Tonight, I come not to speak about the "State of the Government", not to
detail every new initiative we plan for the coming year, nor describe every
line in the budget. I'm here to speak to you and to the American people
about the State of the Union about our world, the changes we've seen, the
challenges we face. And what that means for America.

There are singular moments in history, dates that divide all that goes
before from all that comes after. And many of us in this chamber have lived
much of our lives in a world whose fundamental features were defined in
1945. And the events of that year decreed the shape of nations, the pace of
progress, freedom or oppression for millions of people around the world.

Nineteen Forty-Five provided the common frame of reference the compass
points of the postwar era we've relied upon to understand ourselves. And
that was our world until now. The events of the year just ended, the
Revolution of '89, have been a chain reaction, changes so striking that it
marks the beginning of a new era in the world's affairs.

Think back think back just twelve short months ago to the world we knew as
1989 began.

One year, one year ago the people of Panama lived in fear under the thumb
of a dictator. Today democracy is restored. Panama is free.

"Operation Just Cause" has achieved its objective. And the number of
military personel in Panama is now very close to what it was before the
operation began. And tonight I am announcing that before the end of
February the additional numbers of American troops, the brave men and women
of our armed forces who made this mission a success, will be back home.

A year ago in Poland, Lech Walesa declared he was ready to open a dialogue
with the Communist rulers of that country. And today, with the future of a
free Poland in their own hands, members of Solidarity lead the Polish
government.

And a year ago, freedom's playwright, Vaclav Havel, languished as a
prisoner in Prague. And today it's Vaclav Havel, President of
Czechoslovakia.

And one year ago Erich Honecker of East Germany claimed history as his
guide. He predicted the Berlin Wall would last another hundred years. And
today, less than one year later, it's the wall that's history.

Remarkable events, remarkable events, events that fulfill the long-held
hopes of the American people. Events that validate the longstanding goals
of American policy, a policy based upon a single shining principle: the
cause of freedom.

America, not just the nation, but an idea alive in the minds of the people,
everywhere. As this new world takes shape, America stands at the center of
a widening circle of freedom, today, tomorrow and into the next century.

Our nation is the enduring dream of every immigrant who ever set foot on
these shores, and the millions still struggling to be free. This nation,
this idea called America was and always will be a new world, our new
world.

At a workers' rally in a place called Branik on the outskirts of Prague the
idea called America is alive. A worker, dressed in grimy overalls, rises to
speak at the factory gates. And he begins his speech to his fellow citizens
with these words, words of a distant revolution: "We hold these truths to
be self-evident. That all men are created equal, that they are endowed by
their creator with certain unalienable rights, and that among these are
life, liberty and the pursuit of happiness." It's no secret here at home
freedom's door opened long ago. The cornerstones of this free society have
already been set in place: democracy, competition, opportunity, private
investment, stewardship, and of course, leadership.

And our challenge today is to take this democratic system of ours, a system
second to none, and make it better:

A better America where there's a job for whoever wants one;

Where women working outside the home can be confident their children are
in safe and loving care, and where Government works to expand child
alternatives for parents.

Where we reconcile the needs of a clean environment and a strong economy.

Where "Made in the USA" is recognized around the world as the symbol of
quality and progress,

And where every one of us enjoys the same opportunities to live, to work
and to contribute to society. And where, for the first time, the American
mainstream includes all of our disabled citizens.

Where everyone has a roof over his head, and where the homeless get the
help they need to live in dignity.

Where our schools challenge and support our kids and our teachers, and
every one of them makes the grade,

Where every street, every city, every school and every child is drug-free.

And finally, and finally, where no American is forgotten. Our hearts go out
to our hostages, our hostages who are ceaselessly in our minds and in our
efforts. That's part of the future we want to see, the future we can make
for ourselves. But dreams alone won't get us there. We need to extend our
horizon, to commit to the long view. And our mission for the future starts
today.

In the tough competitive markets around the world, America faces the great
challenges and great opportunities. And we know that we can succeed in the
global economic arena of the 90's. But to meet that challenge we must make
some fundamental changes, some crucial investments in ourselves.

Yes, we are going to invest in America. This Administration is determined
to encourage the creation of capital, capital of all kinds. Physical
capital: everything from our farms and factories to our workshops and
production lines, all that is needed to produce and deliver quality goods
and quality services. Intellectual, intellectual capital: the source of
ideas that spark tomorrow's products. And of course human capital: the
talented work force that we'll need to compete in the global market.

And let me tell you, if we ignore human capital, if we lose the spirit of
American ingenuity, the sprit that is the hallmark of the AMERICAN worker,
that would be bad. The American worker is the most productive worker in the
world.

We need to save more. We need to expand the pool of capital for new
investments that mean more jobs and more growth. And that's the idea behind
the new initiative I call the Family Savings Plan, which I will send to
Congress tomorrow.

We need to cut the tax on capital gains, encourage, encourage risk-takers,
especially those in small businesses, to take those steps that translate
into economic reward, jobs, and a better life for all of us.

We'll do what it takes to invest in America's future. The budget commitment
is there. The money is there. It's there for research and development, R
and D, a record high. It's there for our housing initiative, hope, H-O-P-E,
to help everyone from first-time homebuyers to the homeless. The money's
there to keep our kids drug-free, 70 percent more than when I took office
in 1989. It's there for space exploration, and its there for education,
another record high.

And one more, and one more thing. Last fall at the education summit, the
governors and I agreed to look for ways to help make sure that our kids are
ready to learn the very first day they walk into the classroom. And I've
made good on that commitment by proposing a record increase in funds, an
extra half billion dollars, for something near and dear to all of us: Head
Start.

Education is the one investment that means more for our future, because it
means the most for our children. Real improvement in our schools is not
simply a matter of spending more. It's a matter of asking more, expecting
more, of our schools, our teachers, of our kids, of our parents and of
ourselves. And that's why tonight, and that's why tonight, I am announcing
America's education goals, goals developed with enormous cooperation from
the nation's governors. And if I might I'd like to say I'm very pleased
that Governor Gardner and Governor Clinton, Governor Branstad, Governor
Campbell, all of whom were very key in these discussion, these
deliberations, are with us here tonight.

By the, by the year 2000, every child must start school ready to learn. The
United States must increase the high school graduation rate to no less than
90 percent. And we are going to make sure our schools' diplomas mean
something. In critical subjects, at the fourth, eighth, and 12th grades, we
must assess our students' performance.

By the, by the year 2000 U.S. students must be the first in the world in
math and science achievement. Every American adult must be a skilled,
literate worker and citizen. Every school must offer the kind of
disciplined environment that makes it possible for our kids to learn. And
every school in America must be drug-free.

Ambitious aims? Of course. Easy to do? Far from it. But the future's at
stake. The nation will not accept anything less than excellence in
education.

These investments will help keep America competitive. And I know this about
the American people: we welcome competition. We'll match our ingenuity, our
energy, our experience, and technology our spirit and enterprise against
anyone. But let the competition be free, but let it also be fair. America
is ready.

Since we really mean it, and since we're serious about being ready to meet
our challenge, we're getting our own house in order. We have made real
progress. Seven years ago, the Federal deficit was 6 percent of our gross
national product, 6 percent. In the new budget I sent up two days ago the
deficit is down to 1 percent of GNP.

That budget brings Federal spending under control. It meets the
Gramm-Rudman target. It brings the deficit down further. And balances the
budget by 1993, with no new taxes.

And let me tell you, there's still more than enough Federal spending. For
most of us, $1.2 trillion is still a lot of money.

And once the budget is balanced, we can operate the way every family must
when it has bills to pay. We won't leave it to our children and
grandchildren. Once it's balanced, we will start paying off the national
debt.

And there's something more, and there's something more we owe the
generations of the future: stewardship, the safekeeping of America's
precious environmental inheritance.

As just one sign of how serious we are, we will elevate the Environmental
Protection Agency to Cabinet rank. Not, not more bureaucracy, not more red
tape, but the certainty that here at home, and especially in our dealings
with other nations, environmental issues have the status they deserve.

This year's budget provides over $2 billion in new spending to protect our
environment, with over $1 billion for global change research, and a new
initiative I call America the Beautiful to expand our national parks and
wildlife preserves and improve recreational facilities on public lands.

And something else, something that will help keep this country clean, from
our forest land to the inner cities, and keep America beautiful for
generations to come, the money to plant a billion trees a year.

And tonight, and tonight let me say again to all the members of the
Congress, the American people did not send us here to bicker. There is work
to do, and they sent us here to get it done. And once again, in the spirit
of cooperation I offer my hand to all of you. And let's work together to do
the will of the people--clean air, child care, the educational excellence
act, crime and drugs. It's time to act. The farm bill, transportation
policy, product liability reform, enterprise zones. It's time to act
together.

And there's one thing I hope we can agree on. It's about our commitments.
And I'm talking about Social Security.

To every American out there on Social Security, to every, every American
supporting that system today, and to everyone counting on it when they
retire, we made a promise to you, and we are going to keep it.

We, we rescued the system in 1983 and it's sound again, bipartisan
arrangement. Our budget fully funds today's benefits and it assures that
future benefits will be funded as well. And the last thing we need to do is
mess around with Social Security.

There's one more problem we need to address. We must give careful
consideration to the recommendations of the health care studies under way
now. And that's why tonight, I am asking Dr. Sullivan, Lou Sullivan,
Secretary of Health and Human Services, to lead a Domestic Policy Council
review of recommendations on the quality, accessibility and cost of our
nation's health care system. I am committed to bring the staggering costs
of health care under control.

The State of the Government does indeed depend on many of us in this very
chamber. But the State of the Union depends on all Americans. We must
maintain the democratic decency that makes a nation out of millions of
individuals. And I've been appalled at the recent mail bombings across this
country. Every one of us must confront and condemn racism, anti-Semitism,
bigotry and hate. Not next week, not tomorrow, but right now. Every single
one of us.

The State of the Union depends on whether we help our neighbor, claim the
problems of our community as our own. We've got to step forward when
there's trouble, lend a hand, be what I call a point of light to a stranger
in need. We've got to take the time after a busy day to sit down and read
with our kids, help them with their homework, pass along the values we had
as children. And that's how we sustain the State of the Union.

Every effort is important. It all adds up. It's doing the things that give
democracy meaning. It all adds up to who we are and who we will be.

And let me say, that so long as we remember the American idea, so long as
we live up to the American ideal, the State of the Union will remain sound
and strong.

And to those who worry that we've lost our way, well, I want you to listen
to parts of a letter written by James Markwell, Pvt. 1st Class James
Markwell, a 20-year-old Army medic to the First Battalion, 75th Rangers.
It's dated Dec. 18, the day before our armed forces went into action in
Panama. It's a letter servicemen write--and hope will never, ever be sent.
And sadly, Private Markwell's mother did receive this letter. She passed it
on to me out there in Cincinnati.

And here is some of what he wrote: "I've never been afraid of death, but I
know he is waiting at the corner...I've been trained to kill and to save,
and so has everyone else. I am frightened of what lays beyond the fog, and
yet... do not mourn for me. Revel in the life that I have died to give
you... But most of all, don't forget that the Army was my choice. Something
that I wanted to do. Remember I joined the Army to serve my country and
inure that you are free to do what you want and to live your lives
freely."

Let me add that Private Markwell was among the first to see battle in
Panama, and among the first to fall. But he knew what he believed in. He
carried the idea we call America in his heart.

I began tonight speaking about the changes we've seen this past year. There
is a new world of challenges and opportunities before us. And there is a
need for leadership that only America can provide.

Nearly 40 years ago, in his last address to the Congress, President Harry
Truman predicted such a time would come. He said, "As our world grows
stronger, more united, more attractive to men on both sides of the Iron
Curtain, then inevitably there will come a time of change within the
Communist world." Today, that change is taking place.

For more than 40 years, America and its allies held Communism in check and
insured that democracy would continue to exist. And today, with Communism
crumbling, our aim must be to insure democracy's advance, to take the lead
in forging peace and freedom's best hope, a great and growing commonwealth
of free nations.

And to the Congress and to all Americans, I say it is time to acclaim a new
consensus at home and abroad, a common vision of the peaceful world we want
to see.

Here in our own hemisphere it is time for all the people of the Americas,
North and South, to live in freedom.

In the Far East and Africa, it's time for the full flowering of free
governments and free markets that have served the engine of progress.

It is time to offer our hand to the emerging democracies of Eastern Europe
so that continent, for too long a continent divided, can see a future whole
and free.

It's time to build on our new relationship with the Soviet Union, to
endorse and encourage a peaceful process of internal change toward
democracy and economic opportunity.

We are in a period of great transition, great hope, and yet great
uncertainty. We recognize that the Soviet military threat in Europe is
diminishing, but we see little change in Soviet strategic modernization.
And, therefore, we must sustain our own strategic offense modernization and
the Strategic Defense Initiative.

But the time is right to move forward on a conventional arms control
agreement to move us to more appropriate levels of military forces in
Europe, a coherent defense program that insures the U.S. will continue to
be a catalyst for peaceful change in Europe. And I've consulted with
leaders of NATO. In fact I spoke by phone with President Gorbachev just
today.

And I agree with our European allies that an American military presence in
Europe is essential and that it should not be solely tied to the Soviet
military presence in Eastern Europe.

But our troop levels can still be lower. And so tonight I am announcing a
major new step for a further reduction in U.S. and Soviet manpower in
Central and Eastern Europe to 195,000 on each side.

This number, this number, this level, reflects the advice of our senior
military advisers. It's designed to protect American and European interests
and sustain NATO's defense strategy. A swift conclusion to our arms control
talks--conventional, chemical and strategic--must now be our goal. And
that time has come.

Still, we must recognize an unfortunate fact: in many regions of the world
tonight the reality is conflict, not peace. Enduring animosities and
opposing interests remain. And thus the cause of peace must be served by an
America strong enough and sure enough to defend our interests and our
ideals. It's this American idea that for the past four decades helped
inspire the Revolution of '89.

And here at home, and in the world, there is history in the making, and
history to be made. Six months ago, early in this season of change, I stood
at the gates of the Gdansk shipyard in Poland at the monument to the fallen
workers of Solidarity. It's a monument of simple majesty. Three tall
crosses rise up from the stones, and atop each cross, an anchor, an ancient
symbol of hope.

The anchor in our world today is freedom. Holding us steady in times of
change, a symbol of hope to all the world. And freedom is at the very heart
of the idea that is America. Giving life to the idea depends on every one
of us. Our anchor has always been faith and family.

In the last few days of this past monumentous year, our family was blessed
once more, celebrating the joy of life when a little boy became our 12th
grandchild. When I held the little guy for the first time, the troubles at
home and abroad seemed manageable, and totally in perspective.

And now I know, I know you're probably thinking, Well, that's just a
grandfather talking.

Well, maybe you're right. But I've met a lot of children this past year
across this country, as all of you have. Everywhere from the Far East to
Eastern Europe. All kids are unique. Yet, all kids are alike. The budding
young environmentalist I met this month, who joined me in exploring the
Florida Everglades. The Little Leaguers I played catch with in Poland,
ready to go from Warsaw to the World Series. And even the kids who are ill
or alone--and God bless those boarder babies, born addicted to drugs and
AIDS--coping with problems no child should have to face. But, you know,
when it comes to hope and the future, every kid is the same: full of
dreams, ready to take on the world, all special because they are the very
future of freedom. And to them belongs this new world I've been speaking
about.

And so tonight, I'm going to ask something of every one of you. Now let me
start with my generation, with the grandparents out there. You are our
living link with the past. Tell your grandchildren the story of struggles
waged at home and abroad, of sacrifices freely made for freedom's sake. And
tell them your own story as well, because every American has a story to
tell.

And parents, your children look to you for direction and guidance. Tell
them of faith and family. Tell them we are one nation under God. Teach them
that of all the many gifts they can receive, liberty is their most precious
legacy. And of all the gifts they can give, the greatest, the greatest is
helping others.

And to the children and young people out there tonight, with you rests our
hope, all that America will mean in the years and decades ahead. Fix your
vision on a new century, your century, on dreams we cannot see, on the
destiny that is yours and yours alone.

And finally, let all Americans, all of us here in this chamber, the
symbolic center of democracy, affirm our allegiance to this idea we call
America. And let us remember that the State of the Union depends upon each
and every one of us.

God bless all of you. And may God bless this great nation, the United
States of America.