This recovery will bring with it a revival of economic confidence and spending for consumer items and capital goods—­the stimulus we need to restart our stalled economic engines.  The American people have already stepped up their rate of saving, assuring that the funds needed to modernize our factories and improve our technology will once again flow to business and industry.

The inflationary expectations that led to a 21 1/2-percent interest prime rate and soaring mortgage rates 2 years ago are now reduced by almost half.  Leaders have started to realize that double-digit inflation is no longer a way of life.  I misspoke there.  I should have said “lenders.”

So, interest rates have tumbled, paving the way for recovery in vital industries like housing and autos.

The early evidence of that recovery has started coming in.  Housing starts for the fourth quarter of 1982 were up 45 percent from a year ago, and housing permits, a sure indicator of future growth, were up a whopping 60 percent.

We’re witnessing an upsurge of productivity and impressive evidence that American industry will once again become competitive in markets at home and abroad, ensuring more jobs and better incomes for the Nation’s work force.  But our confidence must also be tempered by realism and patience.  Quick fixes and artificial stimulants repeatedly applied over decades are what brought us the inflationary disorders that we’ve now paid such a heavy price to cure.

The permanent recovery in employment, production, and investment we seek won’t come in a sharp, short spurt.  It’ll build carefully and steadily in the months and years ahead.  In the meantime, the challenge of government is to identify the things that we can do now to ease the massive economic transition for the American people.

The Federal budget is both a symptom and a cause of our economic problems.  Unless we reduce the dangerous growth rate in government spending, we could face the prospect of sluggish economic growth into the indefinite future.  Failure to cope with this problem now could mean as much as a trillion dollars more in national debt in the next 4 years alone.  That would average $4,300 in additional debt for every man, woman, child, and baby in our nation.

To assure a sustained recovery, we must continue getting runaway spending under control to bring those deficits down.  If we don’t, the recovery will be too short, unemployment will remain too high, and we will leave an unconscionable burden of national debt for our children.  That we must not do.

Let’s be clear about where the deficit problem comes from.  Contrary to the drumbeat we’ve been hearing for the last few months, the deficits we face are not rooted in defense spending.  Taken as a percentage of the gross national product, our defense spending happens to be only about four-fifths of what it was in 1970.  Nor is the deficit, as some would have it, rooted in tax cuts.  Even with our tax cuts, taxes as a fraction of gross national product remain about the same as they were in 1970.  The fact is, our deficits come from the uncontrolled growth of the budget for domestic spending.