Speech Transcript:

 Mr. President, Mr. Speaker, Members of the 96th Congress, and my
fellow citizens:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thank you very much.