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Our budget will help meet it by being expansionary without being inflationary a job-producing budget that will help take up the gap as the economy expands to full employment. Our program to raise farm income will help meet it by helping to revitalize rural America, by giving to America's farmers their fair share of America's increasing productivity.
At this time, it is essential not only that the Federal budget be balanced, but also that there be a substantial surplus to reduce inflationary pressures, and to permit a sizable reduction in the national debt, which now stands at $252 billion. I recommend, therefore, that the Congress enact new tax legislation to bring in an additional $4 billion of Government revenue.
Only a reduction in spending can make it possible for the Federal Reserve System to avoid an inflationary growth in the money supply and thus restore balance to our economy. A major reduction in the growth of Federal spending can help dispel the uncertainty that so many feel about our economy and put us on the way to curing our economic ills.
To offset inflationary distortions and to generate more economic activity, the corporate tax rate will be reduced from 48 percent to 42 percent. Now let me turn, if I might, to the international dimension of the present crisis. At no time in our peacetime history has the state of the Nation depended more heavily on the state of the world.
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.
In countries devoid of inflation accounting, nominal gains are fully taxed though they reflect the rise in the general price level rather than any growth in income. Even where inflation accounting is introduced, inflationary profits are taxed. Thus inflation increases the state's revenues while eroding the real value of its debts, obligations, and expenditures denominated in local currency.
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.
I know they are as wholehearted in their patriotism as any other group. They have suffered from the constant fluctuations of farm prices occasionally too high, more often too low. Nobody knows better than farmers the disastrous effects of wartime inflationary booms, and postwar deflationary panics. So I have also suggested today that the Congress make our agricultural economy more stable.
We must move away from inflationary cost-based reimbursement and fee-for-service, and toward a system of prospective reimbursement, under which health care providers would operate within predetermined budgets. This reimbursement reform is essential to ultimately control inflation in health care costs, and will be a significant challenge to the new Congress.
To offset inflationary distortions and to generate more economic activity, the corporate tax rate will be reduced from 48 percent to 42 percent. Now let me turn, if I might, to the international dimension of the present crisis. At no time in our peacetime history has the state of the Nation depended more heavily on the state of the world.
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