Mr. Speaker, Mr. President, distinguished Members of the Congress, honored
guests, and fellow citizens:

Once again, in keeping with time-honored tradition, I have come to report
to you on the state of the Union, and I'm pleased to report that America is
much improved, and there's good reason to believe that improvement will
continue through the days to come.

You and I have had some honest and open differences in the year past. But
they didn't keep us from joining hands in bipartisan cooperation to stop a
long decline that had drained this nation's spirit and eroded its health.
There is renewed energy and optimism throughout the land. America is back,
standing tall, looking to the eighties with courage, confidence, and hope.

The problems we're overcoming are not the heritage of one person, party, or
even one generation. It's just the tendency of government to grow, for
practices and programs to become the nearest thing to eternal life we'll
ever see on this Earth. And there's always that well-intentioned chorus of
voices saying, "With a little more power and a little more money, we could
do so much for the people." For a time we forgot the American dream isn't
one of making government bigger; it's keeping faith with the mighty spirit
of free people under God.

As we came to the decade of the eighties, we faced the worst crisis in our
postwar history. In the seventies were years of rising problems and falling
confidence. There was a feeling government had grown beyond the consent of
the governed. Families felt helpless in the face of mounting inflation and
the indignity of taxes that reduced reward for hard work, thrift, and
risktaking. All this was overlaid by an evergrowing web of rules and
regulations.

On the international scene, we had an uncomfortable feeling that we'd lost
the respect of friend and foe. Some questioned whether we had the will to
defend peace and freedom. But America is too great for small dreams. There
was a hunger in the land for a spiritual revival; if you will, a crusade
for renewal. The American people said: Let us look to the future with
confidence, both at home and abroad. Let us give freedom a chance.

Americans were ready to make a new beginning, and together we have done it.
We're confronting our problems one by one. Hope is alive tonight for
millions of young families and senior citizens set free from unfair tax
increases and crushing inflation. Inflation has been beaten down from 12.4
to 3.2 percent, and that's a great victory for all the people. The prime
rate has been cut almost in half, and we must work together to bring it
down even more.

Together, we passed the first across-the-board tax reduction for everyone
since the Kennedy tax cuts. Next year, tax rates will be indexed so
inflation can't push people into higher brackets when they get
cost-of-living pay raises. Government must never again use inflation to
profit at the people's expense.

Today a working family earning $25,000 has $1,100 more in purchasing power
than if tax and inflation rates were still at the 1980 levels. Real
after-tax income increased 5 percent last year. And economic deregulation
of key industries like transportation has offered more chances--or
choices, I should say, to consumers and new changes--or chances for
entrepreneurs and protecting safety. Tonight, we can report and be proud of
one of the best recoveries in decades. Send away the handwringers and the
doubting Thomases. Hope is reborn for couples dreaming of owning homes and
for risktakers with vision to create tomorrow's opportunities.

The spirit of enterprise is sparked by the sunrise industries of high-tech
and by small business people with big ideas--people like Barbara Proctor,
who rose from a ghetto to build a multimillion-dollar advertising agency in
Chicago; Carlos Perez, a Cuban refugee, who turned $27 and a dream into a
successful importing business in Coral Gables, Florida.

People like these are heroes for the eighties. They helped 4 million
Americans find jobs in 1983. More people are drawing paychecks tonight than
ever before. And Congress helps--or progress helps everyone--well, Congress
does too----everyone. In 1983 women filled 73 percent of all the new jobs
in managerial, professional, and technical fields.

But we know that many of our fellow countrymen are still out of work,
wondering what will come of their hopes and dreams. Can we love America and
not reach out to tell them: You are not forgotten; we will not rest until
each of you can reach as high as your God-given talents will take you.

The heart of America is strong; it's good and true. The cynics were wrong;
America never was a sick society. We're seeing rededication to bedrock
values of faith, family, work, neighborhood, peace, and freedom--values
that help bring us together as one people, from the youngest child to the
most senior citizen.

The Congress deserves America's thanks for helping us restore pride and
credibility to our military. And I hope that you're as proud as I am of the
young men and women in uniform who have volunteered to man the ramparts in
defense of freedom and whose dedication, valor, and skill increases so much
our chance of living in a world at peace.

People everywhere hunger for peace and a better life. The tide of the
future is a freedom tide, and our struggle for democracy cannot and will
not be denied. This nation champions peace that enshrines liberty,
democratic rights, and dignity for every individual. America's new
strength, confidence, and purpose are carrying hope and opportunity far
from our shores. A world economic recovery is underway. It began here.

We've journeyed far, but we have much farther to go. Franklin Roosevelt
told us 50 years ago this month: "Civilization can not go back;
civilization must not stand still. We have undertaken new methods. It is
our task to perfect, to improve, to alter when necessary, but in all cases
to go forward."

It's time to move forward again, time for America to take freedom's next
step. Let us unite tonight behind four great goals to keep America free,
secure, and at peace in the eighties together.

We can ensure steady economic growth. We can develop America's next
frontier. We can strengthen our traditional values. And we can build a
meaningful peace to protect our loved ones and this shining star of faith
that has guided millions from tyranny to the safe harbor of freedom,
progress, and hope.

Doing these things will open wider the gates of opportunity, provide
greater security for all, with no barriers of bigotry or discrimination.

The key to a dynamic decade is vigorous economic growth, our first great
goal. We might well begin with common sense in Federal budgeting:
government spending no more than government takes in.

We must bring Federal deficits down. But how we do that makes all the
difference.

We can begin by limiting the size and scope of government. Under the
leadership of Vice President Bush, we have reduced the growth of Federal
regulations by more than 25 percent and cut well over 300 million hours of
government-required paperwork each year. This will save the public more
than $150 billion over the next 10 years.

The Grace commission has given us some 2,500 recommendations for reducing
wasteful spending, and they're being examined throughout the
administration. Federal spending growth has been cut from 17.4 percent in
1980 to less than half of that today, and we have already achieved over
$300 billion in budget savings for the period of 1982 to '86. But that's
only a little more than half of what we sought. Government is still
spending too large a percentage of the total economy.

Now, some insist that any further budget savings must be obtained by
reducing the portion spent on defense. This ignores the fact that national
defense is solely the responsibility of the Federal Government; indeed, it
is its prime responsibility. And yet defense spending is less than a third
of the total budget. During the years of President Kennedy and of the years
before that, defense was almost half the total budget. And then came
several years in which our military capability was allowed to deteriorate
to a very dangerous degree. We are just now restoring, through the
essential modernization of our conventional and strategic forces, our
capability to meet our present and future security needs. We dare not shirk
our responsibility to keep America free, secure, and at peace.

The last decade saw domestic spending surge literally out of control. But
the basis for such spending had been laid in previous years. A pattern of
overspending has been in place for half a century. As the national debt
grew, we were told not to worry, that we owed it to ourselves.

Now we know that deficits are a cause for worry. But there's a difference
of opinion as to whether taxes should be increased, spending cut, or some
of both. Fear is expressed that government borrowing to fund the deficit
could inhibit the economic recovery by taking capital needed for business
and industrial expansion. Well, I think that debate is missing an important
point. Whether government borrows or increases taxes, it will be taking the
same amount of money from the private sector, and, either way, that's too
much. Simple fairness dictates that government must not raise taxes on
families struggling to pay their bills. The root of the problem is that
government's share is more than we can afford if we're to have a sound
economy.

We must bring down the deficits to ensure continued economic growth. In the
budget that I will submit on February 1st, I will recommend measures that
will reduce the deficit over the next 5 years. Many of these will be
unfinished business from last year's budget.

Some could be enacted quickly if we could join in a serious effort to
address this problem. I spoke today with Speaker of the House O'Neill,
Senate Majority Leader Baker, Senate Minority Leader Byrd, and House
Minority Leader Michel. I asked them if they would designate congressional
representatives to meet with representatives of the administration to try
to reach prompt agreement on a bipartisan deficit reduction plan. I know it
would take a long, hard struggle to agree on a full-scale plan. So, what I
have proposed is that we first see if we can agree on a down payment.

Now, I believe there is basis for such an agreement, one that could reduce
the deficits by about a hundred billion dollars over the next 3 years. We
could focus on some of the less contentious spending cuts that are still
pending before the Congress. These could be combined with measures to close
certain tax loopholes, measures that the Treasury Department has previously
said to be worthy of support. In addition, we could examine the possibility
of achieving further outlay savings based on the work of the Grace
commission.

If the congressional leadership is willing, my representatives will be
prepared to meet with theirs at the earliest possible time. I would hope
the leadership might agree on an expedited timetable in which to develop
and enact that down payment.

But a down payment alone is not enough to break us out of the deficit
problem. It could help us start on the right path. Yet, we must do more.
So, I propose that we begin exploring how together we can make structural
reforms to curb the built-in growth of spending.

I also propose improvements in the budgeting process. Some 43 of our 50
States grant their Governors the right to veto individual items in
appropriation bills without having to veto the entire bill. California is
one of those 43 States. As Governor, I found this line-item veto was a
powerful tool against wasteful or extravagant spending. It works in 43
States. Let's put it to work in Washington for all the people.

It would be most effective if done by constitutional amendment. The
majority of Americans approve of such an amendment, just as they and I
approve of an amendment mandating a balanced Federal budget. Many States
also have this protection in their constitutions.

To talk of meeting the present situation by increasing taxes is a Band-Aid
solution which does nothing to cure an illness that's been coming on for
half a century--to say nothing of the fact that it poses a real threat to
economic recovery. Let's remember that a substantial amount of income tax
is presently owed and not paid by people in the underground economy. It
would be immoral to make those who are paying taxes pay more to compensate
for those who aren't paying their share.

There's a better way. Let us go forward with an historic reform for
fairness, simplicity, and incentives for growth. I am asking Secretary Don
Regan for a plan for action to simplify the entire tax code, so all
taxpayers, big and small, are treated more fairly. And I believe such a
plan could result in that underground economy being brought into the
sunlight of honest tax compliance. And it could make the tax base broader,
so personal tax rates could come down, not go up. I've asked that specific
recommendations, consistent with those objectives, be presented to me by
December 1984.

Our second great goal is to build on America's pioneer spirit--I said
something funny? I said America's next frontier--and that's to develop that
frontier. A sparkling economy spurs initiatives, sunrise industries, and
makes older ones more competitive.

Nowhere is this more important than our next frontier: space. Nowhere do we
so effectively demonstrate our technological leadership and ability to make
life better on Earth. The Space Age is barely a quarter of a century old.
But already we've pushed civilization forward with our advances in science
and technology. Opportunities and jobs will multiply as we cross new
thresholds of knowledge and reach deeper into the unknown.

Our progress in space--taking giant steps for all mankind--is a tribute to
American teamwork and excellence. Our finest minds in government, industry,
and academia have all pulled together. And we can be proud to say: We are
first; we are the best; and we are so because we're free.

America has always been greatest when we dared to be great. We can reach
for greatness again. We can follow our dreams to distant stars, living and
working in space for peaceful, economic, and scientific gain. Tonight, I am
directing NASA to develop a permanently manned space station and to do it
within a decade.

A space station will permit quantum leaps in our research in science,
communications, in metals, and in lifesaving medicines which could be
manufactured only in space. We want our friends to help us meet these
challenges and share in their benefits. NASA will invite other countries to
participate so we can strengthen peace, build prosperity, and expand
freedom for all who share our goals.

Just as the oceans opened up a new world for clipper ships and Yankee
traders, space holds enormous potential for commerce today. The market for
space transportation could surpass our capacity to develop it. Companies
interested in putting payloads into space must have ready access to private
sector launch services. The Department of Transportation will help an
expendable launch services industry to get off the ground. We'll soon
implement a number of executive initiatives, develop proposals to ease
regulatory constraints, and, with NASA's help, promote private sector
investment in space.

And as we develop the frontier of space, let us remember our responsibility
to preserve our older resources here on Earth. Preservation of our
environment is not a liberal or conservative challenge, it's common sense.

Though this is a time of budget constraints, I have requested for EPA one
of the largest percentage budget increases of any agency. We will begin the
long, necessary effort to clean up a productive recreational area and a
special national resource--the Chesapeake Bay.

To reduce the threat posed by abandoned hazardous waste dumps, EPA will
spend $410 million. And I will request a supplemental increase of 50
million. And because the Superfund law expires in 1985, I've asked Bill
Ruckelshaus to develop a proposal for its extension so there'll be
additional time to complete this important task.

On the question of acid rain, which concerns people in many areas of the
United States and Canada, I'm proposing a research program that doubles our
current funding. And we'll take additional action to restore our lakes and
develop new technology to reduce pollution that causes acid rain.

We have greatly improved the conditions of our natural resources. We'll ask
the Congress for $157 million beginning in 1985 to acquire new park and
conservation lands. The Department of the Interior will encourage careful,
selective exploration and production on our vital resources in an Exclusive
Economic Zone within the 200-mile limit off our coasts--but with strict
adherence to environmental laws and with fuller State and public
participation.

But our most precious resources, our greatest hope for the future, are the
minds and hearts of our people, especially our children. We can help them
build tomorrow by strengthening our community of shared values. This must
be our third great goal. For us, faith, work, family, neighborhood,
freedom, and peace are not just words; they're expressions of what America
means, definitions of what makes us a good and loving people.

Families stand at the center of our society. And every family has a
personal stake in promoting excellence in education. Excellence does not
begin in Washington. A 600-percent increase in Federal spending on
education between 1960 and 1980 was accompanied by a steady decline in
Scholastic Aptitude Test scores. Excellence must begin in our homes and
neighborhood schools, where it's the responsibility of every parent and
teacher and the right of every child.

Our children come first, and that's why I established a bipartisan National
Commission on Excellence in Education, to help us chart a commonsense
course for better education. And already, communities are implementing the
Commission's recommendations. Schools are reporting progress in math and
reading skills. But we must do more to restore discipline to schools; and
we must encourage the teaching of new basics, reward teachers of merit,
enforce tougher standards, and put our parents back in charge.

I will continue to press for tuition tax credits to expand opportunities
for families and to soften the double payment for those paying public
school taxes and private school tuition. Our proposal would target
assistance to low- and middle-income families. Just as more incentives are
needed within our schools, greater competition is needed among our schools.
Without standards and competition, there can be no champions, no records
broken, no excellence in education or any other walk of life.

And while I'm on this subject, each day your Members observe a 200-year-old
tradition meant to signify America is one nation under God. I must ask: If
you can begin your day with a member of the clergy standing right here
leading you in prayer, then why can't freedom to acknowledge God be enjoyed
again by children in every schoolroom across this land?

America was founded by people who believed that God was their rock of
safety. He is ours. I recognize we must be cautious in claiming that God is
on our side, but I think it's all right to keep asking if we're on His
side.

During our first 3 years, we have joined bipartisan efforts to restore
protection of the law to unborn children. Now, I know this issue is very
controversial. But unless and until it can be proven that an unborn child
is not a living human being, can we justify assuming without proof that it
isn't? No one has yet offered such proof; indeed, all the evidence is to
the contrary. We should rise above bitterness and reproach, and if
Americans could come together in a spirit of understanding and helping,
then we could find positive solutions to the tragedy of abortion.

Economic recovery, better education, rededication to values, all show the
spirit of renewal gaining the upper hand. And all will improve family life
in the eighties. But families need more. They need assurance that they and
their loved ones can walk the streets of America without being afraid.
Parents need to know their children will not be victims of child
pornography and abduction. This year we will intensify our drive against
these and other horrible crimes like sexual abuse and family violence.

Already our efforts to crack down on career criminals, organized crime,
drugpushers, and to enforce tougher sentences and paroles are having
effect. In 1982 the crime rate dropped by 4.3 percent, the biggest decline
since 1972. Protecting victims is just as important as safeguarding the
rights of defendants.

Opportunities for all Americans will increase if we move forward in fair
housing and work to ensure women's rights, provide for equitable treatment
in pension benefits and Individual Retirement Accounts, facilitate child
care, and enforce delinquent parent support payments.

It's not just the home but the workplace and community that sustain our
values and shape our future. So, I ask your help in assisting more
communities to break the bondage of dependency. Help us to free enterprise
by permitting debate and voting "yes" on our proposal for enterprise zones
in America. This has been before you for 2 years. Its passage can help
high-unemployment areas by creating jobs and restoring neighborhoods.

A society bursting with opportunities, reaching for its future with
confidence, sustained by faith, fair play, and a conviction that good and
courageous people will flourish when they're free--these are the secrets of
a strong and prosperous America at peace with itself and the world.

A lasting and meaningful peace is our fourth great goal. It is our highest
aspiration. And our record is clear: Americans resort to force only when we
must. We have never been aggressors. We have always struggled to defend
freedom and democracy.

We have no territorial ambitions. We occupy no countries. We build no walls
to lock people in. Americans build the future. And our vision of a better
life for farmers, merchants, and working people, from the Americas to Asia,
begins with a simple premise: The future is best decided by ballots, not
bullets.

Governments which rest upon the consent of the governed do not wage war on
their neighbors. Only when people are given a personal stake in deciding
their own destiny, benefiting from their own risks, do they create
societies that are prosperous, progressive, and free. Tonight, it is
democracies that offer hope by feeding the hungry, prolonging life, and
eliminating drudgery.

When it comes to keeping America strong, free, and at peace, there should
be no Republicans or Democrats, just patriotic Americans. We can decide the
tough issues not by who is right, but by what is right.

Together, we can continue to advance our agenda for peace. We can establish
a more stable basis for peaceful relations with the Soviet Union;
strengthen allied relations across the board; achieve real and equitable
reductions in the levels of nuclear arms; reinforce our peacemaking efforts
in the Middle East, Central America, and southern Africa; or assist
developing countries, particularly our neighbors in the Western Hemisphere;
and assist in the development of democratic institutions throughout the
world.

The wisdom of our bipartisan cooperation was seen in the work of the
Scowcroft commission, which strengthened our ability to deter war and
protect peace. In that same spirit, I urge you to move forward with the
Henry Jackson plan to implement the recommendations of the Bipartisan
Commission on Central America.

Your joint resolution on the multinational peacekeeping force in Lebanon is
also serving the cause of peace. We are making progress in Lebanon. For
nearly 10 years, the Lebanese have lived from tragedy to tragedy with no
hope for their future. Now the multinational peacekeeping force and our
marines are helping them break their cycle of despair. There is hope for a
free, independent, and sovereign Lebanon. We must have the courage to give
peace a chance. And we must not be driven from our objectives for peace in
Lebanon by state-sponsored terrorism. We have seen this ugly specter in
Beirut, Kuwait, and Rangoon. It demands international attention. I will
forward shortly legislative proposals to help combat terrorism. And I will
be seeking support from our allies for concerted action.

Our NATO alliance is strong. 1983 was a banner year for political courage.
And we have strengthened our partnerships and our friendships in the Far
East. We're committed to dialog, deterrence, and promoting prosperity.
We'll work with our trading partners for a new round of negotiations in
support of freer world trade, greater competition, and more open markets.

A rebirth of bipartisan cooperation, of economic growth, and military
deterrence, and a growing spirit of unity among our people at home and our
allies abroad underline a fundamental and far-reaching change: The United
States is safer, stronger, and more secure in 1984 than before. We can now
move with confidence to seize the opportunities for peace, and we will.

Tonight, I want to speak to the people of the Soviet Union, to tell them
it's true that our governments have had serious differences, but our sons
and daughters have never fought each other in war. And if we Americans have
our way, they never will.

People of the Soviet Union, there is only one sane policy, for your country
and mine, to preserve our civilization in this modern age: A nuclear war
cannot be won and must never be fought. The only value in our two nations
possessing nuclear weapons is to make sure they will never be used. But
then would it not be better to do away with them entirely?

People of the Soviet, President Dwight Eisenhower, who fought by your side
in World War II, said the essential struggle "is not merely man against man
or nation against nation. It is man against war." Americans are people of
peace. If your government wants peace, there will be peace. We can come
together in faith and friendship to build a safer and far better world for
our children and our children's children. And the whole world will rejoice.
That is my message to you.

Some days when life seems hard and we reach out for values to sustain us or
a friend to help us, we find a person who reminds us what it means to be
Americans.

Sergeant Stephen Trujillo, a medic in the 2d Ranger Battalion, 75th
Infantry, was in the first helicopter to land at the compound held by Cuban
forces in Grenada. He saw three other helicopters crash. Despite the
imminent explosion of the burning aircraft, he never hesitated. He ran
across 25 yards of open terrain through enemy fire to rescue wounded
soldiers. He directed two other medics, administered first aid, and
returned again and again to the crash site to carry his wounded friends to
safety.

Sergeant Trujillo, you and your fellow service men and women not only saved
innocent lives; you set a nation free. You inspire us as a force for
freedom, not for despotism; and, yes, for peace, not conquest. God bless
you.

And then there are unsung heroes: single parents, couples, church and civic
volunteers. Their hearts carry without complaint the pains of family and
community problems. They soothe our sorrow, heal our wounds, calm our
fears, and share our joy.

A person like Father Ritter is always there. His Covenant House programs in
New York and Houston provide shelter and help to thousands of frightened
and abused children each year. The same is true of Dr. Charles Carson.
Paralyzed in a plane crash, he still believed nothing is impossible. Today
in Minnesota, he works 80 hours a week without pay, helping pioneer the
field of computer-controlled walking. He has given hope to 500,000
paralyzed Americans that some day they may walk again.

How can we not believe in the greatness of America? How can we not do what
is right and needed to preserve this last best hope of man on Earth? After
all our struggles to restore America, to revive confidence in our country,
hope for our future, after all our hard-won victories earned through the
patience and courage of every citizen, we cannot, must not, and will not
turn back. We will finish our job. How could we do less? We're Americans.

Carl Sandburg said, "I see America not in the setting sun of a black night
of despair... I see America in the crimson light of a rising sun fresh
from the burning, creative hand of God... I see great days ahead for men
and women of will and vision."

I've never felt more strongly that America's best days and democracy's best
days lie ahead. We're a powerful force for good. With faith and courage, we
can perform great deeds and take freedom's next step. And we will. We will
carry on the tradition of a good and worthy people who have brought light
where there was darkness, warmth where there was cold, medicine where there
was disease, food where there was hunger, and peace where there was only
bloodshed.

Let us be sure that those who come after will say of us in our time, that
in our time we did everything that could be done. We finished the race; we
kept them free; we kept the faith.

Thank you very much. God bless you, and God bless America.

NOTE: The President spoke at 9:02 p.m. in the House Chamber of the Capitol.
He was introduced by Thomas P. O'Neill, Jr., Speaker of the House of
Representatives. The address was broadcast live on nationwide radio and
television.