President Reagan talks about economy, Soviets, Iran, PLO

Q. Economic forecasters say there's very little you can do to bring down the rate of inflation. Do you think that you can defy the experts and, if so, by how much?

A. It's pretty hard to tell by how much because it does take some time. I think I have to talk about the balance of the fiscal year, which ends Oct. 1, and how quickly our economies will begin to bear fruit.

We've got to reduce the burden of government, the percentage of earnings and the gross national product that it is taking. We have to increase productivity and our tax policies and the cuts in spending are aimed at accomplishing those two things. And I believe as we begin to do that, inflation will come down, and maybe even as they see it happening, psychologically there might be a help in it being brought down.

You also seem to be dampening hopes that you can put a quick fix on the economy. But didn't you yourself during the campaign raise these hopes?

Well, yes, but our plan envisioned balancing the budget by 1983. I said that we had hopes that we could do it even sooner than that. I have not retreated from the 1983 figure, nor have any of our people. Now, that's hardly a quick fix, but I'm not as optimistic about advancing it beyond that because since I introduced that economic plan, there was a drastic change in the size of the budget and in the estimate of revenues.

When I made that, if I recall correctly, the previous administration was talking about roughly a $600 or $605 billion budget and they had a pretty good estimate of what revenues were going to be. Now and before they left, we suddenly find ourselves with a vastly increased budget, but at the same time, a decreased estimate in what revenues are going to be. So, what we had thought that our cuts in the economy, which as I said would be 2 percent -- and we're still aiming at that -- will not be as big. They will not cut into a deficit that we thought was only going to be a $20- odd billion and is now going to be in the neighborhood of $60 billion. That's not going to have that big an effect.

You have heard the argument about whether tax cuts come first, or the budget is cut first, or whether they go together. Where does the President stand on that?

They go together. We've tried the other way. And I do believe in supply side economics and I think all the evidence shows it.

You've hinted that you would use arms to prevent any Soviet move in the Persian Gulf to cut off oil to the United States. Are we capable now militarily of backing up that threat?

Well, no. Now, it was the President that said during the campaign that we'd use armed force in the Persian Gulf area. He had to admit a short time later that we didn't have the force to do this.

What I have called for -- and what I think is needed as we refurbish our capability -- is a presence in the Middle East. And I think this is something we ought to also take up with our own allies in Europe because there would be total disaster to the European economy if there was an interference with the energy supply from there. They're far more dependent on it than we are.

What is meant by a presence is that we're there enough to know, or for the Soviets to know, that if they made a reckless move they would be risking a confrontation with the United States.

Why wouldn't such a presence simply be an empty threat that the Soviets could see through?

Well, you don't just plant a flag in the ground and walk away and leave it. There would be Americans there, and I think there should be a kind of an American presence. That's what we're doing right now with the Navy in the Indian Ocean.But I think we need a ground presence also. But it's based on the assumption, and I think a correct assumption, that the Soviet Union is not ready yet to take on that confrontation which could become World War III.

Is not the foreign aid bill essential to that presence?

Yes, I'm quite sure it does figure in there. And here again was another little case of bureaucracy at work. We set up a process whereby Dave Stockman is to review the budget and he's to take these up with the Cabinet officers that are directly involved. And they work on this whole project. Finally, it comes to the entire Cabinet and myself for everyone's input and, finally, my decision.

But what Dave Stockman had -- this was at the first stage of this process that someone threw this out as if it was an accomplished fact and that we had decided to do this. No decision has been made. But also, I think in Dave's behalf, it must be pointed out that the Carter administration had left us with a 34 percent increase in that program in foreign aid in the 1982 budget. And his cut simply is a reduction of that increase. In other words, it's not saying we are now going to spend less in foreign aid than we've been spending. It was to say we're not going to increase to the extent that they had planned.

Why such harsh language in your press conference about the Soviet Union?

I wouldn't have opened my mouth if they hadn't asked the question.

They don't subscribe to our sense of morality because they don't believe in any of the good things. They don't believe in an afterlife. They don't believe in a god or a religion. And that the only morality they recognize, therefore, is what will advance the cause of socialism. And thus they reserve unto themselves the right to do anything that will advance it, and that's not immoral. And I just felt that when they say that we're pretty naive if we, who operate on a basis that if you make a pledge to a man or shake his hand you've got a deal, and that, you keep that deal, that we're pretty naive if we don't recognize that we are talking business with someone who does not operate on that basis.

Now, they've come snarling back at me and charged me with lies and everything else. But I haven't heard them refute what I said.

In Israel, there appears to be an accelerated settling on the West Bank. Do you approve of that? And is yours an even-handed policy in the Mideast? Or do you, as many in the Jewish community in the United States seem to feel, tilt toward Israel?

Well, since it's tilting toward Israel, I believe that we have, No. 1: a moral commitment to see that the State of Israel has a right to continue living as a nation. But beyond that, I think it's also a two-way street. I think that Israel, being a country sharing our same ideals, our same democratic approach to things with a combat-ready and even a combat-experienced military, is a force in the Middle East that actually is a benefit to us. If there were no Israel with that force, we'd have to supply that with our own. So, this isn't just altruism on our part in this moral obligation. But I also feel that morally, the United States should do everything it can in an even- handed manner to bring peace to the Middle East.

Now this, based on our first commitment, means that we have to get over the hurdle of those nations in the Middle East that refuse to recognize the right of Israel to exist. Peace will come when that first step is taken.

As to the West Bank and the settlement there, I disagree with the previous administration as they referred to them as illegal. They're not illegal -- not under the UN resolutions that leaves the West Bank open to all people, Arab and Israeli alike, Christian alike, and then when peace comes, to be -- the West Bank to be decided. I do think, perhaps now, this rush to do it and this moving in there the way they are is ill-advised, because if we're going to continue in the spirit of Camp David to try to arrive at peace, maybe this at this time is unnecessarily provocative.

You talked about the moral obligations toward Israel. Do you have any sympathy toward the Palestinians or any moral feeling towards them and their aspirations toward some sort of entity?

No. I can recognize that and I know that that's got to be a part of any settlement. Here again there is the outspoken utterance that Israel doesn't have a right to exist. There is the terrorism that is being practiced by the PLO. Of course, I never thought that the PLO had ever been elected by the Palestinians. Maybe it is recognized by them as their leadership, but I've never seen that that's been definitely established. But again, it starts with the acceptance of Israel as a nation.

Have you had a chance to look over the agreement with Iran on the hostages? What's your reaction?

Let me say that I just believe that we got off on the wrong track with those negotiations to begin with. The negotiations started from the standpoint -- well, first of all, the first reply that we made was a proper reply: There will be no negotiations until the hostages are returned. And then we violated that and we went into negotiations. But it was always negotiating the other fellow's demand. If they were kidnappers, they were the ones who broke international law , who committed actually an act of war. And it seems to me that way back there, some place, we should have had a demand also that said: "We want to talk about our demand, and here's the price that we put on your keeping them." So, I don't think I would have been faced with that.

You suggested or hinted at in your press conference that there would be some steps taken in reviewing the situation and plans to prevent this.

Well, we've not had the meeting. But I've ordered a study of this entire matter. We have not had an opportunity to see the results of that study and go over it with those who've been making the study. There are -- I think the things that were already implemented -- exchange of money and so forth.There's no question about that. But there were some executive orders applying to our own people, that I want checked out with regard to not only international law, but our own law. And to see what they do about ordering American citizens to do certain things both with regard to the Shah's personal fortune, giving up rights to -- how do we give up the right of an individual to sue for damages?

Talk about the fact, though, for the future about the danger to those both in embassies and our people around the globe. Do you have any ideas at this time on how to definitely respond when something like this happens?

Well, these are the questions that I will want to be discussing with Al Haig, and with Caspar Weinberger, and others, and also with our own intelligence services. No. 1: a better feeling for the attitude. We apparently had warnings that this could happen, and we ignored them. We can withdraw people from our embassy, or we can strengthen our defenses for an embassy, our security forces. But this calls for having maybe better intelligence than we've been having in the past adopted. And then I think each one has to be determined. You can't set policy. I think each one has to be determined on its own as to whether this is one in which you say "We've got to bring the people home for a while," or whether it's just sending in some added people, or whether just some strong diplomatic approaches to them would do it.

You've said on the subject of SALT that you were not so much interested in the ceilings but you were interested in disarmament, cutting back on nuclear arms. If you really believe in this and would like to work for disarmament, how does this square with your move now to build up your military?

Well, because we have to face reality as it is now. We sat at a negotiating table for a long time for SALT I and SALT II. And during that time the Soviet Union made the greatest military buildup in the history of man, while we were sitting there, supposedly negotiating limitations. Now, I think that when you sit down at a table to negotiate that, they should be under no illusions that you lack the will and the determination to keep your defenses strong.

So we're going to do what we have to do to be able to say to ourselves, "We have the defensive capability that is required for our national security."

But disarmament is a goal that you'll work for?

Yes, particularly the nuclear and strategic armaments. And it doesn't make sense to me to call it SALT, strategic arms limitation treaty, when they would be authorized to add multiple warheads and we could go forward with the MX missile. If we're going to have an arms race, we might as well have it in our best interests and not be encumbered by a treaty that means nothing.