Economic Report of the President

to $27.5 billion in the new budget for fiscal year 1982, and reduce itstill further to $8 billion in 1983, despite the substantial increases indefense spending which I find it necessary to recommend for thoseyears:• Beyond exerting strict control over requests for new appropriationsfor ongoing programs, my 1982 budget sets forth a detailedlist of requests to the Congress for the legislation neededto pare some $9 billion in spending in both fiscal 1982 and fiscal1983. If enacted, these savings would help make possible a reductionin the share of GNP taken by Federal spending from23.3 percent in 1981 to 23.0 percent in 1982 and 22.6 percent in1983.• The personal tax reductions which I am proposing should takeeffect on January 1, 1982, rather than at some earlier date in1981.• I am renewing my request to the Congress for a modest increasein the tax on gasoline; there is no better way to provide additionalrevenues for reducing the budget deficit than a measurewhich simultaneously reduces our imports of foreign oil.• I still strongly support the national health insurance proposal that Iearlier submitted to the Congress, but the need for budgetaryrestraint to control inflation requires that its introduction bedelayed until more budgetary room is available and adequate costcontainment is in place.In order to avoid repetition of the recent situation in which manyFederal payments rose too rapidly because they are tied to an indexwhich does not accurately reflect changes in the cost of living, I amrecommending that the Congress authorize use of a more representativeindex. I am informed by the Commissioner that the Bureau ofLabor Statistics is now producing an index of this type and that it canquickly be made available on a timely basis.Although my 1982 budget emphasizes the need for fiscal restraint,and for reduction of the deficit, it also takes the first major step in along-term program of tax reductions aimed at increasing capital formation.The causes of the longer-term slowdown in productivity growth aremany—and some of them are still unknown. But a major depressingfactor has been the failure of the Nation's capital stock to increaserelative to its rapidly growing labor force in the past 5 or 6 years.Unlike earlier periods, American workers have not been working withincreasing amounts of capital. Improving the trend of productivitygrowth will require restoring the growth of capital per worker.Higher investment will also be critically required throughoutAmerica's energy-using industries to speed up the replacement of10