Now we know that deficits are a cause for worry.  But there’s a difference of opinion as to whether taxes should be increased, spending cut, or some of both.  Fear is expressed that government borrowing to fund the deficit could inhibit the economic recovery by taking capital needed for business and industrial expansion.  Well, I think that debate is missing an important point.  Whether government borrows or increases taxes, it will be taking the same amount of money from the private sector, and, either way, that’s too much.  Simple fairness dictates that government must not raise taxes on families struggling to pay their bills.  The root of the problem is that government’s share is more than we can afford if we’re to have a sound economy.

We must bring down the deficits to ensure continued economic growth.  In the budget that I will submit on February 1st, I will recommend measures that will reduce the deficit over the next 5 years.  Many of these will be unfinished business from last year’s budget.

Some could be enacted quickly if we could join in a serious effort to address this problem.  I spoke today with Speaker of the House O’Neill, Senate Majority Leader Baker, Senate Minority Leader Byrd, and House Minority Leader Michel.  I asked them if they would designate congressional representatives to meet with representatives of the administration to try to reach prompt agreement on a bipartisan deficit reduction plan.  I know it would take a long, hard struggle to agree on a full-scale plan.  So, what I have proposed is that we first see if we can agree on a down payment.

Now, I believe there is basis for such an agreement, one that could reduce the deficits by about a hundred billion dollars over the next 3 years.  We could focus on some of the less contentious spending cuts that are still pending before the Congress.  These could be combined with measures to close certain tax loopholes, measures that the Treasury Department has previously said to be worthy of support.  In addition, we could examine the possibility of achieving further outlay savings based on the work of the Grace commission.

If the congressional leadership is willing, my representatives will be prepared to meet with theirs at the earliest possible time.  I would hope the leadership might agree on an expedited timetable in which to develop and enact that down payment.

But a down payment alone is not enough to break us out of the deficit problem.  It could help us start on the right path.  Yet, we must do more.  So, I propose that we begin exploring how together we can make structural reforms to curb the built-in growth of spending.

I also propose improvements in the budgeting process.  Some 43 of our 50 States grant their Governors the right to veto individual items in appropriation bills without having to veto the entire bill.  California is one of those 43 States.  As Governor, I found this line-item veto was a powerful tool against wasteful or extravagant spending.  It works in 43 States.  Let’s put it to work in Washington for all the people.