January 26, 1982
Mr. Speaker, Mr. President, distinguished Members of the Congress, honored guests, and fellow
citizens:
Today marks my first State of the Union address to you, a constitutional duty as old as our
Republic itself.
President Washington began this tradition in 1790 after reminding the Nation that the destiny of
self-government and the ``preservation of the sacred fire of liberty'' is ``finally staked on the
experiment entrusted to the hands of the American people.'' For our friends in the press, who
place a high premium on accuracy, let me say: I did not actually hear George Washington say that.
[Laughter] But it is a matter of historic record. [Laughter]
But from this podium, Winston Churchill asked the free world to stand together against the
onslaught of aggression. Franklin Delano Roosevelt spoke of a day of infamy and summoned a
nation to arms. Douglas MacArthur made an unforgettable farewell to a country he loved and
served so well. Dwight Eisenhower reminded us that peace was purchased only at the price of
strength. And John F. Kennedy spoke of the burden and glory that is freedom.
When I visited this Chamber last year as a newcomer to Washington, critical of past policies
which I believed had failed, I proposed a new spirit of partnership between this Congress and this
administration and between Washington and our State and local governments. In forging this new
partnership for America, we could achieve the oldest hopes of our Republic -- prosperity for our
nation, peace for the world, and the blessings of individual liberty for our children and, someday,
for all of humanity.
It's my duty to report to you tonight on the progress that we have made in our relations with other
nations, on the foundation we've carefully laid for our economic recovery, and finally, on a bold
and spirited initiative that I believe can change the face of American government and make it
again the servant of the people.
Seldom have the stakes been higher for America. What we do and say here will make all the
difference to autoworkers in Detroit, lumberjacks in the Northwest, steelworkers in Steubenville
who are in the unemployment lines; to black teenagers in Newark and Chicago; to hard-pressed
farmers and small businessmen; and to millions of everyday Americans who harbor the simple
wish of a safe and financially secure future for their children. To understand the state of the
Union, we must look not only at where we are and where we're going but where we've been. The
situation at this time last year was truly ominous.
The last decade has seen a series of recessions. There was a recession in 1970, in 1974, and again
in the spring of 1980. Each time, unemployment increased and inflation soon turned up again. We
coined the word ``stagflation'' to describe this.
Government's response to these recessions was to pump up the money supply and increase
spending. In the last 6 months of 1980, as an example, the money supply increased at the fastest
rate in postwar history -- 13 percent. Inflation remained in double digits, and government
spending increased at an annual rate of 17 percent. Interest rates reached a staggering 21\1/2\
percent. There were 8 million unemployed.
Late in 1981 we sank into the present recession, largely because continued high interest rates hurt
the auto industry and construction. And there was a drop in productivity, and the already high
unemployment increased.
This time, however, things are different. We have an economic program in place, completely
different from the artificial quick fixes of the past. It calls for a reduction of the rate of increase in
government spending, and already that rate has been cut nearly in half. But reduced spending
alone isn't enough. We've just implemented the first and smallest phase of a 3-year tax-rate
reduction designed to stimulate the economy and create jobs. Already interest rates are down to
15\3/4\ percent, but they must still go lower. Inflation is down from 12.4 percent to 8.9, and for
the month of December it was running at an annualized rate of 5.2 percent. If we had not acted as
we did, things would be far worse for all Americans than they are today. Inflation, taxes, and
interest rates would all be higher.
A year ago, Americans' faith in their governmental process was steadily declining. Six out of 10
Americans were saying they were pessimistic about their future. A new kind of defeatism was
heard. Some said our domestic problems were uncontrollable, that we had to learn to live with
this seemingly endless cycle of high inflation and high unemployment.
There were also pessimistic predictions about the relationship between our administration and this
Congress. It was said we could never work together. Well, those predictions were wrong. The
record is clear, and I believe that history will remember this as an era of American renewal,
remember this administration as an administration of change, and remember this Congress as a
Congress of destiny.
Together, we not only cut the increase in government spending nearly in half, we brought about
the largest tax reductions and the most sweeping changes in our tax structure since the beginning
of this century. And because we indexed future taxes to the rate of inflation, we took away
government's built-in profit on inflation and its hidden incentive to grow larger at the expense of
American workers.
Together, after 50 years of taking power away from the hands of the people in their States and
local communities, we have started returning power and resources to them.
Together, we have cut the growth of new Federal regulations nearly in half. In 1981 there were
23,000 fewer pages in the Federal Register, which lists new regulations, than there were in 1980.
By deregulating oil we've come closer to achieving energy independence and helped bring down
the cost of gasoline and heating fuel.
Together, we have created an effective Federal strike force to combat waste and fraud in
government. In just 6 months it has saved the taxpayers more than $2 billion, and it's only getting
started.
Together we've begun to mobilize the private sector, not to duplicate wasteful and discredited
government programs, but to bring thousands of Americans into a volunteer effort to help solve
many of America's social problems.
Together we've begun to restore that margin of military safety that ensures peace. Our country's
uniform is being worn once again with pride.
Together we have made a New Beginning, but we have only begun.
No one pretends that the way ahead will be easy. In my Inaugural Address last year, I warned that
the ``ills we suffer have come upon us over several decades. They will not go away in days,
weeks, or months, but they will go away . . . because we as Americans have the capacity now, as
we've had it in the past, to do whatever needs to be done to preserve this last and greatest bastion
of freedom.''
The economy will face difficult moments in the months ahead. But the program for economic
recovery that is in place will pull the economy out of its slump and put us on the road to
prosperity and stable growth by the latter half of this year. And that is why I can report to you
tonight that in the near future the state of the Union and the economy will be better -- much better
-- if we summon the strength to continue on the course that we've charted.
And so, the question: If the fundamentals are in place, what now? Well, two things. First, we must
understand what's happening at the moment to the economy. Our current problems are not the
product of the recovery program that's only just now getting underway, as some would have you
believe; they are the inheritance of decades of tax and tax and spend and spend.
Second, because our economic problems are deeply rooted and will not respond to quick political
fixes, we must stick to our carefully integrated plan for recovery. That plan is based on four
commonsense fundamentals: continued reduction of the growth in Federal spending; preserving
the individual and business tax reductions that will stimulate saving and investment; removing
unnecessary Federal regulations to spark productivity; and maintaining a healthy dollar and a
stable monetary policy, the latter a responsibility of the Federal Reserve System.
The only alternative being offered to this economic program is a return to the policies that gave us
a trillion-dollar debt, runaway inflation, runaway interest rates and unemployment. The doubters
would have us turn back the clock with tax increases that would offset the personal tax-rate
reductions already passed by this Congress. Raise present taxes to cut future deficits, they tell us.
Well, I don't believe we should buy that argument.
There are too many imponderables for anyone to predict deficits or surpluses several years ahead
with any degree of accuracy. The budget in place, when I took office, had been projected as
balanced. It turned out to have one of the biggest deficits in history. Another example of the
imponderables that can make deficit projections highly questionable -- a change of only one
percentage point in unemployment can alter a deficit up or down by some $25 billion.
As it now stands, our forecast, which we're required by law to make, will show major deficits
starting at less than a hundred billion dollars and declining, but still too high. More important,
we're making progress with the three keys to reducing deficits: economic growth, lower interest
rates, and spending control. The policies we have in place will reduce the deficit steadily, surely,
and in time, completely.
Higher taxes would not mean lower deficits. If they did, how would we explain that tax revenues
more than doubled just since 1976; yet in that same 6-year period we ran the largest series of
deficits in our history. In 1980 tax revenues increased by $54 billion, and in 1980 we had one of
our alltime biggest deficits. Raising taxes won't balance the budget; it will encourage more
government spending and less private investment. Raising taxes will slow economic growth,
reduce production, and destroy future jobs, making it more difficult for those without jobs to find
them and more likely that those who now have jobs could lose them. So, I will not ask you to try
to balance the budget on the backs of the American taxpayers.
I will seek no tax increases this year, and I have no intention of retreating from our basic program
of tax relief. I promise to bring the American people -- to bring their tax rates down and to keep
them down, to provide them incentives to rebuild our economy, to save, to invest in America's
future. I will stand by my word. Tonight I'm urging the American people: Seize these new
opportunities to produce, to save, to invest, and together we'll make this economy a mighty
engine of freedom, hope, and prosperity again.
Now, the budget deficit this year will exceed our earlier expectations. The recession did that. It
lowered revenues and increased costs. To some extent, we're also victims of our own success.
We've brought inflation down faster than we thought we could, and in doing this, we've deprived
government of those hidden revenues that occur when inflation pushes people into higher income
tax brackets. And the continued high interest rates last year cost the government about $5 billion
more than anticipated.
We must cut out more nonessential government spending and rout out more waste, and we will
continue our efforts to reduce the number of employees in the Federal work force by 75,000.
The budget plan I submit to you on February 8th will realize major savings by dismantling the
Departments of Energy and Education and by eliminating ineffective subsidies for business. We'll
continue to redirect our resources to our two highest budget priorities -- a strong national defense
to keep America free and at peace and a reliable safety net of social programs for those who have
contributed and those who are in need.
Contrary to some of the wild charges you may have heard, this administration has not and will not
turn its back on America's elderly or America's poor. Under the new budget, funding for social
insurance programs will be more than double the amount spent only 6 years ago. But it would be
foolish to pretend that these or any programs cannot be made more efficient and economical.
The entitlement programs that make up our safety net for the truly needy have worthy goals and
many deserving recipients. We will protect them. But there's only one way to see to it that these
programs really help those whom they were designed to help. And that is to bring their spiraling
costs under control.
Today we face the absurd situation of a Federal budget with three-quarters of its expenditures
routinely referred to as ``uncontrollable.'' And a large part of this goes to entitlement
programs.
Committee after committee of this Congress has heard witness after witness describe many of
these programs as poorly administered and rife with waste and fraud. Virtually every American
who shops in a local supermarket is aware of the daily abuses that take place in the food stamp
program, which has grown by 16,000 percent in the last 15 years. Another example is Medicare
and Medicaid -- programs with worthy goals but whose costs have increased from 11.2 billion to
almost 60 billion, more than 5 times as much, in just 10 years.
Waste and fraud are serious problems. Back in 1980 Federal investigators testified before one of
your committees that ``corruption has permeated virtually every area of the Medicare and
Medicaid health care industry.'' One official said many of the people who are cheating the system
were ``very confident that nothing was going to happen to them.'' Well, something is going to
happen. Not only the taxpayers are defrauded; the people with real dependency on these programs
are deprived of what they need, because available resources are going not to the needy, but to the
greedy.
The time has come to control the uncontrollable. In August we made a start. I signed a bill to
reduce the growth of these programs by $44 billion over the next 3 years while at the same time
preserving essential services for the truly needy. Shortly you will receive from me a message on
further reforms we intend to install -- some new, but others long recommended by your own
congressional committees. I ask you to help make these savings for the American taxpayer.
The savings we propose in entitlement programs will total some $63 billion over 4 years and will,
without affecting social security, go a long way toward bringing Federal spending under
control.
But don't be fooled by those who proclaim that spending cuts will deprive the elderly, the needy,
and the helpless. The Federal Government will still subsidize 95 million meals every day. That's
one out of seven of all the meals served in America. Head Start, senior nutrition programs, and
child welfare programs will not be cut from the levels we proposed last year. More than one-half
billion dollars has been proposed for minority business assistance. And research at the National
Institute of Health will be increased by over $100 million. While meeting all these needs, we
intend to plug unwarranted tax loopholes and strengthen the law which requires all large
corporations to pay a minimum tax.
I am confident the economic program we've put into operation will protect the needy while it
triggers a recovery that will benefit all Americans. It will stimulate the economy, result in
increased savings and provide capital for expansion, mortgages for homebuilding, and jobs for the
unemployed.
Now that the essentials of that program are in place, our next major undertaking must be a
program -- just as bold, just as innovative -- to make government again accountable to the people,
to make our system of federalism work again.
Our citizens feel they've lost control of even the most basic decisions made about the essential
services of government, such as schools, welfare, roads, and even garbage collection. And they're
right. A maze of interlocking jurisdictions and levels of government confronts average citizens in
trying to solve even the simplest of problems. They don't know where to turn for answers, who to
hold accountable, who to praise, who to blame, who to vote for or against. The main reason for
this is the overpowering growth of Federal grants-in-aid programs during the past few
decades.
In 1960 the Federal Government had 132 categorical grant programs, costing $7 billion. When I
took office, there were approximately 500, costing nearly a hundred billion dollars -- 13 programs
for energy, 36 for pollution control, 66 for social services, 90 for education. And here in the
Congress, it takes at least 166 committees just to try to keep track of them.
You know and I know that neither the President nor the Congress can properly oversee this
jungle of grants-in-aid; indeed, the growth of these grants has led to the distortion in the vital
functions of government. As one Democratic Governor put it recently: The National Government
should be worrying about ``arms control, not potholes.''
The growth in these Federal programs has -- in the words of one intergovernmental commission --
made the Federal Government ``more pervasive, more intrusive, more unmanageable, more
ineffective and costly, and above all, more [un]accountable.'' Let's solve this problem with a
single, bold stroke: the return of some $47 billion in Federal programs to State and local
government, together with the means to finance them and a transition period of nearly 10 years to
avoid unnecessary disruption.
I will shortly send this Congress a message describing this program. I want to emphasize,
however, that its full details will have been worked out only after close consultation with
congressional, State, and local officials.
Starting in fiscal 1984, the Federal Government will assume full responsibility for the cost of the
rapidly growing Medicaid program to go along with its existing responsibility for Medicare. As
part of a financially equal swap, the States will simultaneously take full responsibility for Aid to
Families with Dependent Children and food stamps. This will make welfare less costly and more
responsive to genuine need, because it'll be designed and administered closer to the grassroots and
the people it serves.
In 1984 the Federal Government will apply the full proceeds from certain excise taxes to a
grassroots trust fund that will belong in fair shares to the 50 States. The total amount flowing into
this fund will be $28 billion a year. Over the next 4 years the States can use this money in either of
two ways. If they want to continue receiving Federal grants in such areas as transportation,
education, and social services, they can use their trust fund money to pay for the grants. Or to the
extent they choose to forgo the Federal grant programs, they can use their trust fund money on
their own for those or other purposes. There will be a mandatory pass-through of part of these
funds to local governments.
By 1988 the States will be in complete control of over 40 Federal grant programs. The trust fund
will start to phase out, eventually to disappear, and the excise taxes will be turned over to the
States. They can then preserve, lower, or raise taxes on their own and fund and manage these
programs as they see fit.
In a single stroke we will be accomplishing a realignment that will end cumbersome administration
and spiraling costs at the Federal level while we ensure these programs will be more responsive to
both the people they're meant to help and the people who pay for them.
Hand in hand with this program to strengthen the discretion and flexibility of State and local
governments, we're proposing legislation for an experimental effort to improve and develop our
depressed urban areas in the 1980's and '90's. This legislation will permit States and localities to
apply to the Federal Government for designation as urban enterprise zones. A broad range of
special economic incentives in the zones will help attract new business, new jobs, new opportunity
to America's inner cities and rural towns. Some will say our mission is to save free enterprise.
Well, I say we must free enterprise so that together we can save America.
Some will also say our States and local communities are not up to the challenge of a new and
creative partnership. Well, that might have been true 20 years ago before reforms like
reapportionment and the Voting Rights Act, the 10-year extension of which I strongly support.
It's no longer true today. This administration has faith in State and local governments and the
constitutional balance envisioned by the Founding Fathers. We also believe in the integrity,
decency, and sound, good sense of grassroots Americans.
Our faith in the American people is reflected in another major endeavor. Our private sector
initiatives task force is seeking out successful community models of school, church, business,
union, foundation, and civic programs that help community needs. Such groups are almost
invariably far more efficient than government in running social programs.
We're not asking them to replace discarded and often discredited government programs dollar for
dollar, service for service. We just want to help them perform the good works they choose and
help others to profit by their example. Three hundred and eighty-five thousand corporations and
private organizations are already working on social programs ranging from drug rehabilitation to
job training, and thousands more Americans have written us asking how they can help. The
volunteer spirit is still alive and well in America.
Our nation's long journey towards civil rights for all our citizens -- once a source of discord, now
a source of pride -- must continue with no backsliding or slowing down. We must and shall see
that those basic laws that guarantee equal rights are preserved and, when necessary, strengthened.
Our concern for equal rights for women is firm and unshakable. We launched a new Task Force
on Legal Equity for Women and a Fifty States Project that will examine State laws for
discriminatory language. And for the first time in our history, a woman sits on the highest court in
the land.
So, too, the problem of crime -- one as real and deadly serious as any in America today. It
demands that we seek transformation of our legal system, which overly protects the rights of
criminals while it leaves society and the innocent victims of crime without justice.
We look forward to the enactment of a responsible clean air act to increase jobs while continuing
to improve the quality of our air. We're encouraged by the bipartisan initiative of the House and
are hopeful of further progress as the Senate continues its deliberations.
So far, I've concentrated largely, now, on domestic matters. To view the state of the Union in
perspective, we must not ignore the rest of the world. There isn't time tonight for a lengthy
treatment of social -- or foreign policy, I should say, a subject I intend to address in detail in the
near future. A few words, however, are in order on the progress we've made over the past year,
reestablishing respect for our nation around the globe and some of the challenges and goals that
we will approach in the year ahead.
At Ottawa and Cancun, I met with leaders of the major industrial powers and developing nations.
Now, some of those I met with were a little surprised that I didn't apologize for America's wealth.
Instead, I spoke of the strength of the free marketplace system and how that system could help
them realize their aspirations for economic development and political freedom. I believe lasting
friendships were made, and the foundation was laid for future cooperation.
In the vital region of the Caribbean Basin, we're developing a program of aid, trade, and
investment incentives to promote self-sustaining growth and a better, more secure life for our
neighbors to the south. Toward those who would export terrorism and subversion in the
Caribbean and elsewhere, especially Cuba and Libya, we will act with firmness.
Our foreign policy is a policy of strength, fairness, and balance. By restoring America's military
credibility, by pursuing peace at the negotiating table wherever both sides are willing to sit down
in good faith, and by regaining the respect of America's allies and adversaries alike, we have
strengthened our country's position as a force for peace and progress in the world.
When action is called for, we're taking it. Our sanctions against the military dictatorship that has
attempted to crush human rights in Poland -- and against the Soviet regime behind that military
dictatorship -- clearly demonstrated to the world that America will not conduct ``business as
usual'' with the forces of oppression. If the events in Poland continue to deteriorate, further
measures will follow.
Now, let me also note that private American groups have taken the lead in making January 30th a
day of solidarity with the people of Poland. So, too, the European Parliament has called for
March 21st to be an international day of support for Afghanistan. Well, I urge all peace-loving
peoples to join together on those days, to raise their voices, to speak and pray for freedom.
Meanwhile, we're working for reduction of arms and military activities, as I announced in my
address to the Nation last November 18th. We have proposed to the Soviet Union a far-reaching
agenda for mutual reduction of military forces and have already initiated negotiations with them in
Geneva on intermediate-range nuclear forces. In those talks it is essential that we negotiate from a
position of strength. There must be a real incentive for the Soviets to take these talks seriously.
This requires that we rebuild our defenses.
In the last decade, while we sought the moderation of Soviet power through a process of restraint
and accommodation, the Soviets engaged in an unrelenting buildup of their military forces. The
protection of our national security has required that we undertake a substantial program to
enhance our military forces.
We have not neglected to strengthen our traditional alliances in Europe and Asia, or to develop
key relationships with our partners in the Middle East and other countries. Building a more
peaceful world requires a sound strategy and the national resolve to back it up. When radical
forces threaten our friends, when economic misfortune creates conditions of instability, when
strategically vital parts of the world fall under the shadow of Soviet power, our response can
make the difference between peaceful change or disorder and violence. That's why we've laid such
stress not only on our own defense but on our vital foreign assistance program. Your recent
passage of the Foreign Assistance Act sent a signal to the world that America will not shrink from
making the investments necessary for both peace and security. Our foreign policy must be rooted
in realism, not naivete or self-delusion.
A recognition of what the Soviet empire is about is the starting point. Winston Churchill, in
negotiating with the Soviets, observed that they respect only strength and resolve in their dealings
with other nations. That's why we've moved to reconstruct our national defenses. We intend to
keep the peace. We will also keep our freedom.
We have made pledges of a new frankness in our public statements and worldwide broadcasts. In
the face of a climate of falsehood and misinformation, we've promised the world a season of truth
-- the truth of our great civilized ideas: individual liberty, representative government, the rule of
law under God. We've never needed walls or minefields or barbed wire to keep our people in. Nor
do we declare martial law to keep our people from voting for the kind of government they
want.
Yes, we have our problems; yes, we're in a time of recession. And it's true, there's no quick fix, as
I said, to instantly end the tragic pain of unemployment. But we will end it. The process has
already begun, and we'll see its effect as the year goes on.
We speak with pride and admiration of that little band of Americans who overcame insuperable
odds to set this nation on course 200 years ago. But our glory didn't end with them. Americans
ever since have emulated their deeds.
We don't have to turn to our history books for heroes. They're all around us. One who sits among
you here tonight epitomized that heroism at the end of the longest imprisonment ever inflicted on
men of our Armed Forces. Who will ever forget that night when we waited for television to bring
us the scene of that first plane landing at Clark Field in the Philippines, bringing our POW's home?
The plane door opened and Jeremiah Denton came slowly down the ramp. He caught sight of our
flag, saluted it, said, ``God bless America,'' and then thanked us for bringing him home.
Just 2 weeks ago, in the midst of a terrible tragedy on the Potomac, we saw again the spirit of
American heroism at its finest -- the heroism of dedicated rescue workers saving crash victims
from icy waters. And we saw the heroism of one of our young government employees, Lenny
Skutnik, who, when he saw a woman lose her grip on the helicopter line, dived into the water and
dragged her to safety.
And then there are countless, quiet, everyday heroes of American life -- parents who sacrifice long
and hard so their children will know a better life than they've known; church and civic volunteers
who help to feed, clothe, nurse, and teach the needy; millions who've made our nation and our
nation's destiny so very special -- unsung heroes who may not have realized their own dreams
themselves but then who reinvest those dreams in their children. Don't let anyone tell you that
America's best days are behind her, that the American spirit has been vanquished. We've seen it
triumph too often in our lives to stop believing in it now.
A hundred and twenty years ago, the greatest of all our Presidents delivered his second State of
the Union message in this Chamber. ``We cannot escape history,'' Abraham Lincoln warned. ``We
of this Congress and this administration will be remembered in spite of ourselves.'' The ``trial
through which we pass will light us down, in honor or dishonor, to the latest [last] generation.''
Well, that President and that Congress did not fail the American people. Together they weathered
the storm and preserved the Union. Let it be said of us that we, too, did not fail; that we, too,
worked together to bring America through difficult times. Let us so conduct ourselves that two
centuries from now, another Congress and another President, meeting in this Chamber as we are
meeting, will speak of us with pride, saying that we met the test and preserved for them in their
day the sacred flame of liberty -- this last, best hope of man on Earth.
God bless you, and thank you.
Note: The President spoke at 9 p.m. in the House Chamber at the Capitol. He was introduced by
Thomas P. O'Neill, Jr., Speaker of the House of Representatives. The address was broadcast live
on nationwide radio and television.