The first time that I addressed the National League of Cities as President was in March of 1981. And looking back, I think the most prophetic point I made was the need for a clear and direct line of communication between us -- the need to maintain a direct relationship between the Federal Government and America's cities.

Talking about communication -- communication is more than saying, ``Hello, how are you?'' I have a story -- it's a true incident -- that involves a fellow Californian, Danny Villanueva, who used to placekick for the Rams and then later became a sports announcer. And this was an incident in his life that he relayed to me, and it does deal with communications. Now, I've told it a great many times, this particular incident, but I haven't told it recently. And I hope I haven't told it to you, because I'm going to tell it again. [Laughter]

And anyway, the story goes that Danny, as a sports announcer, was having dinner one night over at the home of a young ballplayer with the Dodgers. He and the ballplayer were talking sports, and the young wife was bustling about getting the dinner ready. And the baby started to cry, and she, over her shoulder, said to her husband, ``Change the baby.'' And he being a young fellow and kind of inexperienced along about that line as a father -- he was embarrassed in front of Danny -- and he said, ``What do you mean, change the baby?'' He says, ``That's not my line of work. I'm a ballplayer.'' And she turned around, put her hands on her hips, and she communicated. [Laughter] She said, ``Look Buster, you lay the diaper out like a diamond, you put second base on home plate, put the baby's bottom on the pitcher's mound, hook up first and third, slide home underneath. And if it starts to rain, the game ain't called; you start all over again.'' [Laughter]

Since those first days in office and my first speech to you, I've gotten to know you better, and I've come to understand your problems more clearly. Hundreds of you have met with me individually, as Ferd said, or in groups at the White House. We've held many working sessions about the challenges we face, and together we've made significant improvements in this administration's original federalism proposal.

As I said last September when I met with local officials, Governors, and State legislators in the Cabinet Room, we will proceed shortly after the first of the year with our amended federalism package. It will encompass three important principles. First, we will return responsibilities and commensurate revenue resources to the levels of government closest to the people. Second, there will be mandatory pass-through provisions to protect local units of government. And third, this initiative will not be a vehicle for budget savings on either side.

Throughout the last 22 months, individually and together, you've had a tremendous impact on the way this administration views the needs of American cities. Ferd Harrison and Bill Hudnut [Mayor of Indianapolis, Ind.] have worked closely with me on our federalism initiative and provided me with a wide range of advice and counsel. Perhaps of greatest importance to you collectively, you have -- not me collectively, you collectively have driven home the absolute need for some programs and some funds to pass directly from Washington to your city without taking a detour by your State capital. Now, this kind of give-and-take, this kind of cooperation and communication will be essential if we're to take the first and the next steps toward national renewal.

As Calvin Coolidge once said, ``Our country was conceived in the theory of local self-government. It has been dedicated by long practice to that wise and benevolent policy. It is the foundation of our system of liberty.'' Well, today that principle faces tremendous challenge.

You represent the urban heart of our great country, our teeming centers of culture, innovation, and progress. But you and your cities are also saddled with concentrations of our nation's most troubling problems -- high unemployment, decaying neighborhoods, grim crime rates, idle industries, eroding tax bases, and roads and bridges that threaten to crumble beneath us.

I've come before you with no magic wand. I'm fighting in Washington to reduce, not increase, the big spending that keeps our Federal budget badly out of balance. Although Americans are laboring under the highest peacetime tax burden in history, their money is spent before it even comes in. In a very real sense our coffers are empty.

But I have come to promote an agenda for growth and to offer you a challenge. There was a time in our history when our cities were gleaming testaments to the notion that nothing is beyond America's power to accomplish. Our cities were once centers of hope and opportunity, and can be again. I've come to urge that America's cities take up that challenge and link arms in a united effort to lead America into a new period of growth and prosperity.

Some elitists in Washington have implied that local officials aren't up to the job. Thinking that you lack their worldly sophistication, they doubt your competence and assume that you need a Capitol Hill perspective to feel an appropriate degree of compassion. Well, sometimes I wish they'd exchange that lofty vista once in a while for your ground floor, closeup view of how the world really is. Forcing Americans to accept the dictates of government in Washington instead of dealing with their elected representatives in their city hall has got to be one of the more serious mistakes of the century.

City hall, county seats, and State legislatures are the very laboratories of democracy. By removing the possibility of resolving our problems where they occur, too many have turned their backs on the genius of our system. Too many have stopped believing in our ability to govern and provide for ourselves.

Well, I believe that you're the hope of our nation. I put my faith in the American people and the quality of the leaders they elect to local office. You, in turn, must call on all your imagination and creativity to find new local answers for today's urban problems.

The Federal Government will not turn its back on you, but it's no coincidence that our present troubles are proportionate to the intervention and intrusion in our lives by Big Brother in Washington. We'll not cure what ails us by drinking more of what caused our sickness in the first place. Yes, there are some services that you cannot provide without some direct assistance from Washington. And you'll get that assistance. But it's time to sort out who does what best. Have Federal grants or loans accompanied by Federal dictates as to your priorities been a solution or a part of the problem? Have we all become addicted to temporary bailouts, failing to realize that the only answer must be a restoration of our economy from sea to shining sea?

Your revenues, I know, are falling away as your tax base shrinks. For a time the answer could be found in help from the Federal Government, which had usurped much of the taxing source. But as Washington responded by taxing more and borrowing even more to maintain its Big Brother role, it became a drag on the economy. Investment and production suffered, and more and more of the people living in your cities found themselves unemployed. It's time to give up the temporary band-aids and placebos and get on with the business of a real cure.

I've proposed a growth agenda for the eighties to put us on solid footing once again to bring back incentive in America, to make saving seem like good sense again, and to make investment more worth the risk. We proposed, and the Congress passed, the largest tax rate cut in history, although that 25 percent, across-the-board tax rate cut won't quite match the largest tax hike in history that was passed during the previous administration. I believe it is already providing, however, the stimulus needed to get our economy moving again.

This next installment, the so-called ``third-year,'' will benefit working men and women more than anyone else and will have the most dramatic impact on our economy. In later years, taxes will be indexed. Then government will not profit by inflation, pushing Americans into higher and higher tax brackets every time they receive a cost-of-living raise.

Now, this tax talk is no pipedream. Think back. When was the last time this country enjoyed real growth? When was the last period of boom, when unemployment dropped low, personal savings piled high, real wages grew, investment steadily increased, our industries were pumping at nearly full speed, and our gross national product was climbing? The last great period of American economic growth, low inflation rates, was in the 1960's, following enactment of the tax rate cut proposed by President John F. Kennedy.

President Kennedy knew as we know today: All the government boondoggles in the world won't fix what's ailing us. The only way to cure our problems is to get the economy moving again. And one of the best ways to stimulate the economy is to give the American worker a break and cut his or her taxes.

To further loosen the Federal chokehold on the American economy, we in this administration have been simultaneously scaling back programs, slowing government growth, and sorting out responsibility between levels of government. As a result, inflation, once public enemy number one, has dropped from double digits to 4.9 percent so far this year. The prime rate, once as high as 21\1/2\ percent, is down to 11\1/2\. The personal savings rate is increasing, the housing industry has begun to recover, and the stock market has been sending a strong signal of confidence for some time.

The worst remaining problems are the tragedy of unemployment and the monstrous proportions of our deficit. We have, as I've said, sizably reduced the annual increase in spending but there's no way we can eliminate, by budget cuts alone, the structural deficit built into the budget, nor can it be eliminated by raising taxes.

In the 5 years leading up to 1981, taxes almost doubled, and so did the deficits. The answer lies in stimulating the economy and increasing productivity. Even the trillion-dollar debt will become more manageable if it becomes a smaller percentage of the gross national product, which is the true measure of our wealth. Therefore, our every action should be aimed at helping the economy. We must not be lured into taking emergency actions aimed at temporary relief.

Once we get our economy growing again, it will generate more jobs. When more people begin to find work, fewer will be forced to depend on government social programs. Americans will be earning more, and the government will take in more revenue without raising the tax rates. By contrast, raising personal income taxes stifles the economy, throwing more people out of work. Fewer tax dollars would come in from higher tax rates as more people would depend on Uncle Sam. We'd spend more money we didn't have, probably raise taxes still more, and end up making the deficit worse and worse.

That's why I believe our economic recovery program, based on solid, time-tested economic principles, will work. But we'll not rely on the pillars of that program alone. We must take advantage of every resource available to us. For example, as people like Mayor Voinovich keep me painfully aware, enormous numbers of citizens are ready and able to work and yet don't have jobs. We'll need the strength of every back and the power of every mind to lift us to recovery. And I won't rest until every American who wants a job can find one.

But if we're to grow into the decades ahead, we must have the skills to work in them. But it's been estimated that at least 20 million American workers now rely on skills that won't be needed 20 years from now. The government has trained thousands more in skills that already aren't needed in their communities. Still others have been steered into make-work, government programs with no future.

We've got to do better, especially for our young people. And that's why I recently signed the Job Training Partnership Act to put more Americans to work where they live. That program will train more than 1 million of our citizens every year in skills that local business, civic, municipal, and labor leaders determine are needed in their own communities. And I'm asking the American business community to give us the support and leadership that we need to make the program succeed.

Now, we're blessed with an agricultural abundance unmatched in the history of the world. To better use this resource, we're seeking out new markets, lifting old barriers, and restoring our reputation as a reliable exporter. Today our agricultural system provides the foundation for about 24 million American jobs -- almost one-fifth of our nation's work force. We can do even better.

Earlier this fall, I signed the Export Trading Company Act to help small- and medium-sized exporting businesses. Experts say that this legislation will mean several hundred thousand American jobs. We've also reduced the tax burden on businesses promoting our products abroad, and are pressuring our trading partners to lift unfair export subsidies. Our export policies are key to our growth agenda and to the revitalization of America.

At home we're trying to nurture the seeds of renewal in the decaying cores of some of our older cities. When I visited Mayor Schaefer in Baltimore, I was shown a vision of a future that we can choose for our cities, and it's a future that works.

There's a renaissance in Baltimore, brought about by a shared commitment between government and industry -- a partnership for progress between the public and the private sector. It's a city of excitement, growth, and diversity. I know that Baltimore has received aid from a number of Federal programs and has made particularly good use of Urban Development Action Grants, but it has also been a center of innovation and incentive. For example, there is a Blue Chip-in program in Baltimore, where private companies are investing in programs that create jobs, train the unemployed, and provide some emergency services to the city. Baltimore is proof that our potential is unlimited if the public and private sectors will work together.

And Baltimore is not alone. Phoenix is also promoting public and private sector cooperation with great results. In that city, for example, local building and zoning regulations have been eased to encourage private development of lower cost housing. More and more cities are making creative use of their resources to solve their problems.

I proposed an enterprise zone initiative to bring some of this innovative growth and excitement to even more cities around the country. The plan would create a free-market environment in depressed areas through tax relief, lifting regulations, and reducing other government burdens. By creating opportunity in our urban centers, businesses will begin returning, jobs will spring up, and the healing process of economic rejuvenation will begin. I don't need to explain to you what that will eventually mean in terms of your tax base.

The idea already has popular support. Fourteen States have already passed their own enterprise zone legislation without waiting for the Congress to act. Hundreds of cities are mapping out enterprise zone sites, as you well know. And in a recent survey of Fortune 500 chief executive officers, 67 percent said they would seriously consider investing in the zones after seeing the final version of the legislation. Keep in mind that most of those who responded said they wouldn't even have considered bringing their businesses into those cities before the enterprise zone incentives were offered. Small and minority-owned businesses would find even more opportunity.

In these difficult economic times when overall unemployment is high and youth and minority unemployment in some places has reached depression proportions, you'd think the Congress would jump at the chance to bring about this kind of growth opportunity and jobs. Well, I call on them today as they prepare to take up the rest of their unfinished chores to complete action on the enterprise zone initiative and let our cities get on with the business of recovery. The Senate has acted on it. The House has not, and it's been before the House for virtually a year.

If we're to move new and more goods in and out of our cities, if our cities are to attract more residents -- there is another facet -- we must face the fact that their infrastructure is falling into disrepair, less and less able to support growing demands. I need only listen to Mayor Caliguiri tell me about Pittsburgh's crumbling bridges or Mayor Hance recite the problems of the transportation system straining to cope with the burgeoning population to understand the urgency of this problem.

The state of our transportation system affects our commerce. It affects our economy and it affects our future. For many cities such repairs have become critical to growth and renewal. But no matter where we live in America, we're all dependent on our world-famous transportation network for the food we eat, the goods we buy, and the mobility we prize. Once a wonder of the modern world, that network is decaying, and we must restore it. I'll ask the Congress to authorize a much-needed overhaul of our transportation system.

We built our highways with user fees -- or with money paid by those of us who benefited from the system. It was a fair concept then, and it is today. And that's why we're proposing to pay for today's repairs by increasing the highway user fee, or gasoline tax, by the equivalent of 5 cents per gallon. That fee hasn't been raised in 23 years, and it no longer meets our needs. The nickel per gallon that we proposed will mean an extra $30 a year for most carowners. But if we don't fix the roads, they might have to pay more than that to keep their wheels alined.

This program will be massive in scope, but it will not add to the deficit or increase your income tax. It will allow us to complete the Interstate System, make almost all the interstate repairs, strengthen all our dangerously weak bridges, improve thousands of others, enhance all of our safety, and address the critical public of transit needs of our cities.

The program that we're proposing will stimulate 170,000 jobs in the hard-hit construction industry and an additional 150,000 jobs in related industries. But while this is significant, the jobs are significant, the proposal's most important contribution is that it is needed for our cities and our country to grow again. It's an investment in tomorrow that we must make today. And I urge the Congress to pass it in this session, and I hope that you'll tell them also they should do that.

In the 1980 campaign, I pledged support for general revenue sharing. I proposed full funding of general revenue sharing in fiscal years '82 and '83. And while I haven't made any final budget decisions for fiscal year '84, I can promise you I will look at revenue sharing in the same light.

Robert Louis Stevenson once said, ``You can't run away from a weakness; you must some time fight it out or perish; and if that is so, why not now, and where you stand?'' The weakness in this country for too many years has been our insistence on leaving -- or carving an ever-increasing number of slices from a shrinking economic pie. Our policies have concentrated on rationing scarcity rather than creating plenty. As a result, our economy has stagnated. But those days are ending.

We must lift where we stand, struggle for tomorrow, and earn anew the reputation this country once had as the land of golden opportunity. That is the reasoning and the challenge behind the agenda for growth that I've outlined today.

One of the first challenges ever given any American came from John Winthrop, standing on the deck of the tiny ship Arabella as it lay off the Massachusetts coast in 1630. As he looked at the band of settlers gathered before him, he said, ``We shall be a city upon a hill. The eyes of all people are upon us. . . .''

America must once again be full of leaders dedicated to building shining cities on hills, until our nation's future is bright again with their collective glow. You have it within you to make it happen, to lead our people and our cities to the renewal we all seek.

I am committed to continuing a direct relationship between the Federal Government and our nation's cities. I will work with you, and the Federal Government will lend you support. But join together to take up the challenge, and there will be nothing to stand in your way. If you do, we will come alive again, we'll grow again, and America will be great again.

Thank you very much.

Note: The President spoke at 10:48 a.m. in the Los Angeles Convention Center.

Following his appearance at the convention, the President returned to Washington, D.C.