Nothing could be finer than to be in Carolina. Your beautiful State is rich in tradition and strong in character, dreams, drive, courage, refusing to quit -- they've made the difference in North Carolina before, and they make the difference now. If you want the proof, watch the Wolfpack and the Tar Heels.

You know, you taught me a thing or two about that winning spirit. I haven't forgotten a great turning point in my life, our great primary victory here that got everything rolling in 1976. And I haven't forgotten an even bigger victory in 1980, when we were together again. Now, of course, I should be saying a thank you, but really I'm back to ask a favor. Please, go out there and work for your great candidates so this year we can make it three for three.

You have great candidates. First is Congressman Bill Hendon from your 11th District. He's been a real star in his freshman class -- and I'm a member of that class, too. Bill is locked in a tough race, and it would be a tragedy if we didn't have him back in January. With your support, he'll be back.

And then there's Congressman Gene Johnston, another great Congressman from the Sixth District. I've been very grateful to have his support, and we can't afford to lose him. Nor can we afford to lose your two fine, experienced Representatives from the 9th and 10th Districts, Congressmen Jim Martin and Jim Broyhill.

Let me just say a few words about these tigers you have for challengers. Bill Cobey from the Fourth District, he's bright, and I understand he's done some mighty good recruiting for one of your great universities. I think that anyone who can produce that many champions is a champion himself and deserves to be elected.

Then there's Anne Bagnal from the Fifth District. She was part of our ticket in 1980 and just barely fell short. And if you can convince responsible Democrats and Independents to get behind her this year, she's going to make it, and we need her.

There's someone else coming on real strong in the Eighth District. He's put together a great campaign, and today, Harris Blake is in a position to win.

And how about that articulate challenger running in the Second District? With your help, Jack Marin will score big on November 2d, just like he scored all those baskets for the Duke Blue Devils.

Now, on election day let's also remember Jim McIntyre and Ed Johnson, two dedicated, principled conservatives, running hard in the First and Seventh Districts. And I want to mention one other candidate. He was commanding officer of the aircraft carrier the U.S.S. Lexington. A POW in North Vietnam, he was condemned to a living hell of torture for a period of a long 6 years. The Communists hadn't reckoned on this man's courage. They didn't realize you can't destroy the spirit of a true American hero. You can't trample on his faith; you can't kill his feelings of hope and love when he's tasted the truth of a better life.

In his book, ``Scars and Stripes,'' Red McDaniel wrote that the greatest moment of his life was seeing his wife Dorothy waiting with open arms, a reunion he dreamed about every night for those 6 years. And when he threw his arms around his family, he said it was worth it all for this moment. I think it's time to give him another fine moment, being elected your Congressman from North Carolina's Third District.

Well, like Red McDaniel, I, too, have a special moment I've dreamed about, and I think that many of you've shared this one. It'll be that day when we can tell our children and our grandchildren that we have begun to pay off this nation's national trillion-dollar debt, and some of the burden will be spared that coming generation.

Now, the problems we face today don't require the same sacrifices that heroes like Red were called upon to make. But they do require courage -- courage to look to the future rather than cling to the past; courage to say, ``I will carry on,'' rather than, ``I give up;'' and courage to believe in our hopes rather than to be ruled by our fears. Only by believing in each other, by living up to the values we share, by trusting in the God who has blessed our land, can we Americans solve the problems that have hit our nation.

Well, I have some good news for you. Just as you were told a few moments ago, we are changing the direction of America. We're putting her back on the course of hope that was charted by our Founding Fathers. We've begun to handcuff the big spenders, to get the Federal Government off your backs, promote economic recovery, and put you, the people, back in charge of your country again. With your support and with the help of your fine Representatives and your two great Senators, Jesse Helms and John East, we're clearing away the economic wreckage that was dumped in our laps.

Now, of course you'd never believe that if you listened to the drumbeat of doom and gloom from our critics. They say our economy is on its knees. Well, do you know something: If our economy is on its knees, that's a big improvement, because 2 years ago it was flat on its back.

Today's Monday morning quarterbacks have already forgotten the monster that they left us: spending shooting up at an annual rate of 17 percent; double-digit inflation; high unemployment; a 21\1/2\-percent prime interest rate, the highest in more than a hundred years; nearly a trillion dollars in debt; and the highest peacetime tax burden this country had ever known.

But those in Congress who spent your hard-earned dollars with such glee still resist the medicine of a balanced budget amendment. They claim it'd be a dangerous risk. Well, let me make one thing plain: There is no more dangerous risk to America or to the loved ones we leave behind than deliberate, planned inflation such as they gave us, and which could destroy our country. Only we're not going to let it.

Let me assure you, there are two other struggles we'll never give up on: protection of innocent human life of an unborn child and the right of your children to begin their school days the same way the Members of the United States Congress begin theirs -- with prayer.

Together, we've pulled America back from the edge of disaster. Of those five critical problems that I mentioned that we inherited -- runaway spending, runaway taxing, double-digit inflation, record interest rates, and high unemployment -- we have already made solid progress on four. And that's a pretty good beginning -- four out of five.

First, we cut that bankrupt government spending growth by nearly two-thirds. Second, we passed the first real tax cut for all American taxpayers in nearly 20 years. And, by the way, I've been biting my tongue about something that needs to be said. The people who constantly beat their breasts about fairness are the same ones who raised taxes during the seventies in the biggest single tax increase our nation has ever had -- raised it to the unbearable levels on hard-working American families. And then, when we arrived in 1981, they tried to stop us from giving you any kind of a tax cut.

And now they say they aim to repeal the third installment, that third year of your tax cut that's due next July 1st, and indexing -- which will follow that -- which is to stop you from being shoved up into higher tax brackets simply because you get a cost-of-living pay raise. Now, that would mean, if they had their way, a loss of about $2,500 over the next 5 years for the average American family. It's about time the people who blow so much smoke about compassion started showing some real compassion for the people who pay this country's bills. We will protect your tax cut.

Third, we're helping to lighten the load of your own bills by beating down that double-digit inflation and the price increases that it brings. Inflation hit 18 percent in January of 1980. We're doing a little better than that; we're doing a lot better. It's back to where it was -- believe it or not -- well, I just have to say that, as of yesterday, I would have still had to say that we reduced inflation from that 18 down to 5.1 percent. But this morning at 8:30 eastern time, the news came out about September. And it's kind of an interesting coincidence. The inflation rate now for this year, the 9 months of 1982, is 4.8 percent. And, by coincidence, it is exactly the same 4.8 percent that it was when Jerry Ford left office -- the last Republican President -- because that's what it was then.

You know, it's hard to mince words, because in these difficult first 21 months we've managed to undo much of the damage of those irresponsible big tax and big spending policies that those who came after President Ford insisted were good for America.

You know, as a matter of fact, someone asked me this morning before I got on the plane up there about the situation, and I just happened to think that they're blaming us, you know, consistently for the high unemployment, which is a great tragedy -- and they're blaming us for that. And if we're to blame for that, how come they say that we're not responsible also for all these reductions that I've just told you about?

That progress against inflation has reduced that prime interest rate from 21\1/2\ percent by nearly 50 percent. It's down to between 11\1/2\ and 12. And whether your livelihood is farming or homebuilding or steel or automobiles, retailing or other, this great progress means more hope, more jobs, confidence, and security for America -- and that's mighty good news.

Certainly, as I indicated, as we meet today, unemployment remains far too high. But just as surely as single-digit inflation started interest rates coming down, getting those interest rates down so that people can buy automobiles and take mortgages out on homes and so forth, that will dramatically drive unemployment back down to single digits, too. And then we will have delivered a knockout blow to recession once and for all. So, unlike some before us, we intend to get the job done and get it done right this time so that it'll stay.

And I hear those who say we haven't done enough. I think there's a double standard there. They won't accept responsibility for what they did in 25 years that they controlled both Houses of the Congress, but they want us to take the full blame for not producing a miracle in less than 25 months.

But the real truth is, our critics are playing with the people's fears, trying to scare them into believing that things will get worse so their own political fortunes will get better. The picture of fear and despair that they paint on the network evening blues -- [laughter] -- that's a picture of America where she was, not where she's going. We didn't create the grain embargo, and we didn't create double-digit inflation or 21\1/2\-percent interest rates that caused so much misery. We ended them.

America has a future of courage and hope -- hope that grows brighter as more people respond to the drop in inflation, tax rates, and interest rates. Not every statistic is strong yet, but look at the trend. Real wages, adjusted for inflation -- real wages are up. Retail sales are up; housing starts and permits are up; the value of the dollar is up; productivity is up; research and development spending is up; venture capital in small business near a record. And, while you're hearing all the story about bankruptcies in these times of stress, business new starts -- the starting up of new businesses is near a record high.

Personal savings is at a 6-year high, and new IRA accounts are pumping $30 to 35 billion into savings and investment that can then be used to provide jobs. Can there be any doubt that what all this means -- that slowly, surely, confidence is being restored, and America will lead the world out of this worldwide recession that we're all in?

This great country of ours is ready to move again. It's time that others stopped trying to scare the people and subvert recovery. If they can't encourage, if they won't work with the rest of us, then let them get out of the way.

We all could recite the criticisms. We've all heard all the things that they've said that we're supposedly doing wrong. But has anyone heard them suggest an actual alternative? All they can talk about or think about -- they don't dare mention it in this election year -- is they'll go right back, if given the chance, to more big spending, big taxing, more regulations, more meddling and make-work, more big government coming through the windows, under the door, and down the chimney.

One week from today you and millions of Americans will have a private moment in a voting booth, the place where you have as much influence and power as any other American in this country. When all of you prepare for that moment, I urge you to consider some very important questions. Ask yourselves: Will we create more jobs by returning to the old policies that sent those interest rates skyrocketing? Will we create more jobs by returning to old policies that gave us back-to-back years of double-digit inflation? Will we create more jobs by going back to the old policies that taxed working families as if they were millionaires? Or is there a better way? Do you think that the program that all of us worked so hard to pass, a program that is still so young, but that has already brought down the spending growth, the tax rates, the inflation, the interest rates -- do you think that program deserves just a little more time to fix the one remaining problem -- unemployment -- so we can put people back on the job and get this country back on its feet? [Applause] Then I urge you, when you're in that voting booth next Tuesday, vote for your hopes, not your fears.

There's a passage in the Psalms which says: ``Weeping may endure for a night, but joy cometh in the morning.'' America has endured a long, terrible night of economic hardship, but now we're seeing the first welcome burst of sunshine, the dawn of a new day for our country. America is entering a new season of hope, a genuine hope which springs from the vitality of the American spirit. We will put strong wings on weary hearts.

On the day that I took the oath of office, I referred to the words of one of the greatest among our Founding Fathers, Dr. Joseph Warren. Dr. Warren was the president of the Massachusetts Congress. I wonder what he'd have to say about Massachusetts today. [Laughter] But Dr. Warren said to his fellow Americans on the eve of our struggle for independence, ``Our country is in danger but not to be despaired of. On you depend the fortunes of America. You are to decide the important question on which rests the happiness and liberty of millions yet unborn. Act worthy of yourselves.''

Well, those words, ``Act worthy of yourselves,'' echo in my ears. Over these last 21 months, I've been sustained and inspired by the strength of each one of you. Your spirit and the warmth of your good wishes have made me more determined than ever to fulfill the enormous trust that is placed in this office. You know, you don't -- maybe not everyone has realized it when they've held the job -- you don't really become President. You are given temporary custody of this great institution which was created by our Founding Fathers.

Through this long night of economic hardship, you the people, the heroes of America, American democracy, have measured up to Dr. Warren's admonition. With your continued help, through the magnificent reach of your determination, by the mighty force of your personal prayers, I know that this great, new season of hope will bring that day of renewal and national regeneration and will bring a better world for our children.

I know every time in one of these rallies when I see the young people that are present here, I am so delighted, because our generation has to realize that's what this election is all about, this country we're going to leave them.

I thank you for your courage. I thank you for being worthy of yourselves. I thank you for being Americans. Send these people to Washington. We need them there, and we'll do the job together. God bless you all.

Note: The President spoke at 12:33 p.m. in the Raleigh Civic Center arena.

Following his appearance at the rally, the President attended a meeting with 11 southern Republican State chairmen at the civic center.