Speech Transcript:

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 travelled 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.
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; nonagricultural 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 standby 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 standby 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.
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:

   1. 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;
   2. 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;
   3. We are holding the fiscal 1962 budget deficit far below the
level incurred after the last recession in 1958; and, finally,
   4. 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. Secondly, 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;
   3. Third, extension of the present excise and corporation tax
rates, except for those changes - which will be recommended in a
message - affecting transportation.

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 commonsense
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 commonsense.

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.
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:

   1. the moral and physical strength of the United States;
   2. the united strength of the Atlantic Community;
   3. the regional strength of our Hemispheric relations;
   4. the creative strength of our efforts in the new and developing
nations;
   5. the peace-keeping strength of the United Nations. 

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.
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 U.N. fulfilled its Charter's lofty aim.

Eighteen months ago the tangled and turbulent Congo presented the
U.N. 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 U.N. assessments. Yet they do pay their annual assessments
to retain their votes - and a new U.N. 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 U.N. 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.
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 twelvefold
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.
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.
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.
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.