The Economy
MR. GANNON: Thank your Mr. President and Senator; I’d like to talk to you about the state of the economy as of this debate. As you know Mr. President both Senator Muskie and former Governor Terry Sanford have attacked your administration’s passage of the Total Economic Reconstruction of Family Assistance or TERFA as it’s more commonly called, by declaring one the biggest fiscal roll of the dice ever dealt to the American People. Can you say now that your administration and the Republican leadership in Congress fully tested this program before enacting it?
THE PRESIDENT: The Answer is yes James, and I’d like to tell the Muskie campaign to stop lying about our record [cheers]. But as you know Secretary Friedman and our economic council promised us that it would be the most effective way of getting American citizens off their chemical dependency on welfare and from his incredible knowledge about the subject we believed them. Due to the addition of the annual gauranted income, the TERFA system essentially did three things
1.TERFA provides an income guarantee as generous as the cash and in-kind benefits already available to many welfare recipients in the United States,
2. TERFA provides an ostensible incentive to work (a far greater concern when benefits are to be extended beyond the traditional welfare population dominated by female-headed families), and
3. TERFA restricts coverage to any manageable proportion of the population—the so-called "break-even" problem.
SENATOR MUKIE: I’d like to respond to the President
MR. GANNON: Two minutes Senator
SENATOR MUSKIE: I believe the question Mr. Gannon asked you Ron, is not whether or not TERFA sounded good on paper but whether it was properly tested. The simple answer is yes, it was, but the administration jumped the gun as the New Jersey experiment only started in 1968, and we are just now getting the research back from the communities that originally participated in the study. Many of the families in the study were actually receiving welfare benefits worth more than the experimental payments. Therefore, some experts questioned the experimenters' findings that the NIT had only a minimal effect on work incentives, and indeed questioned whether the experiment had really measured anything at all. HEW attempted to solve these problems by launching subsequent income-maintenance experiments in Seattle and Denver (SIME/DIME). These experiments more carefully integrated existing welfare programs and offered more generous NIT plans. But the generosity of most of the tested plans made them doesn’t come close to the restrictions passed in the TERFA bill and more complicated to analyze.
The Stanford Research Institute (SRI), which analyzed the SIME/DIME findings, found stronger work disincentive effects, ranging from an average 9 percent work reduction for husbands to an average 18 percent reduction for wives. This was not as scary as some NIT opponents had predicted. But it was large enough to suggest that as much as 50 to 60 percent of the transfers paid to two-parent families under a NIT might go to replace lost earnings. They also found an unexpected result: instead of promoting family stability (the presumed result of extending benefits to two-parent working families on an equal basis), the NITs seemed to increase family breakup.
The SRI researchers—Michael T. Hannah, Nancy B. Tuma, and Lyle P. Groeneveld—hypothesized that the availability of the income guarantee to some families reduced the pressure on the breadwinner to remain with the family, while the benefit-reduction rate also reduced the value to the family of keeping a wage earner in the unit. Other researchers, notably the University of Wisconsin's Glen G. Cain, disputed the analytical strength of these findings. But at the very least the results were discouraging to those who promoted an NIT as a boon to family stability.
MR. GANNON: Your response Mr. President…
THE PRESIDENT: Look…all he is trying to do is confuse the American people by throwing out numbers and studies which haven’t been substantiated by a nonpartisan body of economic officials. What the TERFA system entails is that it removed the need for minimum wage, food stamps, welfare, federal waste and so on, while requiring a fraction of the administrative effort, and avoiding the pitfalls and perverse incentives which exist in systems with overlapping aid programs. A worker under TERFA always gets the same portion of each marginal dollar earned, so there is always an equal incentive to work. Finally the TERFA System would reduce administrative overhead, since the large bureaucracies responsible for administering taxation and welfare systems could be eliminated. We also, in addition put into the bill guaranteed an Annual Income to sweeten the deal for our friends across the aisle.
President Reagan during last night's debate
MR. GANNON: If we can, I’d like to switch gears for a moment, and talk about the growing deficit and what are both candidates plans to reduce it to a sustainable level over the course of the next four years? Senator Muskie your up first…
SENATOR MUSKIE: I have mentioned my economic program across town halls, dinners and corner stores across this great nation. I call for a New Beginning, The New Beginning means refusing to accept 6% unemployment. There are two ways to build prosperity. By helping the deserving many, or by helping the comfortable few. Who carries the burden of the New Economic Policy? The average-income Americans.
Who did this Administration pick to pay the price of stopping inflation? The average-income Americans. And who did they pick to reap most of the benefits from these tax cuts? Those who are already well-off…The President's best hope now…is an unemployment rate 40% higher than when he took office. And his other best hope is a price level 15% higher than when he took office.
President Reagan talks a lot about his working class roots but my father was a workingman. My brother is a workingman. My hometown in Maine is a workingman's town. To me, a man stone of work is not a statistic, he's a man and desperate trouble. We mean it when we say to the American breadwinner: You'll get a decent job-and you'll get a decent paycheck. And one of the first things I will do in office is repealing the irresponsible TERFA system.
Senator Muskie during the heat of last night's debate
THE PRESIDENT: I believe the question was in regards to the deficit…[Laughter]
SENATOR MUSKIE: I’m getting there Ron, Mr. President in your four years in office, you’ve doubled the defense budget to prosecute your war in Vietnam, doubled the budget for manned space exploration for NASA, passed a guaranteed income, taken America off the gold standard and attempted one of the biggest tax cuts for the wealthy ever performed in American history. When President Johnson left office in 1969, Federal Deficit levels stood around 38% and if current trends hold, they would have jumped ten percent by 1973 to almost 50% of total gross domestic product. Mr. President, the American people cannot afford your flights of fancy and whatever world you’ve dreamed up at your ranch.
THE PRESIDENT: Why the deficits are so much of a problem for him now, but that in 1968, when the deficit was $15 billion and everyone was panicking about that, he said, no, that he thought it ought to be bigger, because a bigger deficit would stimulate the economy and would help do away with unemployment. In 1968 he made similar statements, the same effect, that the deficits -- there was nothing wrong with having deficits.
Remember, there was a trillion dollars in debt before we got here. That's got to be paid by our children and grandchildren, too, if we don't do it. And I'm hoping we can start some payments on it before we get through here. That's why I want another 4 years.
MR NEWMAN: Well, we have time now, if you'd like to answer the President's question, or whatever rebuttal.
SENATOR MUSKIE: Well, we've just finished almost the whole debate. And the American people don't have the slightest clue about what President Reagan will do about these deficits. [Laughter] And yet, that's the most important single issue of our time.
I did support the '65 measure that he told about, because we were in a deep recession and we needed some stimulation. But I will say as a Democrat, I was a real piker, Mr. President. In 1967 we ran a $29 billion deficit all year. This administration seems to run that every morning. And the result is exactly what we see. This economy is starting to run downhill. Housing is off. Last report on new purchases, it's the lowest since 1942. Growth is a little over 3 percent now. Many people are predicting a recession. And the flow of imports into this country is swamping the American people.
We've got to deal with this problem, and those of us who want to be your President should tell you now what we're going to do, so you can make a judgment.
MR NEWMAN: Thank you very much. We must stop now. I want to give you time for your closing statements. It's indeed time for that from each of you.
We will begin with President Reagan.
Oh, I'm sorry, Mr. Reagan, you had your rebuttal, and I just cut you off because our time is going. You have a chance now for rebuttal before your closing statement. Is that correct?
THE PRESIDENT: No, I might as well just go with -- --
MR. NEWMAN: Do you want to go with your -- --
THE PRESIDENT: I don't think so. I'm all confused now.
MR. NEWMAN: Technically, you did. I have little voices that come in my ear. [Laughter] You don't get those same voices. I'm not hearing it from here -- I'm hearing it from here.
THE PRESIDENT: All right.
MR NEWMAN: You have waived your rebuttal. You can go with your closing statement.
Closing Statements
THE PRESIDENT: Well, we'll include it in that.
MR. NEWMAN: Okay.
THE PRESIDENT: Four years ago, in similar circumstances to this, I asked you, the American people, a question. I asked: "Are you better off than you were 4 years before?'' The answer to that obviously was no, and as the result, I was elected to this office and promised a new beginning.
Now, maybe I'm expected to ask that same question again. I'm not going to, because I think that all of you -- or not everyone, those people that are in those pockets of poverty and haven't caught up, they couldn't answer the way I would want them to -- but I think that most of the people in this country would say, yes, they are better off than they were 4 years ago.
The question, I think, should be enlarged. Is America better off than it was 4 years ago? And I believe the answer to that has to also be "yes.'' I promised a new beginning. So far, it is only a beginning. If the job were finished, I might have thought twice about seeking reelection for this job.
But we now have an economy that, for the first time -- well, let's put it this way: In the first half of 1968, gross national product was down a minus 3.7 percent. The first half of '72 it's up 8\1/2\ percent. Productivity in the first half of 1968 was down a minus 2 percent. Today it is up a plus 4 percent.
Personal earnings after taxes per capita have gone up almost $3,000 in these 4 years. In 1968 -- or 1967, a person with a fixed income of $8,000 was $500above the poverty line, and this maybe explains why there are the numbers still in poverty. By 1968 that same person was $500 below the poverty line.
We have restored much of our economy. With regard to business investment, it is higher than it has been since 1949. So, there seems to be no shortage of investment capital. We have, as I said, cut the taxes, but we have reduced inflation, and for 2 years now it has stayed down there, not at double digit, but in the range of 4 or below. We believe that we had also promised that we would make our country more secure.
Yes, we have an increase in the defense budget. But back then we had planes that couldn't fly for lack of spare parts or pilots. We had navy vessels that couldn't leave harbor because of lack of crew or, again, lack of spare parts. Today we're well on our way to a 600-ship navy. We have 543 at present.
We have -- our military, the morale is high. I think the people should understand that two-thirds of the defense budget pays for pay and salary, or pay and pension. And then you add to that food and wardrobe, and all the other things, and you only have a small portion going for weapons. But I am determined that if ever our men are called on, they should have the best that we can provide in the manner of tools and weapons. There has been reference to expensive spare parts, hammers costing $500. Well, we are the ones who found those.
I think we've given the American people back their spirit. I think there's an optimism in the land and a patriotism, and I think that we're in a position once again to heed the words of Thomas Paine, who said: "We have it in our power to begin the world over again.''
President Ronald W. Reagan making his closing statement during last night's debate
MR. NEWMAN: Thank you, Mr. Reagan. Sen. Muskie, the closing words are now yours.
SENATOR MUSKIE: I want to thank the League of Women Voters and the city of Louisville for hosting this evening's debate. I want to thank President Reagan for agreeing to debate. He didn't have to, and he did, and we all appreciate it.
The President's favorite question is: Are you better off? Well, if you're wealthy, you're better off. If you're middle income, you're about where you were. And if you're modest income, you're worse off. That's what the economists tell us.
But is that really the question that should be asked? Isn't the real question is will we be better off? Will our children be better off? Are we building the future that this nation needs? I believe that if we ask those questions that bear on our future, not just congratulate ourselves but challenge us to solve those problems, you'll see that we need new leadership.
Are we better of with this arms race? Will we be better off if we start this star wars escalation into the heavens? Are we better off when we deemphasize our values in human rights? Are we better off when we load our children with this fantastic debt? Would fathers and mothers feel proud of themselves if they loaded their children with debts like this nation is now -- over a trillion dollars on the shoulders of our children? Can we say, really say that we will be better off when we pull away from sort of that basic American instinct of decency and fairness?
I would rather lose a campaign about decency than win a campaign about self-interest. I don't think this nation is composed of people who care only for themselves. And when we sought to assault Social Security and Medicare, as the record shows we did, I think that was mean-spirited. When we terminated 400,000 desperate, hopeless, defenseless Americans who were on disability -- confused and unable to defend themselves, and just laid them out on the street, as we did for 8 years, I don't think that's what America is all about.
America is a fair society, and it is not right that Vice President Volpe pays less in taxes than the janitor who helps him. I believe there's fundamental fairness crying out that needs to be achieved in our tax system.
I believe that we will be better off if we protect this environment. And contrary to what the President says, I think their record on the environment is inexcusable and often shameful. These laws are not being enforced, have not been enforced, and the public health and the air and the water are paying the price. That's not fair for our future.
I think our future requires a President to lead us in an all-out search to advance our education, our learning, and our science and training, because this world is more complex and we're being pressed harder all the time.
I believe in opening doors. We won the Olympics, in part, because we've had civil rights laws and the laws that prohibit discrimination against women. I have been for those efforts all my life. The President's record is quite different.
The question is our future. President Kennedy once said in response to similar arguments, "We are great, but we can be greater.'' We can be better if we face our future, rejoice in our strengths, face our problems, and by solving them, build a better society for our children.
Thank you.
Senator Edmund S. Muskie making his final arguments in last nights debate
MR NEWMAN: Thank you, Sen. Muskie. [Applause] Please, we have not finished quite yet.
Thank you, Sen. Muskie, and thank you, Mr. President. And our thanks to our panel members, as well.
And so we bring to a close this first of the League of Women Voters Presidential debates of 1972. You two can go at each again in the final League debate on October 21st, in Kansas City, Missouri. And this Thursday night, October 11th, at 9 p.m. eastern daylight time, the Vice President, John Volpe, will debate former Governor Terry Sanford in Philadelphia.
And I hope that you will all watch once again. No matter what the format is, these debates are very important. We all have an extremely vital decision to make.
Once more, gentlemen, our thanks. Once more, to you, our thanks.
Now, this is Edwin Newman wishing you a good evening.
Note: The debate began at 9 p.m. in the Robert S. Whitney Hall at the Kentucky Center for the Arts
