Speech Transcript:

 Thank you. Mr. Speaker, Mr. President, and distinguished members of
the House and Senate.

When we first met here seven years ago -- many of us for the first
time -- it was with the hope or beginning something new for America.
We meet here tonight in this historic Chamber to continue that work.
If anyone expects just a proud recitation of the accomplishments of
my administration, I say let's leave that to history: we're not
finished yet. (Applause.) So my message to you tonight is, put on
your work shoes -- we're still on the job. (Applause.)

History records the power of the ideas that brought us here those
seven years ago. Ideas like the individual's right to reach as far
and as high as his or her talents will permit, the free market as an
engine of economic progress and, as an ancient Chinese philosopher,
Lao-tzu, said, "Govern a great nation as you would cook a small fish;
do not overdo it."

Well, these ideas were part of a larger notion -- a vision, if you
will, of America herself -- an America not only rich in opportunity
for the individual but an America, too, of strong families and
vibrant neighborhoods, an America whose divergent but harmonizing
communities were a reflection of a deeper community of values -- the
value of work, of family, of religion -- and of the love of freedom
that God places in each of us and whose defense He has entrusted in a
special way to this nation.

All of this was made possible by an idea I spoke of when Mr.
Gorbachev was here -- the belief that the most exciting revolution
ever known to humankind began with three simple words: "We the
People" -- the revolutionary notion that the people grant government
its rights, and not the other way around.

And there is one lesson that has come home powerfully to me, which I
would offer to you now. Just as those who created this Republic
pledged to each other their lives, their fortunes, and their sacred
honor, so, too, America's leaders today must pledge to each other
that we will keep foremost in our hearts and minds not what is best
for ourselves or for our party, but what is best for America.
(Applause.) In the spirit of Jefferson, let us affirm that, in this
Chamber tonight, there are no Republicans, no Democrats, just
Americans.

Yes, we will have our differences. But let us always remember -- what
unites us far outweighs whatever divides us. Those who sent us here to
serve them -- the millions of Americans watching and listening tonight
-- expect this of us. Let's prove to them and to ourselves that
democracy works even in an election year.

We have done this before. And as we have worked together to bring
down spending, tax rates, and inflation, employment has climbed to
record heights; America has created more jobs and better,
higher-paying jobs; family income has risen for four straight years,
and America's poor climbed out of poverty at the fastest rate in more
than 10 years. (Applause.) Our record is not just the longest
peacetime expansion in history, but an economic and social revolution
of hope, based on work, incentives, growth and opportunity; a
revolution of compassion that led to private sector initiatives and a
77 percent increase in charitable giving; a revolution that -- at a
critical moment in world history -- reclaimed and restored the
American dream.

In international relations, too, there's only one description for
what, together, we have achieved -- a complete turnabout, a
revolution. Seven years ago, America was weak and freedom everywhere
was under siege. Today America is strong and democracy is everywhere
on the move. From Central America to East Asia, ideas like free
markets and democratic reforms and human rights are taking hold.
We've replaced "Blame America" with "Look up to America." (Applause.)
We've rebuilt our defenses, and, of all our accomplishments, none can
give us more satisfaction than knowing that our young people are
again proud to wear our country's uniform. (Applause.) And in a few
moments, I'm going to talk about three development -- arms reduction,
the Strategic Defense Initiative, and the global democratic revolution
-- that, when taken together, offer a chance none of us would have
dared imagine seven years ago, a chance to rid the world of the two
great nightmares of the postwar era. I speak of the startling hope of
giving our children a future free of both totalitarianism and nuclear
terror.

Tonight, then, we're strong, prosperous, at peace, and we are free.
This is the state of our Union. And if we will work together this
year, I believe we can give a future President and a future Congress
the chance to make that prosperity, that peace, that freedom, not
just the state of our Union, but the state of our world. (Applause.)

Toward this end, we have four basic objectives tonight. First, steps
we can take this year to keep our economy strong and growing, to give
our children a future of low inflation and full employment. Second,
let's check our progress in attacking social problems where important
gains have been made but which still need critical attention. I mean
schools that work, economic independence for the poor, restoring
respect for family life and family values. Our third objective
tonight is global -- continuing the exciting economic and democratic
revolutions we've seen around the world. Fourth and finally, our
nation has remained at peace for nearly a decade and a half, as we
move toward our goals of world prosperity and world freedom. We must
protect that peace and deter war by making sure the next President
inherits what you and I have a moral obligation to give that
President -- a national security that is unassailable and a national
defense that takes full advantage of new technology, and is fully
funded. Applause.)

This is a full agenda. It's meant to be. You see, my thinking on the
next year is quite simple -- let's make this the best of eight. And
that means -- (applause) -- and that means it's all out -- right to
the finish line. I don't buy the idea that this is the last year of
anything, because we're not talking here tonight about registering
temporary gains, but ways of making permanent our successes. And
that's why our focus is the values, the principles, and ideas that
made America great. Let's be clear on this point -- we're for limited
government because we understand, as the Founding Fathers did, that it
is the best way of ensuring personal liberty and empowering the
individual so that every American of every race and region shares
fully in the flowering of American prosperity and freedom.

One other thing we Americans like -- the future -- like the sound of
it, the idea of it, the hope of it. Where others fear trade and
economic growth, we see opportunities for creating new wealth and
undreamed-of opportunities for millions in our own land and beyond.
Where others seek to throw up barriers, we seek to bring them down;
where others take counsel of their fears, we follow our hopes. Yes,
we Americans like the future and like making the most of it. Let's do
that now.

And let's begin by discussing how to maintain economic growth by
controlling and eventually eliminating the problem of federal
deficits. We have had a balanced budget only eight times in the last
57 years. For the first time in 14 years, the federal government
spent less in real terms last year than the year before. We took $73
billion off last year's deficit compared to the year before. The
deficit itself has moved from 6.3 percent of the Gross National
Product to only 3.4 percent. And perhaps the most important sign of
progress has been the change in our view of deficits. You know, a few
of us can remember when, not too many years ago, those who created the
deficits said they would make us prosperous and not to worry about the
debt because "we owe it to ourselves." Well, at last there is
agreement that we can't spend ourselves rich.

Our recent budget agreement, designed to reduce federal deficits by
$76 billion over the next two years, builds on this consensus. But
this agreement must be adhered to without slipping into the errors of
the past -- more broken promises and more unchecked spending. As I
indicated in my first State of the Union, what ails us can be simply
put: The federal government is too big and it spends too much money.
(Applause.) I can assure you, the bipartisan leadership of Congress,
of my help in fighting off any attempt to bust our budget agreement.
And this includes the swift and certain use of the veto power.

Now, it is also time for some plain talk about the most immediate
obstacle to controlling federal deficits. The simple but frustrating
problem of making expenses match revenues -- something American
families do and the federal government can't -- has caused crisis
after crisis in this city. Mr. Speaker, Mr. President, I will say to
you tonight what I have said before -- and will continue to say: The
budget process has broken down; it needs a drastic overhaul.
(Applause.) With each ensuing year, the spectacle before the American
people is the same as it was this Christmas -- budget deadlines
delayed or missed completely, monstrous continuing resolutions that
pack hundreds of billions of dollars worth of spending into one bill
-- and a federal government on the brink of default.

I know I'm echoing what you here in the Congress have said because
you suffered so directly -- but let's recall that in seven years, of
91 appropriations bills scheduled to arrive on my desk by a certain
date, only 10 made it on time. Last year, of the 13 appropriations
bills due by October 1st, none of them made it. Instead, we had four
continuing resolutions lasting 41 days, then 36 days, and two days,
and three days, respectively. And then, along came these behemoths.
(Applause.) This is the conference report -- 1,053 page report
weighing 14 pounds. Then this -- a reconciliation bill six months
late, that was 1,186 pages long, weighing 15 pounds; and the
long-term continuing resolution -- (applause) -- this one was two
months late and it's 1,057 pages long, weighing 14 pounds. That was a
total of 43 pounds of paper and ink. You had three hours -- yes, three
hours -- to consider each, and it took 300 people at my Office of
Management and Budget just to read the bill so the government
wouldn't shut down.

Congress shouldn't send another one of these. (Applause.) No -- and
if you do, I will not sign it. (Applause.)

Let's change all this; instead of a presidential budget that gets
discarded and a congressional budget resolution that is not enforced,
why not a simple partnership, a joint agreement that sets out the
spending priorities within the available revenues? And let's remember
our deadline is October 1st, not Christmas (applause); let's get the
people's work done in time to avoid a footrace with Santa Claus.
(Laughter.) And yes, this year -- to coin a phrase -- a new
beginning. Thirteen individual bills, on time and fully reviewed by
Congress.

I'm also certain you join me in saying: Let's help ensure our future
of prosperity by giving the President a tool that -- though I will
not get use to use it -- is one I know future Presidents of either
party must have. Give the President the same authority that 43
governors use in their states, the right to reach into massive
appropriation bills, pare away the waste, and enforce budget
discipline. Let's approve the line-item veto. (Applause.)

And let's take a partial step in this direction. Most of you in this
Chamber didn't know what was in this catch-all bill and report. Over
the past few weeks, we've all learned what was tucked away behind a
little comma here and there. For example, there's millions for items
such as cranberry research, blueberry research, the study of
crawfish, and the commercialization of wild flowers. And that's not
to mention the $5 million or so -- that -- so that people from
developing nations could come here to watch Congress at work.
(Laughter.) I won't even touch that. (Laughter.) So tonight, I offer
you this challenge. In 30 days, I will send back to you those items
as rescissions, which if I had the authority to line them out, I
would do so. (Applause.)

Now, review this multibillion-dollar package that will not undercut
our bipartisan budget agreement. As a matter of fact, if adopted, it
will improve our deficit reduction goals. And what an example we can
set; that we're serious about getting our financial accounts in
order. By acting and approving this plan, you have the opportunity to
override a congressional process that is out of control.

There is another vital reform. Yes, Gramm-Rudman-Hollings has been
profoundly helpful, but let us take its goal of a balanced budget and
make it permanent. Let us do now what so many states do to hold down
spending and what 32 state legislatures have asked us to do; let us
heed the wishes of an overwhelming plurality of Americans and pass a
constitutional amendment that mandates a balanced budget and forces
the federal government to live within its means. (Applause.)

Reform of the budget process -- including the line-item veto and
balanced budget amendment -- will, together with real restraint on
government spending, prevent the federal budget from ever again
ravaging the family budget.

Let's ensure that the federal government never again legislates
against the family and the home. Last September, I signed an
Executive Order on the family requiring that every department and
agency review its activities in light of seven standards designed to
promote and not harm the family. But let us make certain that the
family is always at the center of the public policy process, not just
in this administration but in future -- all future administrations.
It's time for Congress to consider -- at the beginning -- a statement
of the impact that legislation will have on the basic unit of American
society, the family.

And speaking of the family, let's turn to a matter on the mind of
every American parent tonight -- education. We all know the sorry
story of the 60s and 70s -- soaring spending, plummeting test scores
-- and that hopeful trend of the 80s, when we replaced an obsession
with dollars with a commitment to quality, and test scores started
back up. There's a lesson here that we all should write on the
blackboard 100 times -- in a child's education, money can never take
the place of basics like discipline, hard work, and, yes, homework.
(Applause.)

As a nation we do, of course, spend heavily on education -- more than
we spend on defense -- yet across our country, governors like New
Jersey's Tom Kean are giving classroom demonstrations that how we
spend is as important as how much we spend. Opening up the teaching
profession to all qualified candidates, merit pay, so that good
teachers get A's as well as apples, and stronger curriculum, as
Secretary Bennett has proposed for high schools. These imaginative
reforms are making common sense the most popular new kid in America's
schools.

How can we help? Well, we can talk about and push for these reforms.
But the most important thing we can do is to reaffirm that control of
our schools belongs to the states, local communities and, most of all,
to the parents and teachers. (Applause.)

My friends, some years ago, the federal government declared war on
poverty, and poverty won. (Laughter.) Today, the federal government
has 59 major welfare programs and spends more than $100 billion a
year on them. What has all this money done?

Well, too often it has only made poverty harder to escape. Federal
welfare programs have created a massive social problem. With the best
of intentions, government created a poverty trap that wreaks havoc on
the very support system the poor need most to lift themselves out of
poverty -- the family. Dependency has become the one enduring
heirloom, passed from one generation to the next, of too many
fragmented families.

It is time -- this may be the most radical thing I've said in seven
years in this office -- it's time for Washington to show a little
humility. There are a thousand sparks of genius in 50 states and a
thousand communities around the nation. It is time to nurture them
and see which ones can catch fire and become guiding lights.

States have begun to show us the way. They have demonstrated that
successful welfare programs can be built around more effective child
support enforcement practices and innovative programs requiring
welfare recipients to work or prepare for work. (Applause.)

Let us give the states even more flexibility and encourage more
reforms.

Let's start making our welfare system the first rung on America's
ladder of opportunity -- a boost up from dependency; not a graveyard,
but a birthplace of hope.

And now let me turn to three other matters vital to family values and
the quality of family life. The first is an untold American success
story. Recently, we released our annual survey of what graduating
high school seniors have to say about drugs. Cocaine use is declining
and marijuana use was the lowest since surveying began. We can be
proud that our students are "just saying no" to drugs. (Applause.)
But let us remember what this menace requires -- commitment from
every part of America and every single American -- a commitment to a
drug-free America. The war against drugs is a war of individual
battles, a crusade with many heroes -- including America's young
people, and also someone very special to me. She has helped so many
of our young people to say "no" to drugs. Nancy, much credit belongs
to you, and I want to express to you your husband's pride and your
country's thanks. (Applause.) Surprised you, didn't I? (Laughter.)

Well now, we come to a family issue that we must have the courage to
confront. Tonight, I call America -- a good nation, a moral people --
to charitable but realistic consideration of the terrible cost of
abortion on demand. To those who say this violates a woman's right to
control of her own body -- can they deny that now medical evidence
confirms the unborn child is a living human being entitled to life,
liberty, and the pursuit of happiness? (Applause.) Let us unite as a
nation and protect the unborn with legislation that would stop all
federal funding for abortion -- and with a human life amendment
making, of course, an exception where the unborn child threatens the
life of the mother. Our Judeo-Christian tradition recognizes the
right of taking a life in self-defense.

But with that one exception, let us look to those others in our land
who cry out for children to adopt. I pledge to you tonight, I will
work to remove barriers to adoption and extend full sharing in family
life to millions of Americans, so that children who need homes can be
welcomed to families who want them and love them. (Applause.)

And let me add here: so many of our greatest statesmen have reminded
us that spiritual values alone are essential to our nation's health
and vigor. The Congress opens its proceedings each day, as does the
Supreme Court, with an acknowledgment of the Supreme Being -- yet we
are denied the right to set aside in our schools a moment each day
for those who wish to pray. I believe Congress should pass our school
prayer amendment. (Applause.)

Now, to make sure there is a full nine-member Supreme Court to
interpret the law, to protect the rights of all Americans, I urge the
Senate to move quickly and decisively in confirming Judge Anthony
Kennedy to the highest Court in the land and to also confirm 27
nominees now waiting to fill vacancies in the federal judiciary.
(Applause.)

Here then are our domestic priorities; yet if the Congress and the
administration work together, even greater opportunities lie ahead to
expand a growing world economy; to continue to reduce the threat of
nuclear arms and to extend the frontiers of freedom and the growth of
democratic institutions.

Our policies consistently received the strongest support of the late
Congressman Dan Daniel of Virginia. I'm sure all of you join me in
expressing heartfelt condolences on his passing.

One of the greatest contributions the United States can make to the
world is to promote freedom as the key to economic growth. A
creative, competitive America is the answer to a changing world, not
trade wars that would close doors, create greater barriers, and
destroy millions of jobs. We should always remember: protectionism is
destructionism. America's jobs, America's growth, America's future
depend on trade -- trade that is free, open, and fair. (Applause.)

This year, we have it within our power to take a major step toward a
growing global economy and an expanding cycle of prosperity that
reaches to all the free nations of this Earth. I'm speaking of the
historic Free Trade Agreement negotiated between our country and
Canada. And I can also tell you that we're determined to expand this
concept, south as well as north. Next month I will be traveling to
Mexico where trade matters will be of foremost concern. And, over the
next several months, our Congress and the Canadian Parliament can make
the start of such a North American accord a reality. Our goal must be
a day when the free flow of trade -- from the tip of Tierra del Fuego
to the Arctic Circle -- unites the people of the Western Hemisphere in
a bond of mutually beneficial exchange; when all borders become what
the U.S.-Canadian border so long has been -- a meeting place, rather
than a dividing line. (Applause.)

This movement we see in so many places toward economic freedom is
indivisible from the worldwide movement toward political freedom --
and against totalitarian rule. This global democratic revolution has
removed the specter -- so frightening a decade ago -- of democracy
doomed to permanent minority status in the world. In South and
Central America, only a third of the people enjoyed democratic rule
in 1976. Today, over 90 percent of Latin Americans live in nations
committed to democratic principles.

And the resurgence of democracy is owed to these courageous people on
almost every continent who have struggled to take control of their own
destiny. In Nicaragua, the struggle has extra meaning because that
nation is so near our own borders. The recent revelations of a former
high-level Sandinista major, Roger Miranda, show us that, even as they
talk peace, the communist Sandinista government of Nicaragua has
established plans for a large 600,000-man army. Yet even as these
plans are made, the Sandinista regime knows the tide is turning and
the cause of Nicaraguan freedom is riding at its crest. Because of
the freedom fighters, who are resisting communist rule, the
Sandinistas have been forced to extend some democratic rights,
negotiate with Church authorities, and release a few political
prisoners.

The focus is on the Sandinistas, their promises and their actions.
There is a consensus among the four Central American democratic
presidents that the Sandinistas have not complied with the plan to
bring peace and democracy to all of Central America. The Sandinistas
again have promised reforms. Their challenge is to take irreversible
steps toward democracy.

On Wednesday, my request to sustain the freedom fighters will be
submitted which reflects our mutual desire for peace, freedom, and
democracy in Nicaragua. I ask Congress to pass this request -- let us
be for the people of Nicaragua what Lafayette, Pulaski, and Von
Steuben were for our forefathers and the cause of American
independence. (Applause.)

So, too, in Afghanistan, the freedom fighters are the key to peace.
We support the Mujahadeen. There can be no settlement unless all
Soviet troops are removed and the Afghan people are allowed genuine
self-determination. (Applause.) I have made my views on this matter
known to Mr. Gorbachev. But not just Nicaragua or Afghanistan. Yes,
everywhere we see a swelling freedom tide across the world -- freedom
fighters rising up in Cambodia and Angola, fighting and dying for the
same democratic liberties we hold sacred. Their cause is our cause.
Freedom.

Yet, even as we work to expand world freedom, we must build a safer
peace and reduce the danger of nuclear war. But let's have no
illusions. Three years of steady decline in the value of our annual
defense investment have increased the risk of our most basic security
interests, jeopardizing earlier hard-won goals. We must face squarely
the implications of this negative trend and make adequate, stable
defense spending a top goal both this year and in the future. This
same concern applies to economic and security assistance programs as
well. But the resolve of America and its NATO allies has opened the
way for unprecedented achievement in arms reduction. Our recently
signed INF Treaty is historic because it reduces nuclear arms and
establishes the most stringent verification regime in arms control
history, including several forms of short-notice, on-site inspection.
I submitted the treaty today, and I urge the Senate to give its advice
and consent to ratification of this landmark agreement. (Applause.)
Thank you very much.

In addition to the INF Treaty, we're within reach of an even more
significant START agreement that will reduce U.S. and Soviet
long-range missile or strategic arsenals by half. But let me be clear
-- our approach is not to seek agreement for agreement's sake, but to
settle only for agreements that truly enhance our national security
and that of our allies. We will never put our security at risk -- or
that of our allies -- just to reach an agreement with the Soviets.
(Applause.) No agreement is better than a bad agreement. (Applause.)

As I mentioned earlier, our efforts are to give future generations
what we never had -- a future free of nuclear terror. Reduction of
strategic offensive arms is one step. SDI another. Our funding
request for our Strategic Defense Initiative is less than two percent
of the total defense budget. SDI funding is money wisely appropriated
and money well spent. (Applause.) SDI has the same purpose and
supports the same goals of arms reduction. It reduces the risk of war
and the threat of nuclear weapons to all mankind. Strategic defenses
that threaten no one could offer the world a safer, more stable basis
for deterrence. We must also remember that SDI is our insurance policy
against a nuclear accident -- a Chernobyl of the sky -- or an
accidental launch, or some madman who might come along.

We've seen such changes in the world in seven years -- as
totalitarianism struggles to avoid being overwhelmed by the forces of
economic advance and the aspiration for human freedom, it is the free
nations that are resilient and resurgent. As the global democratic
revolution has put totalitarianism on the defensive, we have left
behind the days of retreat -- America is again a vigorous leader of
the free world, a nation that acts decisively and firmly in the
furtherance of her principles and vital interests. No legacy would
make me more proud than leaving in place a bipartisan consensus for
the cause of world freedom, a consensus that prevents a paralysis of
American power from ever occurring again. (Applause.)

But my thoughts tonight go beyond this. And I hope you'll let me end
this evening with a personal reflection. You know, the world could
never be quite the same again after Jacob Shallus, a trustworthy and
dependable clerk of the Pennsylvania General Assembly, took his pen
and engrossed those words about representative government in the
Preamble of our Constitution. And in a quiet but final way, the
course of human events was forever altered when, on a ridge
overlooking the Emmitsburg Pike in an obscure Pennsylvania town
called Gettysburg, Lincoln spoke of our duty to government of and by
the people and never letting it perish from the Earth.

At the start of this decade, I suggested that we lived in equally
momentous times -- that it is up to us now to decide whether our form
of government would endure and whether history still had a place of
greatness for a quiet, pleasant, greening land called America. Not
everything has been made perfect in seven years -- nor will it be
made perfect in seven times 70 years -- but before us, this year and
beyond, are great prospects for the cause of peace and world
freedom.

It means, too, that the young Americans I spoke of seven years ago,
as well as those who might be coming along the Virginia or Maryland
shores this night and seeing for the first time the lights of this
capital city, the lights that cast their glow on our great halls of
government and the monuments to the memory of our great men -- it
means those young Americans will find a city of hope in a land that
is free.

We can be proud that for them and for us as those lights along the
Potomac are still seen this night -- signaling, as they have for
nearly two centuries and as we pray God they always will, that
another generation of Americans has protected and passed on lovingly
this place called America, this shining city on a hill, this
government of, by, and for the people.

Thank you and God bless you. (Applause.)