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Public Papers - 1989

The President's News Conference

1989-01-27

The President. Harmony and peace in here. [Laughter] First, I sound worse than I feel. Let me -- --

Q. What's wrong with you?

The President. Slight cold. But it's been a full week since the inauguration. I just wanted to stop by under our new policy, give you an update.

I've been talking this week about ethics and the emphasis is not, believe me, a fad or some passing fancy. We're going to be hearing more about it -- I think a lot more. In broader terms, I'm trying to set high standards for government service: duty, honor, personal sacrifice for the common good. And I want to assemble a government that the people of this nation can be proud of. That's our goal; that's our mission. We did appoint this week, as you know, a new commission on ethics. We've got two able Chairmen, Vice Chairmen: Judge Wilkey and [Attorney] General Griffin Bell. That commission started a fresh, constructive dialog with Congress on both sides of the aisle. I'm pleased with the way those initial meetings have gone. So, we're ready to roll.

I think it's been officially announced that we're going to -- certainly to Tokyo, then on to China, and I'm looking forward to it very much. And then, also, we'll be stopping for a relatively brief stop in Korea on the way back from China. We've had other invitations. That's about all we can do. And in a nostalgic basis, needless to say, Barbara and I are looking forward in a very personal way to going back to Beijing.

Now, with no further ado, I'll be glad to take some questions.

Terry [Terence Hunt, Associated Press]?

Federal Pay Raise

Q. Mr. President, you said before you became President that you supported Ronald Reagan's decision on a 50-percent pay raise for Members of Congress and that you'd have something more to say about it once you'd get to the Oval Office. Most of the polls show that a vast majority of Americans oppose that pay raise.

The President. Yes.

Q. Now you're President, what's your view on that pay increase?

The President. Well, I did say I supported it, and I do support it. A raise is overdue. There's no question about that. There are some good things in this. The reform of the honorarium, payments for these speeches, I think, is very, very good. I think it's good government. It's a complicated formulation. There are some elements that bother people, including me. But the President did consider all this carefully. He went forward with the Commission's [Quadrennial Commission on Executive, Legislative, and Judicial Salaries] recommendation, and because of the way it works on Congress -- and the ball is clearly in their court -- it leaves us with either the Commission recommendation or nothing. And so, seeing the problems as I do, I still feel that I should not go about undoing the Reagan decision.

Yes, Helen [Helen Thomas, United Press International]?

Savings and Loan Crisis

Q. Mr. President, your trial balloon on the S L's taxing savings and checking accounts has fallen like a lead balloon. Are you dropping that plan? Do you have any other plans?

The President. First place, I think it's a little absurd to be commenting on a facet, a possible facet, of solving a problem when it hasn't even come to me. You're talking about speculating on something that hasn't even reached the desk of the President even as an option -- say nothing of its being a proposal.

Q. Well, it certainly has come from your people.

The President. Well, as an option, not as a proposal. And I think you're right. There seems to be some controversy around it. But that doesn't mean that any thinking along those lines should cease. But I'm going to reserve comment until I actually have it presented to me. And I expect this is the first of many such things that's going to happen of this nature. I will say this: that the savings and loans deposits are backed by the full faith and credit of the Government. And they are sound; they are good -- dollar good. And I just want to assure the American people of that, and nothing is going to change in that regard. But in terms of this one idea, let them float around. It doesn't bother me for a lot of ideas to be considered and debated.

Q. The reaction is very negative -- the public reaction, congressional reaction. Will that enter into your decision?

The President. Anything I do on savings and loans or when we get into this budget deficit reduction program -- look, I don't expect it's all going to be sweetness and harmony and light. The minute we get those proposals up there on February 9th, I expect we're going to have other firestorms swirling around. But I have not made decisions on this one. I'll wait until I get all the facts, call them as I see them, and hope that we can convince the American people that that's the way to go.

Relations With Congress

Q. Mr. President, you've set a tone of high-mindedness and propriety this week with your emphasis on ethics, also of bipartisanship in your discussions with Congress. Beyond those matters of process and tone, sir, what would you like the country and the world to say is the message of your first week in office as to what your administration is about?

The President. Reaching out to the Congress. I really am serious about this trying to get more of a bipartisan foreign policy, for example. And though we haven't addressed that specifically in terms of issues, I have addressed it in broad terms to the Members of Congress with whom I've met here and with whom I met over in the Residence. And so, I'd like to signal an era of real openness with Congress.

Look, I know we're going to have conflicts, Brit [Brit Hume, ABC News]. And I know we're going to run up against each other. But I want to start with that approach. And we're in a broad review -- as you've heard from my various nominees as they appear before the Senate -- on specific areas of foreign policy. A message would be taking steps to make clear to the congressional leadership that that's what I want to do. The other one, as I mentioned, is trying to set a tone, in terms of conflict of interest, that I hope will serve us in good stead.

Visit to China

Q. What signal do you think it may send the world, sir, that you're making your first visit to China -- after, of course, the ceremonial trip to Tokyo -- while Soviet leader Gorbachev, having asked for early talks, is still waiting for a response?

The President. Well, I don't know what signal it sends in that regard. But let me just remind you that I'm the one who does not believe in ``playing the Soviet card'' or ``playing the China card.'' We have a strong bilateral relationship with the People's Republic of China. I have a personal acquaintance with the leaders with whom I will be meeting there, including Deng Xiaoping [Chairman of China's Central Military Commission], and being that close -- it just seemed like an appropriate visit, but not to signal a playing of the card to go one up on Mr. Gorbachev. There's nothing of that nature in this visit. That is a strong, important strategic and commercial and cultural relationship that we have with the Chinese -- the largest number of people in the world, in that country. And so, the visit stands on its own and does not have any signaling that should be detrimental to anybody else's interest.

Going right across here. How do we get in the back here, Marlin?

Soviet-U.S. Relations

Q. Mr. President, your national security adviser, Brent Scowcroft, said last week on television that the Cold War was not over and that he felt that Mr. Gorbachev was trying to make trouble for the Western alliance. What is your view, sir?

The President. Well, I'm not sure that's an exact -- I should let the General defend himself. But I've expressed my view not only in the campaign context but in several times afterward, and also to Mr. Gorbachev. And our administration position, in which General Scowcroft is in total agreement -- indeed, he'll be one of the leaders in this reassessment -- is: Let's take our time now. Let's take a look at where we stand on our strategic arms talks; on conventional force talks; on chemical, biological weapons talks; on some of our bilateral policy problems with the Soviet Union; formulate the policy and then get out front -- here's the U.S. position.

And I don't think the Soviets see that as foot-dragging. I'm confident they don't. Indeed, I made that clear to General Secretary Gorbachev just this week in a rather long talk with him. So, I want to try to avoid words like ``Cold War'' if I can because that has an implication. If someone says Cold War to me, that doesn't properly give credit to the advances that have taken place in this relationship. So, I wouldn't use that term. But if it's used in the context of do we still have problems; are there still uncertainties; are we still unsure in our predictions on Soviet intentions? I'd have to say, yes, we should be cautious.

Yes, Lesley [Lesley Stahl, CBS News]?

Tax Increases

Q. Mr. President, there seems to be some question about just how long your no-tax pledge applies. Is that a 1-year pledge, a 2-year pledge, a 4-year pledge?

The President. I'd like it to be a 4-year pledge.

Q. Is it a 4-year pledge? Are you -- --

The President. I'd like it to be a 4-year pledge, yes.

U.S. Contact With the PLO

Q. Mr. President, Yasser Arafat [Chairman of the Palestine Liberation Organization] has been over in Europe meeting with Foreign Ministers of Spain, France and Greece. Marlin has said, and so has Mr. Scowcroft, that it's too early for Arafat to meet with Secretary of State-designate Jim Baker. On what level would it be appropriate for Arafat to meet with an American official? An Assistant Secretary of State, for example?

The President. As we changed the policy on the Middle East on dealing with -- I mean, as the change came about in the policy on communicating with the PLO, it was based on their acceptance of three principles. As long as they stay hooked and stay committed to those three principles, we will have, when appropriate, meetings with the PLO.

I haven't given any thought at all to when a meeting with the Chairman -- Arafat with an American official -- is appropriate. And I would wait to see how we go forward. The point in talking to them is to try to facilitate peace in the Middle East. And it seems to me that if there's some logical step that requires high-level sign-off by various participants over there, then, and then only, would it be proper to elevate the meetings to that level. You crawl before you walk. We're just starting to talk to them because they have, dramatically I'd say, agreed to the principles that are part of our policy.

U.S. Foreign Policy Initiatives

Q. Let me ask you if I can in that regard: You said in a wire service interview the other day that you needed to have some foreign policy initiative early in your administration. It seems the Soviet relationship is going on the back burner while you discuss the nuclear force structure, for example. In what area are you going to try to move forward? Central America? The Mideast? Where?

The President. All of them. But we've got to have a little time. We're not going to let this Soviet thing put us in the mode of foot-draggers. We're going to be out front. There's no reason to suggest that all we have to do is react to a speech by the General Secretary. I want to take the offense in moving this relationship forward and taking steps that are in the interest of freedom around the world, whether it's in Eastern Europe or in strengthening our alliance.

But there's plenty of troublespots -- one of them, as you mentioned I think, Central America. But we need to complete the reviews. But I can't tell you, John [John Cochran, NBC News], where you will see the first major initiative -- whether it's going to be the Middle East, whether it's going to be Central America. We've got problems, of course, that afflict the whole continent and other continents in this Third World debt problem, and then, of course, the Soviet Union.

But, no, I don't want to play defense, and I don't want to look like we're foot-dragging, just waiting around to, you know, let others set the agenda, but prudence is the order of the day. And when you're gunning for something as important as a bilaterally supported policy in Central America, it does take a little time. I've only been here less than a week.

Yes, Owen [Owen Ullmann, Knight-Ridder]?

Minimum Wage

Q. As you know, the minimum wage has been frozen for even longer than congressional pay raises. Since you support a large increase in pay for the most affluent 1 percent of the country, would you favor pushing for an increase in the minimum wage, which would benefit the lowest income groups of the country, as part of your promise in your Inaugural Address to reach out to all the people?

The President. I've always said that my position on minimum wage is that I would want it linked to a training wage, to a differential of sorts, so that you don't throw people out of work by raising the minimum wage. And I'm not one who has felt that the minimum wage is the key to economic prosperity for people on the lowest end of the economic spectrum. But as I indicated, a certain flexibility on that question -- and again I'll wait for Elizabeth Dole -- takes office next couple of days -- to come in with her recommendation.

Saul [Saul Friedman, Newsday]?

Followup Questions

Q. If I could just follow: Do you -- --

The President. Now, let me ask you to stop the proceedings. Don't take it out of their time. What would be the fair and noble way to handle followup questions as we do these things? Would it be good to have them or not have them?

Q. Handle them. Handle them, yes.

Q. There should be one followup.

Q. One followup.

The President. But then if we do it, everybody else doesn't get a chance to ask a question, and I'm about to pull the ripcord on this thing. [Laughter] No, seriously, how do we -- I want some -- --

Q. Stay longer. [Laughter]

Q. If you make the statement and just leave and not have anyone follow it up, it just hangs out there.

The President. Yes.

Q. Suppose you don't answer the question?

The President. You mean my first answer is less than precise? [Laughter]

Q. Yes -- [laughter] -- on occasion. [Laughter]

The President. On occasion. No, but I'm asking. I'd like to get -- because here we are, all these -- --

Q. One followup.

Q. Make a deal: one followup.

Q. You'll just have to be more precise.

The President. -- -- women and men who have a Leubsdorf area there -- untested on the question. [Laughter]

Q. And the standee!

Q. Spread it out.

The President. And the standees have gotten no time at all, so -- --

Q. When, in fact, it's a true followup.

The President. Instead of yet another question, you mean?

Q. Yes.

Q. Right, right.

Q. A real followup.

Q. Exactly, you decide. If you think somebody's playing games with you, say, I'm sorry.

The President. Say I've already answered that? Then what happens? [Laughter]

Saul?

Q. Wait a minute. Where's my followup?

Q. You're finished. [Laughter]

The President. You didn't have a follow -- --

Q. The first row gets to follow up? That wouldn't be fair.

The President. All right. I've already answered that one.

Yes, Saul? [Laughter]

Q. I yield to Owen first.

Federal Pay Raise and the Minimum Wage

Q. Are you concerned from the standpoint of perception you're supporting a pay raise for a high-income group and not pushing on an equal basis for a lower income group to give the public the perception that you're lobbying for a wealthy sector of the country?

The President. No, I'm not concerned about that perception, but I am troubled by certain aspects of the proposal, as I think I've indicated -- the pay raise proposal. But we're down to the crunch here: recommendations up there on the Hill. It's yea or nay. I mean it's one way or another. But I don't think that would be fair at all.

I think the main thing in terms of the question you raise: Jobs -- how do we continue to create jobs, keep it going? And I've given you one ingredient that I think has to be a part of any consideration of the minimum wage. But as I've indicated, I'm flexible on how that should be accomplished.

I'm not sure that one can make a connection between the minimum wage and more employment. If you raise the minimum wage without this differential, I think you will reduce employment. So, I think the main thing in the area you're talking about is: How do we increase economic opportunity? And maybe there is a way to do it, but I don't think it would be fair to say when you take a pay raise that affects a tiny fraction -- judges and Congressmen -- that that has a broad economic impact on the country. I've expressed some concern about it, but for other reasons.

Strategic Defense Initiative

Q. Do you agree with Senator Tower's [Secretary of Defense-designate] testimony in which he doesn't seem to believe that the SDI program, as envisioned by President Reagan, is likely? And if you do agree with it, can you expand on that, please?

The President. No, I think I should wait and see a little more what John Tower means. My position has not changed on SDI.

Q. Which is? I mean, John Tower has said that he doesn't believe that a large-scale SDI to protect the population, as envisioned by Reagan -- --

The President. I'd better -- --

Q. -- -- is likely.

The President. Saul, before I comment on Tower's testimony, I'd better read it. If he's talking about a shield so impenetrable that that eliminates the need for any kind of other defense, I probably would agree with that, certainly short-run. But I'd better cover by waiting until I see what he said.

The standees, two standees?

Afghanistan

Q. Thank you. The first action taken by your Secretary of State was to order the boarding up of the Embassy in Kabul. Does that indicate that this administration, this country, then, has no influence with the rebels and you are now fearful of chaos and massacres there? And to what extent did you discuss this with Gorbachev the other day?

The President. Did not discuss it with him the other day. And what it indicates is a prudent policy to protect a handful of American life. And it's a step that other countries have taken. In Afghanistan, certainly, I think we'd all agree there is uncertainty about what follows. I'm convinced the Soviets will continue their withdrawal, and well they should. But it is simply a prudent way in which to protect life, I think. We've had meeting after meeting with Afghan rebels, and there's no question in their mind how we feel about, say, a Soviet presence in that country. But I think there's a lot of uncertainty. And there's enough uncertainty that a Secretary of State was taking prudent action in this regard.

Q. What role do you see for the United States after the Soviets withdraw in that country?

The President. Catalytic role for helping bring about stability hopefully in a government where the people have a lot of say. And it won't be easy.

Yes, Tom [Tom DeFrank, Newsweek]?

Federal Pay Raise

Q. Mr. President, I'd like to try the pay raise one last time. As you just said, it's not just for Members of Congress and not just for Federal judges. It's for a lot of senior officials of the Government, political appointees. You also have told some reporters in recent days that you're concerned about the long-term pension implications of all these larger salaries. Wouldn't you be happier with a pay raise that's a little bit less rich than 50 percent?

The President. I don't have that option to get into that now. I have, I think, expressed myself in the past on separating out some of these categories, but regrettably you're never dealing with just the way I would like it to be. And so, I'll just leave it that -- my earlier statement.

First Days as President

Q. Sir, this is a thematic question. You've had a week on the job. Has it been easier or tougher than you expected? Any surprises? And did you find the note in your underwear drawer? [Laughter]

The President. No note in the underwear, and it's been a good, easy week. And I expect it will change dramatically in the days ahead. But my view is to -- if it weren't for the cold -- smile and enjoy it while you can, because I can already sense, you know, looking forward to a little more confrontation out there.

Q. Have there been any surprises, sir?

The President. None particularly, no. And I think one of the reasons is that I've been around here in a different role for 8 years and then in and out on other jobs. But there's still the wonder of it all. I mean, it still feels different, but not surprises.

Q. A followup, sir?

The President. You already had a followup. Nice try. [Laughter]

Rita [Rita Beamish, Associated Press]?

Drug Control Policy Director Bennett

Q. Mr. President, there seems to be some brouhaha about the fact that Bill Bennett's not an actual member of the Cabinet, as are the USTR [U.S. Trade Representative] and the OMB [Office of Management and Budget] Director. In light of the fact that you emphasized drugs as an overriding consideration in your campaign and also that public opinion polls show consistently this is among the top priorities of the public, why isn't he in the Cabinet? And do you foresee that you might change your mind on that?

The President. No. The reason he isn't in the Cabinet is that I tried to reduce down the numbers of full Cabinet members. And I think Bill Bennett's time is best spent not worrying about agricultural subsidies, when we have a meeting on agriculture, but concentrating on drugs. To the degree there's symbolism that this means I think it's less important, I'd like to knock that down hard. And I have to do that in substantive ways: sitting at his side as we meet with his peers at Cabinet level, making clear to them that I will be insisting on cooperation as he asks for the support of the Defense Secretary for military assets on interdiction, as he asks for the support of the Education Secretary on certain educational initiatives.

But the Cabinet rank is there, giving him the standing that I think the job not only requires but demands. And I think the idea of not sitting through Cabinet meetings that have nothing to do with that subject should be a rationale for having Cabinet level, but not being in all those meetings.

I'm glad he mentioned this because I think there's been some feeling, well, that means I'm less interested in drugs. That's not right. I'm very interested in the economic statistics, but our chief of economic advisers [Michael J. Boskin] is not a Cabinet member, as he's been designated by previous Presidents. Our Chief of Staff, in whom I have full confidence, is not a Cabinet member, but I think we have a very strong Chief of Staff setup.

Over here, way up in the window -- innovative standing.

Monetary Policy

Q. You just touched on the issue of Third World debt. There are many experts who are saying that if there's any danger for the U.S. economy it's in how greatly leveraged it is, both in terms of corporate indebtedness and Third World debt. And they say that the S L crisis, for example, is simply a subsumed feature of this. Do you see this as a real problem that you're going to address aggressively, and what kind of steps would you take to overcome the high proportionality of debt to equity that exists in the U.S. economy now?

The President. The question of corporate debt -- on that one, the role of the White House and the role of the Federal Government ought to be to do its level best to keep a strong economy. And I don't believe that it's the government role to assign levels beyond which a corporation can't borrow. In terms of Third World debt, we do have a responsibility, and a lot of that's going to be working with the private banks and others. And again, we'll have some recommendations; we have to have them pretty soon on that question.

I'm not sure I got to the substance of your question -- separating out these two things.

Q. Try another one.

Q. -- -- reported differences that you have with Alan Greenspan's [Federal Reserve Chairman] testimony in Congress earlier this week with regard to interest rates and monetary policy.

The President. I'll be honest with you. I don't think I'm far apart from Chairman Greenspan at all -- far apart. There may be some differences. Because of plant capacity, utilization, he is more concerned about inflationary pressures than I am right now. Seems to me, there's an area of difference, but basically and generally speaking, I think we're fairly close together.

Government Ethics

Q. Mr. President, by spending your first week dwelling as you have on ethics, aren't you voicing an implicit criticism of the Reagan administration's ethical record?

The President. No.

Q. Why else was it necessary to declare National Ethics Week, so to speak?

The President. Because I feel strongly about it.

Q. Can I follow on that line, sir?

The President. No, she's in first, and then you. Need to cool off on that one. [Laughter]

Savings and Loan Crisis

Q. Mr. President, given your strong antitax ban in the campaign, why are you allowing Mr. Brady [Secretary of the Treasury-designate] to consider as an option for the S L's a tax increase?

The President. I'm not. He has thrown out a lot of different possibilities in discussions we've had. We have people that are experts on what a tax is. I would refer you to Richard Darman, who is the head of the OMB. And he's the guy that defined that very well up there with the duck test on the Hill and -- --

Q. So, you're not thinking of a tax?

The President. Well, I'm just saying I'm not prepared to say what I think on it right now till I hear from it, because the more I discuss it, the more you all go out and say this is something that I'm considering when I'm not. It hasn't come to me yet. But I've been around for a long time, and I don't remember hearing people talk about the fee that went into covering the FDIC [Federal Deposit Insurance Corporation] or FSLIC [Federal Savings and Loan Insurance Corporation] as a tax. I don't remember people writing that before. But -- not trying to get into the fight anymore right now. I'll be back.

Government Ethics

Q. You've mentioned ethics in a number of ways, and you've talked about the value of service this year. The last 2 days we've picked up the headlines in the papers, and they've read President Reagan has a million book deal. He's got a ,000 a speech deal. With all respect for the office and the former President, do you think it's appropriate to cash in on the Presidency?

The President. I don't know whether I'd call it cashing in. I expect every President has written his memoirs and received money for it. Indeed, I read that a former President -- was it Grant? Grant got half a million bucks. That's when half a million really meant something. [Laughter] I mean, you know, so I think there is plenty of tradition that goes with Presidents' writing memoirs and being paid for it.

Q. But you've also talked about perceptions. Is there a perception problem here?

The President. No, because I think there has been a long history of that, and I don't think it's ever been challenged as inappropriate.

Secretary-Designate Sullivan

Q. Mr. President, would you try to clear up the continuing controversy over the reported disagreements on abortion between your nominee for Health and Human Services and yourself? Are you in sync?

The President. Yes.

Q. Is he in sync with you? Does it matter? Do you have to be absolutely in sync as long as once in office he would support your position?

The President. Well, I think that last point is the important point, but also, we are in sync. And so, I have a person who has stood in front of you all when I nominated him and said that, and I have no reason to think anything differently.

Tax Increases

Q. Mr. President, a few moments ago you talked about -- on your no-new-taxes pledge -- the idea that you'd like it to be a 4-year pledge, and that does appear to be a softening of language from the campaign. I wonder, has anybody -- Mr. Darman or any of your advisers -- told you to change your mind about the duration of that pledge -- revenues needed and so on?

The President. No, that hasn't changed my mind -- anything in the last few days of talking like that.

Abortion

Q. Mr. President, we've heard a lot about your position on abortion this week because of Mr. Sullivan. Are you planning any initiatives from the White House related to abortion? Or are you going to wait and see what the Supreme Court does, number one? And number two, as a person who's always, from what we know, had the financial and emotional resources to know that you could raise your children comfortably, do you feel any awkwardness about telling other people, whose situations you don't know, how they should run their lives?

The President. Not when it comes to the question of life. I do feel an awkwardness in terms of having been able to take care of my kids when they were sick or raise them properly or something like that. I feel a certain privilege. I was very fortunate in that regard, and I know a lot of people aren't. But on this issue, I think we're talking here of principle. And I sure would like to put the emphasis on adoption, and that means a broader acceptance of that principle.

Q. Are you going to have any White House initiatives, or are you going to wait for the Supreme Court?

The President. I think probably wait, but I have been pledged, as you know, to an amendment. But I'd like to see the Supreme Court decision as soon as possible.

One, two, three.

Iran-U.S. Relations

Q. Mr. President, a Teheran radio report this morning seems to indicate that they are rejecting your statement of a week ago today that good will would beget good will. While you didn't specifically mention Iran by name in your speech, what would your message to them be on relations, and what would your message be to them about helping get the hostages out?

The President. Well, I would make a broad appeal, transcending Iran, to anybody that can be helpful to get the hostages out. I haven't seen the wire copy, but if there is such a story by them, maybe they're saying, Well look, we're not holding your hostages. And I'd have to say, Well, from our intelligence, our information, that's probably correct -- probably correct. In terms of the future -- there was a period of time when we had excellent relations with Iran, and I don't want to think that the status quo has to go on forever. But I do think that the renunciation of terror in any form and a facilitating to the degree they can the release of the hostages would be a couple of good steps they could take.

Q. A followup, Mr. President -- follow up on that?

The President. No, you don't get to follow his question. [Laughter] Ann [Ann McFeatters, Scripps-Howard] and then here. We've got to get these ground rules -- sure.

Affirmative Action

Q. Mr. President, you've spoken frequently about reaching out to blacks, that you want that to be an important goal of your administration. This week the Supreme Court issued a decision that may kill many of the minority set-aside programs that have been so helpful to blacks across this country. Does that concern you? Are you worried about these programs?

The President. It didn't kill all set-asides, and it didn't kill off affirmative action. I have been committed to affirmative action. I want to see a reinvigorated Office of Minority Business in Commerce. I want to see our SBA [Small Business Administration] program go forward vigorously. And so, I would say that decision spoke to one set of facts -- in Richmond, I believe it was -- but I will not read into that a mandate to me to stop trying on equal employment and on affirmative action generally.

Capital Gains Taxes

Q. You said during the campaign, Mr. President, that you would roll back taxes on capital gains if elected. Now that you've begun to look at the budget numbers, is that going to be a promise you can keep when you make your submission to Congress, or is that no longer affordable?

The President. I hope it's affordable; it gains you revenue. And we've got a big argument with some people about that. They don't want to go back and look at what happened in 1978. It gains revenue. Now, I know we've got all kinds of bureaucracies around here that doesn't agree with that, but that was discussed in the campaign. I'm convinced it will bring in additional revenue and, in the process, create additional jobs for men and women. So, I would like to see it a fundamental part of whatever we do.

Now, if your question is: Can I get it done? -- that's something else again. But I want to see it done. There was an issue in our campaign where there was a clear difference. That was when there was a clear difference. The opposition was saying: My opponent is proposing something that'll cost the taxpayer billion. And I'm saying: It'll create jobs. And indeed, I've seen estimates by intelligent people thinking it'll bring in revenues in excess of billion. And so, I'm going to keep pushing that, because I know it's right, and I ran on it.

Federal Pay Raise

Q. Mr. President, once more on the pay raise. You've portrayed yourself as a latecomer on the issue who has no real power to affect it. But in point of fact, I believe that you do have the power, if you want to, to limit the pay raises that would otherwise automatically go to your own staff. Will you do that, number one? And number two, do you think both Houses of Congress ought to vote on this?

Q. Sununu already -- --

The President. Well, I think in the best of all worlds -- [laughter] -- wait until I get -- --

Mr. Fitzwater. It's a trick question, sir. [Laughter]

The President. He's a fairminded guy. [Laughter] No, I think our Chief of Staff has tried to hold the line in increases in hiring people. And I think you're all aware of that. And I think he's done a very good job on it. I don't know how the law affects the staff in terms of automatic increases, but there's a nice little problem that if you do go forward with automatic increases, or any money that has to be appropriated some way. So, we'll have to talk about what we'll do.

What was the other part of it?

Q. Do you think both Houses of Congress ought to vote on this issue?

The President. In a perfect world, in a world where you're starting over, yes, I'd have to say I do. But that isn't the proposal that's up there, and it's all or nothing. And in my view, I've told you where I come down on that.

We've got time for a couple of more, because it's 3857.89, 58.80 -- this thing is buzzing away up here.

Yes, go back -- --

Hostages in the Middle East

Q. Mr. President, a few minutes ago on the answer concerning the hostages, you indicated that Iran was probably not holding the hostages. Did you mean to say that we believe that Iran exercises no control over the people who are holding the hostages?

The President. No, I mean to say they are not holding the hostages. Do they have any control? I think you can get varying degrees of intelligence on that, various assessments as to how much control they have over Hizballah [radical Shi'ite terrorist group] or these families or whoever it is. And also, you've got different groups involved in the holding of these hostages. But, no, I'm glad to get a chance to clarify it because, unless the information I have is wrong, Iran itself, the government, is not actually holding these people. And if they were, I would just reiterate my view that the way to improve relations is to let them go, give these people their freedom. They didn't do anything wrong.

Q. And a followup, Mr. President. Do we believe that Iran can exercise influence to gain the hostages' release?

The President. I think they can have influence.

Defense Spending

Q. You inherited a budget from President Reagan that calls for something like a 2-percent real increase in defense spending. In the campaign, you seemed to think that maybe zero real growth in defense spending would be adequate. With deficit pressures, do you think there's some room for reduction in the Reagan defense budget to fund some of the other programs, like the S L problem that you've got to worry about?

The President. We're wrestling with that problem right now. I'm committed to a strong defense. I did say certain things in the campaign that fit into our flexible freeze concept. And so, I will have to address that with some detail on February 9th, and I will. We've got time for just a couple of more.

War on Drugs

Q. Mr. President, just the other day that education was the main way of dealing with drugs.

The President. Yes.

Q. Isn't that a backing away from your commitment on drugs? Certainly there are other things than education to deal with the problem.

The President. Absolutely. And I was surprised when I read that some interpreted what I said as suggesting that interdiction is not important, or cooperation with foreign governments in terms of eradication at the source is not important. They are very important. My point is: We are not going to solve the problem of drug use in this country through interdiction alone, through cutting off the supply alone. And a larger component of this solution lies in education, and in that whole demand side of the equation: law enforcement at home -- these things.

Last one here. This is a followup?

Q. It is a followup. But, Mr. President, how much money are you going to spend on drugs? If it's a major problem that you say it is, certainly education is just one very small part of it, isn't it?

The President. It's not a small part; it's a tremendous part. And the Federal Government can spend some on it, and the private sector has got to spend enormous amounts. The media has done a good job in terms of pro bono advertising, and that's got to be enormously stepped up. So, look, it has got to be a tremendous increase not only on the money but the emphasis on the educational side. I do want to find a way to step up the total funding on antinarcotics.

And I want to go back to what I said on Bill Bennett, because this question of Cabinet rank and whether that shows less an interest in narcotics troubles me. You will see me side by side with Bill Bennett, on putting the proper emphasis from the Oval Office on my determination to do everything in the Government's power, Federal Government's power, to eliminate this scourge.

Last one.

President's Agenda

Q. Mr. President, you and your aides have talked about the need for a fast start, and you've talked all week about ethics and about bipartisanship. And yet the week has been marked by unexpected controversies over Dr. Sullivan's views on abortion and then the S L issue, which is sort of a self-inflicted wound. Are you finding it harder to control the agenda here than you thought you would?

The President. No, no. I'm just getting a preview of coming attractions, and it's been lovely. [Laughter] And it's going to change, and I know it. But, no, I think it's been a wonderfully harmonious week, and these are just little ripples on the surface of an otherwise calm pond.

Q. You're not concerned that if you just talk about things that -- I mean, everyone approves of ethics, just about, and everyone approves of bipartisanship. Isn't there a danger of people saying that there's not much meat behind the words?

The President. There's a danger of that, yes, but people realize that we've been here 4 days of this week, or 5 -- this is the fifth day in office after the weekend. And they understand that in things like the foreign policy area that it's prudent to have a review. They understand that we've got to get our people in place. And so, there's some danger I guess, Carl [Carl Leubsdorf, Dallas Morning News], but I wouldn't say an overwhelming danger. I mean, we just go forward. If we just sat around and did nothing except be pleasant to people on the Hill or something, why I expect that would grow a little old for you all.

But we're going to -- [laughter] -- I think we set a certain tone and certain outreach and then go forward. As soon as these specific proposals start up there, whether it's on education or antinarcotics or on foreign policy or on some bilateral foreign visitor coming in, there will be plenty of time for controversy and plenty of time for lively debate on substance. But I would simply say that'll follow, and follow pretty soon.

Thank you all very much.

Note: The President's first news conference began at 11:02 a.m. in the Briefing Room at the White House. Marlin Fitzwater was Assistant to the President and Press Secretary.

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