Mr. Vice President, my old colleague from Massachusetts and your new
Speaker, John McCormack, Members of the 87th Congress, ladies and
gentlemen:

This week we begin anew our joint and separate efforts to build the
American future. But, sadly, we build without a man who linked a long past
with the present and looked strongly to the future. "Mister Sam" Rayburn is
gone. Neither this House nor the Nation is the same without him.

Members of the Congress, the Constitution makes us not rivals for power but
partners for progress. We are all trustees for the American people,
custodians of the American heritage. It is my task to report the State of
the Union--to improve it is the task of us all.

In the past year, I have traveled not only across our own land but to
other lands--to the North and the South, and across the seas. And I have
found--as I am sure you have, in your travels--that people everywhere,
in spite of occasional disappointments, look to us--not to our wealth or
power, but to the splendor of our ideals. For our Nation is commissioned
by history to be either an observer of freedom's failure or the cause of
its success. Our overriding obligation in the months ahead is to fulfill
the world's hopes by fulfilling our own faith.

I. STRENGTHENING THE ECONOMY

That task must begin at home. For if we cannot fulfill our own ideals here,
we cannot expect others to accept them. And when the youngest child alive
today has grown to the cares of manhood, our position in the world will
be determined first of all by what provisions we make today--for his
education, his health, and his opportunities for a good home and a good
job and a good life.

At home, we began the year in the valley of recession--we completed it on
the high road of recovery and growth. With the help of new Congressionally
approved or Administratively increased stimulants to our economy, the
number of major surplus labor areas has declined from 101 to 60;
non-agricultural employment has increased by more than a million jobs; and
the average factory work-week has risen to well over 40 hours. At year's
end the economy which Mr. Khrushchev once called a "stumbling horse" was
racing to new records in consumer spending, labor income, and industrial
production.

We are gratified--but we are not satisfied. Too many unemployed are still
looking for the blessings of prosperity. As those who leave our schools and
farms demand new jobs, automation takes old jobs away. To expand our growth
and job opportunities, I urge on the Congress three measures:

(1) First, the Manpower Training and Development Act, to stop the waste of
able-bodied men and women who want to work, but whose only skill has been
replaced by a machine, or moved with a mill, or shut down with a mine;

(2) Second, the Youth Employment Opportunities Act, to help train and place
not only the one million young Americans who are both out of school and out
of work, but the twenty-six million young Americans entering the labor
market in this decade; and

(3) Third, the 8 percent tax credit for investment in machinery and
equipment, which, combined with planned revisions of depreciation
allowances, will spur our modernization, our growth, and our ability to
compete abroad.

Moreover--pleasant as it may be to bask in the warmth of recovery--let us
not forget that we have suffered three recessions in the last 7 years. The
time to repair the roof is when the sun is shining--by filling three basic
gaps in our anti-recession protection. We need:

(1) First, Presidential stand-by authority, subject to Congressional veto,
to adjust personal income tax rates downward within a specified range and
time, to slow down an economic decline before it has dragged us all down;

(2) Second, Presidential stand-by authority, upon a given rise in the rate
of unemployment, to accelerate Federal and federally-aided capital
improvement programs; and

(3) Third, a permanent strengthening of our unemployment compensation
system--to maintain for our fellow citizens searching for a job who cannot
find it, their purchasing power and their living standards without constant
resort--as we have seen in recent years by the Congress and the
Administrations--to temporary supplements.

If we enact this six-part program, we can show the whole world that a free
economy need not be an unstable economy--that a free system need not leave
men unemployed--and that a free society is not only the most productive but
the most stable form of organization yet fashioned by man.

II. FIGHTING INFLATION

But recession is only one enemy of a free economy--inflation is another.
Last year, 1961, despite rising production and demand, consumer prices held
almost steady--and wholesale prices declined. This is the best record of
overall price stability of any comparable period of recovery since the end
of World War II.

Inflation too often follows in the shadow of growth--while price stability
is made easy by stagnation or controls. But we mean to maintain both
stability and growth in a climate of freedom.

Our first line of defense against inflation is the good sense and public
spirit of business and labor--keeping their total increases in wages and
profits in step with productivity. There is no single statistical test to
guide each company and each union. But I strongly urge them--for their
country's interest, and for their own--to apply the test of the public
interest to these transactions.

Within this same framework of growth and wage-price stability:

--This administration has helped keep our economy competitive by widening
the access of small business to credit and Government contracts, and by
stepping up the drive against monopoly, price-fixing, and racketeering;

--We will submit a Federal Pay Reform bill aimed at giving our classified,
postal, and other employees new pay scales more comparable to those of
private industry;

--We are holding the fiscal 1962 budget deficit far below the level
incurred after the last recession in 1958; and, finally,

--I am submitting for fiscal 1963 a balanced Federal Budget.

This is a joint responsibility, requiring Congressional cooperation on
appropriations, and on three sources of income in particular:

(1) First, an increase in postal rates, to end the postal deficit;

(2) Second, passage of the tax reforms previously urged, to remove
unwarranted tax preferences, and to apply to dividends and to interest the
same withholding requirements we have long applied to wages; and

(3) Third, extension of the present excise and corporation tax rates,
except for those changes--which will be recommended in a message--affecting
transportation.

III. GETTING AMERICA MOVING

But a stronger nation and economy require more than a balanced Budget. They
require progress in those programs that spur our growth and fortify our
strength.

CITIES

A strong America depends on its cities--America's glory, and sometimes
America's shame. To substitute sunlight for congestion and progress for
decay, we have stepped up existing urban renewal and housing programs, and
launched new ones--redoubled the attack on water pollution--speeded aid to
airports, hospitals, highways, and our declining mass transit systems--and
secured new weapons to combat organized crime, racketeering, and youth
delinquency, assisted by the coordinated and hard-hitting efforts of our
investigative services: the FBI, the Internal Revenue, the Bureau of
Narcotics, and many others. We shall need further anti-crime, mass transit,
and transportation legislation--and new tools to fight air pollution. And
with all this effort under way, both equity and common sense require that
our nation's urban areas--containing three-fourths of our population--sit
as equals at the Cabinet table. I urge a new Department of Urban Affairs
and Housing.

AGRICULTURE AND RESOURCES

A strong America also depends on its farms and natural resources. American
farmers took heart in 1961--from a billion dollar rise in farm income--and
from a hopeful start on reducing the farm surpluses. But we are still
operating under a patchwork accumulation of old laws, which cost us $1
billion a year in CCC carrying charges alone, yet fail to halt rural
poverty or boost farm earnings.

Our task is to master and turn to fully fruitful ends the magnificent
productivity of our farms and farmers. The revolution on our own
countryside stands in the sharpest contrast to the repeated farm failures
of the Communist nations and is a source of pride to us all. Since 1950 our
agricultural output per man-hour has actually doubled! Without new,
realistic measures, it will someday swamp our farmers and our taxpayers in
a national scandal or a farm depression.

I will, therefore, submit to the Congress a new comprehensive farm
program--tailored to fit the use of our land and the supplies of each crop
to the long-range needs of the sixties--and designed to prevent chaos in
the sixties with a program of common sense.

We also need for the sixties--if we are to bequeath our full national
estate to our heirs--a new long-range conservation and recreation
program--expansion of our superb national parks and forests--preservation
of our authentic wilderness areas--new starts on water and power projects
as our population steadily increases--and expanded REA generation and
transmission loans.

CIVIL RIGHTS

But America stands for progress in human rights as well as economic
affairs, and a strong America requires the assurance of full and equal
rights to all its citizens, of any race or of any color. This
Administration has shown as never before how much could be done through the
full use of Executive powers--through the enforcement of laws already
passed by the Congress--through persuasion, negotiation, and litigation, to
secure the constitutional rights of all: the right to vote, the right to
travel without hindrance across State lines, and the right to free public
education.

I issued last March a comprehensive order to guarantee the right to equal
employment opportunity in all Federal agencies and contractors. The Vice
President's Committee thus created has done much, including the voluntary
"Plans for Progress" which, in all sections of the country, are achieving a
quiet but striking success in opening up to all races new professional,
supervisory, and other job opportunities.

But there is much more to be done--by the Executive, by the courts, and by
the Congress. Among the bills now pending before you, on which the
executive departments will comment in detail, are appropriate methods of
strengthening these basic rights which have our full support. The right to
vote, for example, should no longer be denied through such arbitrary
devices on a local level, sometimes abused, such as literacy tests and poll
taxes. As we approach the 100th anniversary, next January, of the
Emancipation Proclamation, let the acts of every branch of the
Government--and every citizen--portray that "righteousness does exalt a
nation."

HEALTH AND WELFARE

Finally, a strong America cannot neglect the aspirations of its
citizens--the welfare of the needy, the health care of the elderly, the
education of the young. For we are not developing the Nation's wealth for
its own sake. Wealth is the means--and people are the ends. All our
material riches will avail us little if we do not use them to expand the
opportunities of our people.

Last year, we improved the diet of needy people--provided more hot lunches
and fresh milk to school children--built more college dormitories--and, for
the elderly, expanded private housing, nursing homes, health services, and
social security. But we have just begun.

To help those least fortunate of all, I am recommending a new public
welfare program, stressing services instead of support, rehabilitation
instead of relief, and training for useful work instead of prolonged
dependency.

To relieve the critical shortage of doctors and dentists--and this is a
matter which should concern us all--and expand research, I urge action to
aid medical and dental colleges and scholarships and to establish new
National Institutes of Health.

To take advantage of modern vaccination achievements, I am proposing a mass
immunization program, aimed at the virtual elimination of such ancient
enemies of our children as polio, diphtheria, whooping cough, and tetanus.

To protect our consumers from the careless and the unscrupulous, I shall
recommend improvements in the Food and Drug laws--strengthening inspection
and standards, halting unsafe and worthless products, preventing misleading
labels, and cracking down on the illicit sale of habit-forming drugs.

But in matters of health, no piece of unfinished business is more important
or more urgent than the enactment under the social security system of
health insurance for the aged.

For our older citizens have longer and more frequent illnesses, higher
hospital and medical bills and too little income to pay them. Private
health insurance helps very few--for its cost is high and its coverage
limited. Public welfare cannot help those too proud to seek relief but
hard-pressed to pay their own bills. Nor can their children or
grandchildren always sacrifice their own health budgets to meet this
constant drain.

Social security has long helped to meet the hardships of retirement, death,
and disability. I now urge that its coverage be extended without further
delay to provide health insurance for the elderly.

EDUCATION

Equally important to our strength is the quality of our education. Eight
million adult Americans are classified as functionally illiterate. This is
a disturbing figure--reflected in Selective Service rejection
rates--reflected in welfare rolls and crime rates. And I shall recommend
plans for a massive attack to end this adult illiteracy.

I shall also recommend bills to improve educational quality, to stimulate
the arts, and, at the college level, to provide Federal loans for the
construction of academic facilities and Federally financed scholarships.

If this Nation is to grow in wisdom and strength, then every able high
school graduate should have the opportunity to develop his talents. Yet
nearly half lack either the funds or the facilities to attend college.
Enrollments are going to double in our colleges in the short space of 10
years. The annual cost per student is skyrocketing to astronomical
levels--now averaging $1,650 a year, although almost half of our families
earn less than $5,000. They cannot afford such costs--but this Nation
cannot afford to maintain its military power and neglect its brainpower.

But excellence in education must begin at the elementary level. I sent to
the Congress last year a proposal for Federal aid to public school
construction and teachers' salaries. I believe that bill, which passed the
Senate and received House Committee approval, offered the minimum amount
required by our needs and--in terms of across-the-board aid--the maximum
scope permitted by our Constitution. I therefore see no reason to weaken or
withdraw that bill: and I urge its passage at this session.

"Civilization," said H. G. Wells, "is a race between education and
catastrophe." It is up to you in this Congress to determine the winner of
that race.

These are not unrelated measures addressed to specific gaps or grievances
in our national life. They are the pattern of our intentions and the
foundation of our hopes. "I believe in democracy," said Woodrow Wilson,
"because it releases the energy of every human being." The dynamic of
democracy is the power and the purpose of the individual, and the policy of
this administration is to give to the individual the opportunity to realize
his own highest possibilities.

Our program is to open to all the opportunity for steady and productive
employment, to remove from all the handicap of arbitrary or irrational
exclusion, to offer to all the facilities for education and health and
welfare, to make society the servant of the individual and the individual
the source of progress, and thus to realize for all the full promise of
American life.

IV. OUR GOALS ABROAD

All of these efforts at home give meaning to our efforts abroad. Since the
close of the Second World War, a global civil war has divided and tormented
mankind. But it is not our military might, or our higher standard of
living, that has most distinguished us from our adversaries. It is our
belief that the state is the servant of the citizen and not his master.

This basic clash of ideas and wills is but one of the forces reshaping our
globe--swept as it is by the tides of hope and fear, by crises in the
headlines today that become mere footnotes tomorrow. Both the successes and
the setbacks of the past year remain on our agenda of unfinished business.
For every apparent blessing contains the seeds of danger--every area of
trouble gives out a ray of hope--and the one unchangeable certainty is that
nothing is certain or unchangeable.

Yet our basic goal remains the same: a peaceful world community of free and
independent states--free to choose their own future and their own system,
so long as it does not threaten the freedom of others.

Some may choose forms and ways that we would not choose for ourselves--but
it is not for us that they are choosing. We can welcome diversity--the
Communists cannot. For we offer a world of choice--they offer the world of
coercion. And the way of the past shows clearly that freedom, not coercion,
is the wave of the future. At times our goal has been obscured by crisis or
endangered by conflict--but it draws sustenance from five basic sources of
strength:

--the moral and physical strength of the United States;

--the united strength of the Atlantic Community;

--the regional strength of our Hemispheric relations;

--the creative strength of our efforts in the new and developing nations;
and

--the peace-keeping strength of the United Nations.

V. OUR MILITARY STRENGTH

Our moral and physical strength begins at home as already discussed. But it
includes our military strength as well. So long as fanaticism and fear
brood over the affairs of men, we must arm to deter others from
aggression.

In the past 12 months our military posture has steadily improved. We
increased the previous defense budget by 15 percent--not in the expectation
of war but for the preservation of peace. We more than doubled our
acquisition rate of Polaris submarines--we doubled the production capacity
for Minuteman missiles--and increased by 50 percent the number of manned
bombers standing ready on a 15 minute alert. This year the combined force
levels planned under our new Defense budget--including nearly three hundred
additional Polaris and Minuteman missiles--have been precisely calculated
to insure the continuing strength of our nuclear deterrent.

But our strength may be tested at many levels. We intend to have at all
times the capacity to resist non-nuclear or limited attacks--as a
complement to our nuclear capacity, not as a substitute. We have rejected
any all-or-nothing posture which would leave no choice but inglorious
retreat or unlimited retaliation.

Thus we have doubled the number of ready combat divisions in the Army's
strategic reserve--increased our troops in Europe--built up the
Marines--added new sealift and airlift capacity--modernized our weapons and
ammunition--expanded our anti-guerrilla forces--and increased the active
fleet by more than 70 vessels and our tactical air forces by nearly a dozen
wings.

Because we needed to reach this higher long-term level of readiness more
quickly, 155,000 members of the Reserve and National Guard were activated
under the Act of this Congress. Some disruptions and distress were
inevitable. But the overwhelming majority bear their burdens--and their
Nation's burdens--with admirable and traditional devotion.

In the coming year, our reserve programs will be revised--two Army
Divisions will, I hope, replace those Guard Divisions on duty--and
substantial other increases will boost our Air Force fighter units, the
procurement of equipment, and our continental defense and warning efforts.
The Nation's first serious civil defense shelter program is under way,
identifying, marking, and stocking 50 million spaces; and I urge your
approval of Federal incentives for the construction of public fall-out
shelters in schools and hospitals and similar centers.

VI. THE UNITED NATIONS

But arms alone are not enough to keep the peace--it must be kept by men.
Our instrument and our hope is the United Nations--and I see little merit
in the impatience of those who would abandon this imperfect world
instrument because they dislike our imperfect world. For the troubles of
a world organization merely reflect the troubles of the world itself. And
if the organization is weakened, these troubles can only increase. We may
not always agree with every detailed action taken by every officer of the
United Nations, or with every voting majority. But as an institution, it
should have in the future, as it has had in the past since its inception,
no stronger or more faithful member than the United States of America.

In 1961 the peace-keeping strength of the United Nations was reinforced.
And those who preferred or predicted its demise, envisioning a troika in
the seat of Hammarskjold--or Red China inside the Assembly--have seen
instead a new vigor, under a new Secretary General and a fully independent
Secretariat. In making plans for a new forum and principles on disarmament
--for peace-keeping in outer space--for a decade of development effort--the
UN fulfilled its Charter's lofty aim.

Eighteen months ago the tangled and turbulent Congo presented the UN with
its gravest challenge. The prospect was one of chaos--or certain big-power
confrontation, with all of its hazards and all of its risks, to us and to
others. Today the hopes have improved for peaceful conciliation within a
united Congo. This is the objective of our policy in this important area.

No policeman is universally popular--particularly when he uses his stick to
restore law and order on his beat. Those members who are willing to
contribute their votes and their views--but very little else--have created
a serious deficit by refusing to pay their share of special UN assessments.
Yet they do pay their annual assessments to retain their votes--and a new
UN Bond issue, financing special operations for the next 18 months, is to
be repaid with interest from these regular assessments. This is clearly in
our interest. It will not only keep the UN solvent, but require all voting
members to pay their fair share of its activities. Our share of special
operations has long been much higher than our share of the annual
assessment--and the bond issue will in effect reduce our disproportionate
obligation, and for these reasons, I am urging Congress to approve our
participation.

With the approval of this Congress, we have undertaken in the past year a
great new effort in outer space. Our aim is not simply to be first on the
moon, any more than Charles Lindbergh's real aim was to be the first to
Paris. His aim was to develop the techniques of our own country and other
countries in the field of air and the atmosphere, and our objective in
making this effort, which we hope will place one of our citizens on the
moon, is to develop in a new frontier of science, commerce and cooperation,
the position of the United States and the Free World.

This Nation belongs among the first to explore it, and among the first--if
not the first--we shall be. We are offering our know-how and our
cooperation to the United Nations. Our satellites will soon be providing
other nations with improved weather observations. And I shall soon send to
the Congress a measure to govern the financing and operation of an
International Communications Satellite system, in a manner consistent with
the public interest and our foreign policy.

But peace in space will help us naught once peace on earth is gone. World
order will be secured only when the whole world has laid down these weapons
which seem to offer us present security but threaten the future survival of
the human race. That armistice day seems very far away. The vast resources
of this planet are being devoted more and more to the means of destroying,
instead of enriching, human life.

But the world was not meant to be a prison in which man awaits his
execution. Nor has mankind survived the tests and trials of thousands of
years to surrender everything--including its existence--now. This Nation
has the will and the faith to make a supreme effort to break the log jam
on disarmament and nuclear tests--and we will persist until we prevail,
until the rule of law has replaced the ever dangerous use of force.

VII. LATIN AMERICA

I turn now to a prospect of great promise: our Hemispheric relations. The
Alliance for Progress is being rapidly transformed from proposal to
program. Last month in Latin America I saw for myself the quickening of
hope, the revival of confidence, the new trust in our country--among
workers and farmers as well as diplomats. We have pledged our help in
speeding their economic, educational, and social progress. The Latin
American Republics have in turn pledged a new and strenuous effort of
self-help and self-reform.

To support this historic undertaking, I am proposing--under the authority
contained in the bills of the last session of the Congress--a special
long-term Alliance for Progress fund of $3 billion. Combined with our Food
for Peace, Export-Import Bank, and other resources, this will provide more
than $1 billion a year in new support for the Alliance. In addition, we
have increased twelve-fold our Spanish and Portuguese language broadcasting
in Latin America, and improved Hemispheric trade and defense. And while
the blight of communism has been increasingly exposed and isolated in the
Americas, liberty has scored a gain. The people of the Dominican Republic,
with our firm encouragement and help, and those of our sister Republics of
this Hemisphere, are safely passing through the treacherous course from
dictatorship through disorder towards democracy.

VIII. THE NEW AND DEVELOPING NATIONS

Our efforts to help other new or developing nations, and to strengthen
their stand for freedom, have also made progress. A newly unified Agency
for International Development is reorienting our foreign assistance to
emphasize long-term development loans instead of grants, more economic aid
instead of military, individual plans to meet the individual needs of the
nations, and new standards on what they must do to marshal their own
resources.

A newly conceived Peace Corps is winning friends and helping people in
fourteen countries--supplying trained and dedicated young men and women, to
give these new nations a hand in building a society, and a glimpse of the
best that is in our country. If there is a problem here, it is that we
cannot supply the spontaneous and mounting demand.

A newly-expanded Food for Peace Program is feeding the hungry of many
lands with the abundance of our productive farms--providing lunches for
children in school, wages for economic development, relief for the victims
of flood and famine, and a better diet for millions whose daily bread is
their chief concern.

These programs help people; and, by helping people, they help freedom. The
views of their governments may sometimes be very different from ours--but
events in Africa, the Middle East, and Eastern Europe teach us never to
write off any nation as lost to the Communists. That is the lesson of our
time. We support the independence of those newer or weaker states whose
history, geography, economy or lack of power impels them to remain outside
"entangling alliances"--as we did for more than a century. For the
independence of nations is a bar to the Communists' "grand design"--it is
the basis of our own.

In the past year, for example, we have urged a neutral and independent
Laos--regained there a common policy with our major allies--and insisted
that a cease-fire precede negotiations. While a workable formula for
supervising its independence is still to be achieved, both the spread
of war--which might have involved this country also--and a Communist
occupation have thus far been prevented.

A satisfactory settlement in Laos would also help to achieve and safeguard
the peace in Viet-Nam--where the foe is increasing his tactics of
terror--where our own efforts have been stepped up--and where the local
government has initiated new programs and reforms to broaden the base of
resistance. The systematic aggression now bleeding that country is not a
"war of liberation"--for Viet-Nam is already free. It is a war of attempted
subjugation--and it will be resisted.

IX. THE ATLANTIC COMMUNITY

Finally, the united strength of the Atlantic Community has flourished in
the last year under severe tests. NATO has increased both the number and
the readiness of its air, ground, and naval units--both its nuclear and
non-nuclear capabilities. Even greater efforts by all its members are still
required. Nevertheless our unity of purpose and will has been, I believe,
immeasurably strengthened.

The threat to the brave city of Berlin remains. In these last 6 months the
Allies have made it unmistakably clear that our presence in Berlin, our
free access thereto, and the freedom of two million West Berliners would
not be surrendered either to force or through appeasement--and to maintain
those rights and obligations, we are prepared to talk, when appropriate,
and to fight, if necessary. Every member of NATO stands with us in a common
commitment to preserve this symbol of free man's will to remain free.

I cannot now predict the course of future negotiations over Berlin. I can
only say that we are sparing no honorable effort to find a peaceful and
mutually acceptable resolution of this problem. I believe such a resolution
can be found, and with it an improvement in our relations with the Soviet
Union, if only the leaders in the Kremlin will recognize the basic rights
and interests involved, and the interest of all mankind in peace.

But the Atlantic Community is no longer concerned with purely military
aims. As its common undertakings grow at an ever-increasing pace, we are,
and increasingly will be, partners in aid, trade, defense, diplomacy, and
monetary affairs.

The emergence of the new Europe is being matched by the emergence of new
ties across the Atlantic. It is a matter of undramatic daily cooperation in
hundreds of workaday tasks: of currencies kept in effective relation, of
development loans meshed together, of standardized weapons, and concerted
diplomatic positions. The Atlantic Community grows, not like a volcanic
mountain, by one mighty explosion, but like a coral reef, from the
accumulating activity of all.

Thus, we in the free world are moving steadily toward unity and
cooperation, in the teeth of that old Bolshevik prophecy, and at the very
time when extraordinary rumbles of discord can be heard across the Iron
Curtain. It is not free societies which bear within them the seeds of
inevitable disunity.

X. OUR BALANCE OF PAYMENTS

On one special problem, of great concern to our friends, and to us, I am
proud to give the Congress an encouraging report. Our efforts to safeguard
the dollar are progressing. In the 11 months preceding last February 1, we
suffered a net loss of nearly $2 billion in gold. In the 11 months that
followed, the loss was just over half a billion dollars. And our deficit in
our basic transactions with the rest of the world--trade, defense, foreign
aid, and capital, excluding volatile short-term flows--has been reduced
from $2 billion for 1960 to about one-third that amount for 1961.
Speculative fever against the dollar is ending--and confidence in the
dollar has been restored.

We did not--and could not--achieve these gains through import restrictions,
troop withdrawals, exchange controls, dollar devaluation or choking off
domestic recovery. We acted not in panic but in perspective. But the
problem is not yet solved. Persistently large deficits would endanger our
economic growth and our military and defense commitments abroad. Our goal
must be a reasonable equilibrium in our balance of payments. With the
cooperation of the Congress, business, labor, and our major allies, that
goal can be reached.

We shall continue to attract foreign tourists and investments to our
shores, to seek increased military purchases here by our allies, to
maximize foreign aid procurement from American firms, to urge increased aid
from other fortunate nations to the less fortunate, to seek tax laws which
do not favor investment in other industrialized nations or tax havens, and
to urge coordination of allied fiscal and monetary policies so as to
discourage large and disturbing capital movements.

TRADE

Above all, if we are to pay for our commitments abroad, we must expand our
exports. Our businessmen must be export conscious and export competitive.
Our tax policies must spur modernization of our plants--our wage and price
gains must be consistent with productivity to hold the line on prices--our
export credit and promotion campaigns for American industries must continue
to expand.

But the greatest challenge of all is posed by the growth of the European
Common Market. Assuming the accession of the United Kingdom, there will
arise across the Atlantic a trading partner behind a single external tariff
similar to ours with an economy which nearly equals our own. Will we in
this country adapt our thinking to these new prospects and patterns--or
will we wait until events have passed us by?

This is the year to decide. The Reciprocal Trade Act is expiring. We need a
new law--a wholly new approach--a bold new instrument of American trade
policy. Our decision could well affect the unity of the West, the course of
the Cold War, and the economic growth of our Nation for a generation to
come.

If we move decisively, our factories and farms can increase their sales to
their richest, fastest-growing market. Our exports will increase. Our
balance of payments position will improve. And we will have forged across
the Atlantic a trading partnership with vast resources for freedom.

If, on the other hand, we hang back in deference to local economic
pressures, we will find ourselves cut off from our major allies.
Industries--and I believe this is most vital--industries will move their
plants and jobs and capital inside the walls of the Common Market, and
jobs, therefore, will be lost here in the United States if they cannot
otherwise compete for its consumers. Our farm surpluses--our balance of
trade, as you all know, to Europe, the Common Market, in farm products, is
nearly three or four to one in our favor, amounting to one of the best
earners of dollars in our balance of payments structure, and without
entrance to this Market, without the ability to enter it, our farm
surpluses will pile up in the Middle West, tobacco in the South, and other
commodities, which have gone through Western Europe for 15 years. Our
balance of payments position will worsen. Our consumers will lack a wider
choice of goods at lower prices. And millions of American workers--whose
jobs depend on the sale or the transportation or the distribution of
exports or imports, or whose jobs will be endangered by the movement of our
capital to Europe, or whose jobs can be maintained only in an expanding
economy--these millions of workers in your home States and mine will see
their real interests sacrificed.

Members of the Congress: The United States did not rise to greatness by
waiting for others to lead. This Nation is the world's foremost
manufacturer, farmer, banker, consumer, and exporter. The Common Market is
moving ahead at an economic growth rate twice ours. The Communist economic
offensive is under way. The opportunity is ours--the initiative is up to
us--and I believe that 1962 is the time.

To seize that initiative, I shall shortly send to the Congress a new
five-year Trade Expansion Action, far-reaching in scope but designed with
great care to make certain that its benefits to our people far outweigh any
risks. The bill will permit the gradual elimination of tariffs here in the
United States and in the Common Market on those items in which we together
supply 80 percent of the world's trade--mostly items in which our own
ability to compete is demonstrated by the fact that we sell abroad, in
these items, substantially more than we import. This step will make it
possible for our major industries to compete with their counterparts in
Western Europe for access to European consumers.

On other goods the bill will permit a gradual reduction of duties up to 50
percent--permitting bargaining by major categories--and provide for
appropriate and tested forms of assistance to firms and employees adjusting
to import competition. We are not neglecting the safeguards provided by
peril points, an escape clause, or the National Security Amendment. Nor are
we abandoning our non-European friends or our traditional "most-favored
nation" principle. On the contrary, the bill will provide new encouragement
for their sale of tropical agricultural products, so important to our
friends in Latin America, who have long depended upon the European market,
who now find themselves faced with new challenges which we must join with
them in overcoming.

Concessions, in this bargaining, must of course be reciprocal, not
unilateral. The Common Market will not fulfill its own high promise unless
its outside tariff walls are low. The dangers of restriction or timidity in
our own policy have counterparts for our friends in Europe. For together we
face a common challenge: to enlarge the prosperity of free men
everywhere--to build in partnership a new trading community in which all
free nations may gain from the productive energy of free competitive
effort.

These various elements in our foreign policy lead, as I have said, to a
single goal--the goal of a peaceful world of free and independent states.
This is our guide for the present and our vision for the future--a free
community of nations, independent but interdependent, uniting north and
south, east and west, in one great family of man, outgrowing and
transcending the hates and fears that rend our age.

We will not reach that goal today, or tomorrow. We may not reach it in our
own lifetime. But the quest is the greatest adventure of our century. We
sometimes chafe at the burden of our obligations, the complexity of our
decisions, the agony of our choices. But there is no comfort or security
for us in evasion, no solution in abdication, no relief in
irresponsibility.

A year ago, in assuming the tasks of the Presidency, I said that few
generations, in all history, had been granted the role of being the great
defender of freedom in its hour of maximum danger. This is our good
fortune; and I welcome it now as I did a year ago. For it is the fate of
this generation--of you in the Congress and of me as President--to live
with a struggle we did not start, in a world we did not make. But the
pressures of life are not always distributed by choice. And while no
nation has ever faced such a challenge, no nation has ever been so ready
to seize the burden and the glory of freedom.

And in this high endeavor, may God watch over the United States of America.