Tonight I want to examine in a broad sense the state of our American
Union--how we are building a new foundation for a peaceful and a prosperous
world.

Our children who will be born this year will come of age in the 21st
century. What kind of society, what kind of world are we building for them?
Will we ourselves be at peace? Will our children enjoy a better quality of
life? Will a strong and united America still be a force for freedom and
prosperity around the world?

Tonight, there is every sign that the state of our Union is sound.

Our economy offers greater prosperity for more of our people than ever
before. Real per capita income and real business profits have risen
substantially in the last 2 years. Farm exports are setting an all-time
record each year, and farm income last year, net farm income, was up more
than 25 percent.

Our liberties are secure. Our military defenses are strong and growing
stronger. And more importantly, tonight, America--our beloved country--is
at peace.

Our earliest national commitments, modified and reshaped by succeeding
generations, have served us well. But the problems that we face today are
different from those that confronted earlier generations of Americans. They
are more subtle, more complex, and more interrelated. At home, we are
recognizing ever more clearly that government alone cannot solve these
problems. And abroad, few of them can be solved by the United States alone.
But Americans as a united people, working with our allies and friends, have
never been afraid to face problems and to solve problems, either here or
abroad.

The challenge to us is to build a new and firmer foundation for the
future--for a sound economy, for a more effective government, for more
political trust, and for a stable peace--so that the America our children
inherit will be even stronger and even better than it is today.

We cannot resort to simplistic or extreme solutions which substitute myths
for common sense.

In our economy, it is a myth that we must choose endlessly between
inflation and recession. Together, we build the foundation for a strong
economy, with lower inflation, without contriving either a recession with
its high unemployment or unworkable, mandatory government controls.

In our government, it is a myth that we must choose between compassion and
competence. Together, we build the foundation for a government that works,
and works for people.

In our relations with our potential adversaries, it is a myth that we must
choose between confrontation and capitulation. Together, we build the
foundation for a stable world of both diversity and peace.

Together, we've already begun to build the foundation for confidence in our
economic system. During the last 2 years, in bringing our economy out of
the deepest recession since the 1930's, we've created 7,100,000 new jobs.
The unemployment rate has gone down 25 percent. And now we must redouble
our fight against the persistent inflation that has wracked our country for
more than a decade. That's our important domestic issue, and we must do it
together.

We know that inflation is a burden for all Americans, but it's a disaster
for the poor, the sick, and the old. No American family should be forced to
choose among food, warmth, health care, or decent housing because the cost
of any of these basic necessities has climbed out of reach.

Three months ago, I outlined to the Nation a balanced anti-inflation
program that couples responsible government restraint with responsible wage
and price restraint. It's based upon my knowledge that there is a more
powerful force than government compulsion--the force created by the
cooperative efforts of millions of Americans working toward a common goal.

Business and labor have been increasingly supportive. It's imperative that
we in government do our part. We must stop excessive government growth, and
we must control government spending habits.

I've sent to this Congress a stringent but a fair budget, one that, since I
ran for President in 1976, will have cut the Federal deficit in half. And
as a percentage of our gross national product, the deficit will have
dropped by almost 75 percent.

This Congress had a good record last year, and I now ask the 96th Congress
to continue this partnership in holding the line on excess Federal
spending. It will not be easy. But we must be strong, and we must be
persistent.

This budget is a clear message that, with the help of you and the American
people, I am determined, as President, to bring inflation under control.

The 1980 budget provides enough spending restraint to begin unwinding
inflation, but enough support for our country to keep American workers
productive and to encourage the investments that provide new jobs. We will
continue to mobilize our Nation's resources to reduce our trade deficit
substantially this year and to maintain the strength of the American
dollar.

We've demonstrated in this restrained budget that we can build on the gains
of the past 2 years to provide additional support to educate disadvantaged
children, to care for the elderly, to provide nutrition and legal services
for the poor, and to strengthen the economic base of our urban communities
and, also, our rural areas.

This year, we will take our first steps to develop a national health plan.

We must never accept a permanent group of unemployed Americans, with no
hope and no stake in building our society. For those left out of the
economy because of discrimination, a lack of skills, or poverty, we must
maintain high levels of training, and we must continue to provide jobs.

A responsible budget is not our only weapon to control inflation. We must
act now to protect all Americans from health care costs that are rising $1
million per hour, 24 hours a day, doubling every 5 years. We must take
control of the largest contributor to that inflation: skyrocketing hospital
costs.

There will be no clearer test of the commitment of this Congress to the
anti-inflation fight than the legislation that I will submit again this
year to hold down inflation in hospital care.

Over the next 5 years, my proposals will save Americans a total of $60
billion, of which $25 billion will be savings to the American taxpayer in
the Federal budget itself. The American people have waited long enough.
This year we must act on hospital cost containment.

We must also fight inflation by improvements and better enforcement of our
antitrust laws and by reducing government obstacles to competition in the
private sector.

We must begin to scrutinize the overall effect of regulation in our
economy. Through deregulation of the airline industry we've increased
profits, cut prices for all Americans, and begun--for one of the few times
in the history of our Nation--to actually dismantle a major Federal
bureaucracy. This year, we must begin the effort to reform our regulatory
processes for the railroad, bus, and the trucking industries.

America has the greatest economic system in the world. Let's reduce
government interference and give it a chance to work.

I call on Congress to take other anti-inflation action--to expand our
exports to protect American jobs threatened by unfair trade, to conserve
energy, to increase production and to speed development of solar power, and
to reassess our Nation's technological superiority. American workers who
enlist in the fight against inflation deserve not just our gratitude, but
they deserve the protection of the real wage insurance proposal that I have
already made to the Congress.

To be successful, we must change our attitudes as well as our policies. We
cannot afford to live beyond our means. We cannot afford to create programs
that we can neither manage nor finance, or to waste our natural resources,
and we cannot tolerate mismanagement and fraud. Above all, we must meet the
challenges of inflation as a united people.

With the support of the American people, government in recent decades has
helped to dismantle racial barriers, has provided assistance for the
jobless and the retired, has fed the hungry, has protected the safety,
health, and bargaining rights of American workers, and has helped to
preserve our natural heritage.

But it's not enough to have created a lot of government programs. Now we
must make the good programs more effective and improve or weed out those
which are wasteful or unnecessary.

With the support of the Congress, we've begun to reorganize and to get
control of the bureaucracy. We are reforming the civil service system, so
that we can recognize and reward those who do a good job and correct or
remove those who do not.

This year, we must extend major reorganization efforts to education, to
economic development, and to the management of our natural resources. We
need to enact a sunshine [sunset] law that when government programs have
outlived their value, they will automatically be terminated.

There's no such thing as an effective and a noncontroversial reorganization
and reform. But we know that honest, effective government is essential to
restore public faith in our public action.

None of us can be satisfied when two-thirds of the American citizens chose
not to vote last year in a national election. Too many Americans feel
powerless against the influence of private lobbying groups and the
unbelievable flood of private campaign money which threatens our electoral
process.

This year, we must regain the public's faith by requiring limited financial
funds from public funds for congressional election campaigns. House bill 1
provides for this public financing of campaigns. And I look forward with a
great deal of anticipation to signing it at an early date.

A strong economy and an effective government will restore confidence in
America. But the path of the future must be charted in peace. We must
continue to build a new and a firm foundation for a stable world
community.

We are building that new foundation from a position of national
strength--the strength of our own defenses, the strength of our friendships
with other nations, and of our oldest American ideals.

America's military power is a major force for security and stability in the
world. We must maintain our strategic capability and continue the progress
of the last 2 years with our NATO Allies, with whom we have increased our
readiness, modernized our equipment, and strengthened our defense forces in
Europe. I urge you to support the strong defense budget which I have
proposed to the Congress.

But our national security in this complicated age requires more than just
military might. In less than a lifetime, world population has more than
doubled, colonial empires have disappeared, and a hundred new nations have
been born, and migration to the world's cities have all awakened new
yearnings for economic justice and human rights among people everywhere.

This demand for justice and human rights is a wave of the future. In such a
world, the choice is not which super power will dominate the world. None
can and none will. The choice instead is between a world of anarchy and
destruction, or a world of cooperation and peace.

In such a world, we seek not to stifle inevitable change, but to influence
its course in helpful and constructive ways that enhance our values, our
national interests, and the cause of peace.

Towering over this volatile, changing world, like a thundercloud on a
summer day, looms the awesome power of nuclear weapons.

We will continue to help shape the forces of change, to anticipate emerging
problems of nuclear proliferation and conventional arms sales, and to use
our great strength parts of the world before they erupt and spread.

We have no desire to be the world's policeman. But America does want to be
the world's peacemaker.

We are building the foundation for truly global cooperation, not only with
Western and industrialized nations but with the developing countries as
well. Our ties with Japan and our European allies are stronger than ever,
and so are our friendly relations with the people of Latin America, Africa,
and the Western Pacific and Asia.

We've won new respect in this hemisphere with the Panama Canal treaties.
We've gained new trust with the developing world through our opposition to
racism, our commitment to human rights, and our support for majority rule
in Africa.

The multilateral trade negotiations are now reaching a successful
conclusion, and congressional approval is essential to the economic
well-being of our own country and of the world. This will be one of our top
priorities in 1979.

We are entering a hopeful era in our relations with one-fourth of the
world's people who live in China. The presence of Vice Premier Deng
Xiaoping next week will help to inaugurate that new era. And with prompt
congressional action on authorizing legislation, we will continue our
commitment to a prosperous, peaceful, and secure life for the people of
Taiwan.

I'm grateful that in the past year, as in the year before, no American has
died in combat anywhere in the world. And in Iran, Nicaragua, Cyprus,
Namibia, and Rhodesia, our country is working for peaceful solutions to
dangerous conflicts.

In the Middle East, under the most difficult circumstances, we have sought
to help ancient enemies lay aside deep-seated differences that have
produced four bitter wars in our lifetime.

Our firm commitment to Israel's survival and security is rooted in our
deepest convictions and in our knowledge of the strategic importance to our
own Nation of a stable Middle East. To promote peace and reconciliation in
the region, we must retain the trust and the confidence both of Israel and
also of the Arab nations that are sincerely searching for peace.

I am determined, as President, to use the full, beneficial influence of our
country so that the precious opportunity for lasting peace between Israel
and Egypt will not be lost.

The new foundation of international cooperation that we seek excludes no
nation. Cooperation with the Soviet Union serves the cause of peace, for in
this nuclear age, world peace must include peace between the super
powers--and it must mean the control of nuclear arms.

Ten years ago, the United States and the Soviet Union made the historic
decision to open the strategic arms limitations talks, or SALT. The purpose
of SALT, then as now, is not to gain a unilateral advantage for either
nation, but to protect the security of both nations, to reverse the costly
and dangerous momentum of the nuclear arms race, to preserve a stable
balance of nuclear forces, and to demonstrate to a concerned world that we
are determined to help preserve the peace.

The first SALT agreement was concluded in 1972. And since then, during 6
years of negotiation by both Republican and Democratic leaders, nearly all
issues of SALT II have been resolved. If the Soviet Union continues to
negotiate in good faith, a responsible SALT agreement will be reached.

It's important that the American people understand the nature of the SALT
process.

SALT II is not based on sentiment; it's based on self-interest--of the
United States and of the Soviet Union. Both nations share a powerful common
interest in reducing the threat of a nuclear war. I will sign no agreement
which does not enhance our national security.

SALT II does not rely on trust; it will be verifiable. We have very
sophisticated, proven means, including our satellites, to determine for
ourselves whether or not the Soviet Union is meeting its treaty
obligations. I will sign no agreement which cannot be verified.

The American nuclear deterrent will remain strong after SALT II. For
example, just one of our relatively invulnerable Poseidon
submarines--comprising less than 2 percent of our total nuclear force of
submarines, aircraft, and land-based missiles--carries enough warheads to
destroy every large- and medium-sized city in the Soviet Union. Our
deterrent is overwhelming, and I will sign no agreement unless our deterrent
force will remain overwhelming.

A SALT agreement, of course, cannot substitute for wise diplomacy or a
strong defense, nor will it end the danger of nuclear war. But it will
certainly reduce that danger. It will strengthen our efforts to ban nuclear
tests and to stop the spread of atomic weapons to other nations. And it can
begin the process of negotiating new agreements which will further limit
nuclear arms.

The path of arms control, backed by a strong defense, the path our Nation
and every President has walked for 30 years, can lead to a world of law and
of international negotiation and consultation in which all peoples might
live in peace. In this year 1979, nothing is more important than that the
Congress and the people of the United States resolve to continue with me on
that path of nuclear arms control and world peace. This is paramount.

I've outlined some of the changes that have transformed the world and which
are continuing as we meet here tonight. But we in America need not fear
change. The values on which our Nation was founded: individual liberty,
self-determination, the potential for human fulfillment in freedom, all of
these endure. We find these democratic principles praised, even in books
smuggled out of totalitarian nations and on wallposters in lands which we
thought were closed to our influence. Our country has regained its special
place of leadership in the worldwide struggle for human rights. And that is
a commitment that we must keep at home, as well as abroad.

The civil rights revolution freed all Americans, black and white, but its
full promise still remains unrealized. I will continue to work with all my
strength for equal opportunity for all Americans--and for affirmative
action for those who carry the extra burden of past denial of equal
opportunity.

We remain committed to improving our labor laws to better protect the
rights of American workers. And our Nation must make it clear that the
legal rights of women as citizens are guaranteed under the laws of our land
by ratifying the equal rights amendment.

As long as I'm President, at home and around the world America's examples
and America's influence will be marshaled to advance the cause of human
rights.

To establish those values, two centuries ago a bold generation of Americans
risked their property, their position, and life itself. We are their heirs,
and they are sending us a message across the centuries. The words they made
so vivid are now growing faintly indistinct, because they are not heard
often enough. They are words like "justice," "equality," "unity," "truth,"
"sacrifice," "liberty," "faith," and "love."

These words remind us that the duty of our generation of Americans is to
renew our Nation's faith, not focused just against foreign threats but
against the threats of selfishness, cynicism, and apathy.

The new foundation I've discussed tonight can help us build a nation and a
world where every child is nurtured and can look to the future with hope,
where the resources now wasted on war can be turned towards meeting human
needs, where all people have enough to eat, a decent home, and protection
against disease.

It can help us build a nation and a world where all people are free to seek
the truth and to add to human understanding, so that all of us may live our
lives in peace.

Tonight, I ask you, the Members of the Congress, to join me in building
that new foundation, a better foundation, for our beloved country and our
world.

Thank you very much.