your desire to live a peaceful, decent life has been scorned because you didn’t go along with the utopian schemes of those in Washington who want to remake society.
“This is a new coalition of shared values and its time has c[o]m[e]. The values of the American middle class, should be deeply involved in the decision-making process in Washington, for these values underlie the strength of our nation. Yet, those in positions of leadership tell us over and over again that the best has come and gone: that we must do with less. To those who have always had less-especially the minorities-this is like saying that just as you are about to board the train it has left the station. Instead, the message to them should be: we have to move ahead, but we can’t leave anyone behind.
“Right now, the most important issue America faces is this: can we stop inflation and still enjoy economic growth and a rising standard of living? Or, as our leaders are telling us, must we endure a mixture of high inflation, unemployment and austerity for an indefinite period?
“I believe we have the knowledge to devise policys that will curb inflation, restore vitality to our economy and provide private employment for all willing Americans. Certainly we know that today’s policies have not worked. The present administration does not seem to know or believe that the American people have [the] will [to] succeed. In fact, there is a noisy element, especially in government, which argues that growth itself is either undesirable or impossible; that an individual should no longer strive to climb the ladder of opportunity; that a parent wanting to make life better for his or her family is somehow misguided, to that element, the idea of ‘no-growth’ or ‘limited’ growth has become an end in itself. It makes sense get our nat. movng forward agn, may suggst I’m not proposng gimmick only to those who are satisfied to remain where they are, happy to see those below them remain where they are. None of it makes sense to the people I’ve been talking to. It certainly doesn’t make sense to that fellow who has just gotten a toe hold on the bottom rung of the ladder. Th[i]s co[mpany is] b[ui]lt on h[a]rd w[o]rk, thrift, & ingenuity. Its p[eople] surely h[a]v[e] at least [as] much hum[a]n initi[a]t[i]v[e] today as [it] h[a]d wh[e]n th[i]s co[mpany w[a]s b[ui]ld[i]ng tow[a]rd gr[ea]tness. Let me outline now s[o]m[e] elem[e]nts [of] strategy [I] think sh[a]l[l] no[w] stop inflat[ion]-turn unemp[loyment] around & get our nat[ion] mov[i]ng forward ag[ai]n, & may [I] suggest I’m not propos[i]ng gimmicks or [a] quick fix. When a nation has been as badly managed as ours, it is time to repair the damage and get back to basics.
“For almost 200 years, as we Americans expanded the world’s economic and spiritual frontiers, we asked just three things of our government: to protect us from internal disorder, to assure our national security and to maintain a strong, stable dollar. We accepted sensible taxes and regulations to advance our national goals without hindering productivity and initiative. We also demanded that government balance its books and pay back outstanding debts during peacetime. If government would do these things, we would do the rest. And we did. For almost two centuries, the United States was the world’s model of government, a ‘shining city on a hill’ whose success showed that democracy can provide every citizen the chance to reach as high or as far as skill, talent and industry will take him or her.
“This formula of success has been put aside in more recent years. The stable dollar was replaced by the idea that a little inflation is good for us. Taxes and regulations multiplied beyond reason, along with their indispensible handmaiden, the bureaucracy. And, prompt repayment of our public debts was replaced by the notion that government borrowing is a positive virtue.
“Result? The dollar has shrunk to 43 cents compared to the 1967 dollar. Our standard of living has fallen behind that of other nations and continues to decline. Inflation continues its relentless march-and our productivity declines. Yet, the administration has its own brand of optimism. It says it hopes to get inflation down to somewhere like two or two-and-one-half times what it was four years ago. By further reducing productivity, increasing unemployment and taking an additional $100 billion in taxes away from the people, their optimism must have gotten a lift when it was announced that unemployment went up by 825,000 people in April alone.
“Inflation is not caused by workers or businessmen or consumers or producers or by a plague of locusts. It is caused by government. The price of goods goes up only if the government creates too many dollars. Deficits tempt it to print new dollars instead of paying back its debt with honest money. We must remove that temptation by curbing government’s appetite and by balancing the budget.
“Getting control of the government’s monetary policy is only part of the answer. We also need strong economic growth. When we produce fewer goods, prices go up, not down. When we add one percentage point to the unemployment deficits tempt it to print new dollars instead of paying back its debt with honest money. We must remove that temptation by curbing government’s appetite and by balancing the budget.
“Getting control of the government’s monetary policy is only part of the answer. We also need strong economic growth. When we produce fewer goods prices go up, not down. When we add one percentage point to the unemployment rate we increase the federal deficit by anywhere from $25 to $29 billion.
“It is right that we worry about declining productivity. Higher productivity means we can produce more with the same effort. It takes people who have better ideas and it takes people with savings to invest in those ideas. It also takes motivated workers to turn those ideas into the reality of products and services. You can’t increase productivity by making people work harder for less pay. They need better machines and tools and rewards equal to their effort.
“The federal income tax is a tax on all individual productivity-on labor, on savings and investment, on enterprise. These tax rates climb steeply with income. What’s worse, they aren’t adjusted for inflation. Every time inflation raises your income but not your buying power, you are pushed into a higher tax bracket. The government’s refusal to adjust (that is, to ‘index’) income tax rates for inflation not only stops all Americans from climbing higher on the economic ladder, it also pushes some people off the bottom rung every year. Two million more Americans are considered permanently unemployed today than only 10 years ago. Those who do manage to keep their grip on the ladder still face dismal prospects. In half of all household, rich and poor alike, the government takes at least 50 cents of every one dollar wage or salary increase and the average is 46 cents. At these rates, you need to increase your income about twice as fast as inflation, just to stay even after taxes: Americans aren’t losing their confidence, they’re losing their shirts. There is no crisis of confidence, no collapse of the American spirit as Mr. Carter would have us believe. We are suffering from misguided, thoughtless government policies and a hostile adversary attitude by government toward the business community.
“We don’t need to abolish government, of course, or its safety net of programs, but we must change its policies to get it working on our side rather than against us. I would tell our monetary authorities they have only one job: to restore and maintain a sound dollar at home and abroad. They would be directed to create as few or as many dollars as it will take to stabilize [inflation]. Valu[e] [is] wh[a]t [the] $ [will] buy. In proce[e]d[i]ng tow[a]rd [our] goal [of] full emp[loyment] w[i]thout inflat[ion] I w[ou]ld ask Cong[ress] [to] act immediately [and] b[e]g[i]n [the] nec[essary] r[e]f[o]rm [of] our t[a]x syst[em] to restore [and] reward [the] w[o]rk[i]ng *** by cutting inc[ome] t[a]x r[a]t[e]s signif[i]c[a]ntly & adjust[i]ng them automatic[a]l[l]y for inflat[ion].
“I believe Congress should also help existing businesses with measures designed to adjust corporate tax rates for inflation. We need to look at the whole problem of double taxation on corporate earnings and dividends. Depreciation procedures should in the meantime be adjusted to account for the true cost of replacing their plants, equipment and inventories. This is necessary if American business is to recover and to stand up to the fierce international competition of the 1980’s.
“An immediate priority is to go after excessive federal spending. A freeze on federal hiring could be the first step. Seeking out and eliminating waste and fraud would be another. Last year the present Attorney General told Congress that something between one and ten percent of the federal budget could be estimated to fall into these categories. At the time, that meant as much as $50 billion. And while government profits through undeserved revenues in times of inflation, inflation also adds to government’s cost. It is estimated that every one percent of inflation increases spending about $5 billion.
“As part of the process of streamlining government, we should take a close look at the efficiency of various federal programs to determine which could be handled more effectively by state and local government. Those that can should be transferred in an orderly, phased manner, along with the tax sources to pay for them. There would be a significant savings in administrative overhead. Welfare is the number one major prospect for such transfer. In California, where we were able to put a major reform program into effect, we reduced the rolls, saved the taxpayers added expense and were able to increase grants to those truly in need by an average of 43 percent.
“It’s a big job to turn a government around and it must be done with care, but it must be done. Critics of major tax cuts such as I have been proposing often cry that these will aggravate inflation by enlarging the federal deficit. When they say that, they are not taking into account the fact that the additional money the people get to keep isn’t buried in a tin can in the backyard. It’s put into savings and investments, into a new car, a vacation, a new room on the house-all the things people do when they make decisions in the market place. The money spreads out through the economy. It means more production and more jobs. In addition, with the prospect and the reality of tax cuts would have a positive effect on the nation’s investment markets.
“Recent history shows that significant tax cuts, rather than throwing sand in the gears of the federal machinery, actually help it. For the five years just prior to the round of tax cuts proposed by President Kennedy’s administration, federal tax receipts increased by 25 percent, but during the five years they were taking effect, federal receipts increased by more than 50 percent: inflation wasn’t a factor. During [an] earlier 5 y[ea]r p[erio]d [it] av[e]r[a]g[e]d only 1.6% & only 2.3% during [a] 2nd p[erio]d. It w[a]s [a] more product[i]v[e] ec[onomy] [that] provid[e]d [the] add[e]d rev[enue]. Similar effects w[e]r[e] s[ee]n wh[e]n maj[o]r t[a]x cuts w[e]r[e] put into effect by [the] Hard[i]ng & Coolidg[e] adm[i]n[istration]s in [the] 20s. Late l[a]st mo[nth] H[a]rv[ar]d U[niversity]-U.S. Senate Subcommittee on International Trade and the New York Stock Exchange held a conference at Harvard on the subject of U.S. competitiveness in the world. They brought together some 200 leaders of government, the academic world, labor and business. One of the conference panels, chaired by Senator John Danforth, on taxation and investment, reported unanimously, ‘that economic policy should not be developed in an ad hoc manner, repeatedly altered to create changing conditions, but that policy should be developed on a multi-year basis.’ The panelists agreed-and I’m quoting-‘Congress should immediately commence consideration of tax reduction legislation and that such legislation should take effect beginning in 1981.’ There was also a strong consensus ‘that the aggregate amount of tax reduction over the period 1981-82-83 should be in the neighborhood of $50 to $100 billion. A strong minority of participants expressed support of aggregate tax reductions over this period of more th[a]n $100 bil[lion].’ This may sound like a tremendous amount but it actually is only a reduction of the increase in taxes we face.
“The program I have been talking about is not a ‘free lunch’, but a plan for economic growth. We must have growth. Other nations have not waited, militarily or economically for the United States to squabble over matters that should have been settled long ago. The world is a more dangerous and challenging place today than ev[e]r b[e]for[e]. Time does not permit detailed discussion of every aspect of the program I have described, but I do want to emphasize that my belief in its potential success rests on my optimistic view of the strength and will power of the American people.
“To bring us back to the here-and-now of Detroit’s, Michigan’s and the auto industry’s problems, I believe, this program will have a marked and positive effect on them. In addition, my administration would address itself with high priority to the question of U.S. competi[tive]ness in the world. We must once ag[ai]n make ourselves truly competitive. Trade protectionism is not the answer. It only attacks the symptoms and not the causes of the problem. Furthermore, it creates new problems. For example, if you restrict auto imports to attempt to re-start some domestic auto industry jobs, how many Americans selling and servicing imports are going to lose their jobs? No, the answer lies in a restoration of our competitiveness. As president, I would convene a task force to examine both short- and long-range solutions to this problem. I would want to bring together leaders in business, labor, government and the academic world-the best minds I could find-to make recommendations for a new American strategy of competition. These are days when groups which once might have thought themselves adversaries must come together to share in the solutions to common problems. Just as I spoke earlier about the coalition I see forming in a consensus of shared values across America, so when it comes to bringing specialists and experts together to help develop new policies, we need to form new coalitions. A newly productive economy can make it possible for us to restore both our competitiveness and our defense capabilities to make this a safer world. Once we have begun putting our economic house in order we can again gain the confidence of our friends and allies around the world. Just as a coalition of people with shared values and a desire to put them to work productively can solve problems at home-so too on a global scale, we can act again as leaders of the free world. Once we do, I believe we will be supported by a grand coalition of other nations and peoples who want to work with us to preserve their freedom.
“Here in America, our choice is not between liberal and conservative, young and old, black and white, rich and poor, sunbelt and snowbelt, consumer and producer, or Democrat and Republican. Our choice is between up and down; up to the ultimate in the individual freedom, consistent with an orderly society, or down through statism and government intervention to a centrally controlled society, authoritarianism or even totalitarianism. To me [the] signs [are] ev[e]ry wh[e]r[e] & th[e]y [are] unmistakable-[the] Am[erican] p[eople have] chos[e]n [the] hi[gh]-r[oa]d-th[e]y int[end] [to] go up. Th[a]nk you. ”
In the upper left portion of the first page Ronald Reagan has also written the name, Roy Rogers.
Contained in a custom designed brown quarter leather box.
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