Thank you very much for a most warm welcome. And if I may return the compliment, it sure feels good to be back in the Heart of Dixie.

A State that can produce giants like George Washington Carver, Helen Keller, Joe Louis, Bear Bryant, Jim Allen teaches us a valuable lesson. I have to interrupt here and say something about Bear Bryant and myself. I think I set something of a record with regard to Alabama football. A few years ago, I arrived here, had been invited to join him out on a practice session on the field. And yet, I was due -- in black tie and tuxedo -- to speak later. And the only way we could work it out was I had to go to football practice wearing a tuxedo. I don't think it had ever happened before. [Laughter] To make it worse, it was raining. [Laughter]

Well, the greatness of America and the solutions to her problems begin here with your people -- not in Washington, D.C. You know, when you think of those ancestors who settled your State, they were willing to hitch up their wagons, venture across mountains, and sometimes bet the house, the farm, and all the family on the outcome. They didn't have much more than their hands, their heads, their hearts, and their friends. And they made it work without an area redevelopment plan, a subsidy from HUD, or even a go-ahead from OSHA. They did it the same way that Bear Bryant won more games than any college coach, the same way that Alabama set a record last year of attracting new industrial investment, the same way that Jeremiah Denton endured an eternity inside hell. They did it the old-fashioned way -- they earned it. Dreams, drive, courage, refusing to quit made the difference then, and they make the difference now.

Alabama has a serious unemployment problem. But I'm sure you believe the future is yours to shape, not just endure. The growth plan you're now implementing will pay tremendous dividends in the months and years ahead.

Our administration can help and we pledge to be your partner. I have great respect for your Governor, Fob James, your mayors, your councilmen, your county commissioners, other local officials and courageous members of this legislature who stand willing and able to accept their rightful responsibilities. We'll work together and build for the future. Our commitment to strengthen our defenses, increase spending on NASA-related projects, complete the Tennessee-Tombigbee Waterway, and move ahead with enterprise zones will add to the jobs that you're creating.

And then, too, there's something else -- those values and principles I spoke of that are so strong here. Faith in God, patriotism, freedom, the love of freedom, family, work, neighborhood -- the heart and soul of America's past and the promise of her future. If we stand together and live up to these principles, we will not fail.

Not too long ago, Senator Kennedy paid a tribute to former Governor and Ambassador Averell Harriman, who was celebrating a birthday in his nineties, and Teddy Kennedy said that Ambassador Harriman's age was only half as old as Ronald Reagan's ideas. And you know, he's absolutely right. The United States Constitution is almost 200 years old, and that's where I'm proud to get my ideas.

Thomas Jefferson said, ``I know no safe depository of the ultimate powers of the society but the people themselves. . . .'' And that conviction is embodied in our 10th amendment -- the Federal Government will do only those things called for in the Constitution, and all others shall remain with the States or the people.

Would you not agree that we have strayed much too far from that noble beginning and that the whole idea of our Revolution -- personal freedom, equality of opportunity, and keeping government close to the people -- is threatened by a Federal spending machine that takes too much money from the people, too much authority from the States, and yes, too much liberty with our Constitution?

According to polls, Americans -- by more than 2 to 1 -- trust their State and local officials to administer programs more efficiently than the Federal Government. But those who have controlled our government for nearly three decades haven't listened. Prisoners of the past, they remain shackled to the myth that all wisdom, morality, and compassion begin at both ends of Pennsylvania Avenue.

A few weeks back, a leader of the liberal old guard said he would resist returning the responsibilities and resources that belong to you. He claimed to know of a dozen States that would shirk their responsibilities. Now, just which States did not measure up to his standards, he wouldn't say. But the meaning was clear: He and his colleagues don't believe in you or trust you.

But aren't they the same folks who gave us a trillion dollar debt, double-digit inflation, and the highest interest rates in more than a century? The big spenders would have been right at home with Oscar Wilde. He's the one that said he knew of only one way to get rid of temptation -- yield to it. [Laughter] And that reminds me, you know, that someone once said that a woman flees from temptation; a man gets down on his knees and crawls away, hoping it will jump on his back. [Laughter]

But I'm honored to be the first United States President to stand before you in this distinguished chamber. If I may, I'd like to use this historic occasion to make a request of all those who lack faith in the American people: Come to Alabama!

Come to Alabama and learn how a Governor and State legislature took a Medicaid budget, $34 million in the red, and put it in the black while increasing services.

Come to Alabama and see how concern for education and commitment to equal opportunity, including a war on illiteracy, consumes almost two-thirds of State spending and ranks Alabama fifth in the Nation in spending on elementary and secondary education.

Come and see how Alabama will take the nearly $450 million it received from leasing public lands and invest it in a super trust fund for the future, and the principal will not be touched. Then a general obligation bond issue is forthcoming to build roads, bridges, schools, and prisons, eventually creating an estimated 100,000 jobs.

I think I understand now what Jeremiah Denton meant when he said, ``Mr. President, Alabama is the best kept secret in the world.'' You're not frightened by the challenge of regaining control of your destiny. You're excited by it. You've come together to work together.

Only two blocks from where I stand, a courageous American named Martin Luther King organized a struggle for racial equality that led to historic changes in our society nationwide. The sacrifice that he made brings tears of sorrow, but the good that he did brings tears of salvation. And now today, what you are doing here will push Alabama into the forefront of leadership as America approaches the 21st century. So, I salute you.

You don't need convincing that the Federal Government has, at great cost, been attempting to perform tasks that are not its proper function. The only people still defending this indefensible system are special interest groups and their protectors.

The underlying purpose of our whole federalism initiative is to wrest control of government from the hands of special interests and return it to the American people it was always intended to represent and serve. I'm talking about average citizens here in Alabama and across the country -- and nowadays they don't know who to blame when government services go wrong -- citizens who no longer control even the services closest to them, such as schools, libraries, police and fire protection, and even pothole repair.

Think about it. In today's tangle of overlapping Federal agencies, departments, and regulations, who really is accountable? Who can people take their troubles to? And if you do find a sympathetic listener, will it really do any good? If you have a problem with, say, the quality of instruction in your son or daughter's grade school, who's to blame? The teacher? The principal? The city superintendent? The State superintendent? The Governor? The courts? The Federal bureaucracy? Or the President?

Well, the answer today is: everybody and nobody -- and that's no way to run a government. We want to make government work again, to make it accountable to the people it serves. And the only way to do that is to return the appropriate resources and responsibilities to the people and their grassroots representatives. This means asking some basic questions about many areas in which the Federal Government, often with the best of intentions, has injected itself. The first question is, of course, should a particular function be the responsibility of government at all? Then, if it is, is it best handled at the State or local level?

The Federal Government should only do what the people cannot do for themselves or through their locally elected leaders. As one Governor put it recently, ``. . . we can no longer afford -- either fiscally or politically -- to have every level of government involved in the delivery of the entire range of public services.'' To put it another way, the buck and the tax dollar should stop at the closest possible level of responsibility. It shouldn't be automatically kicked upstairs to Washington, because for every step up, the cost of overhead becomes greater.

I know that some have accused advocates of this new balance in government of wanting to turn back the clock to the bad old days. They claim that the injustices of other generations will recur if Washington's unelected regulators and bureaucrats lose their stranglehold on government. Well, that simply isn't true. Reapportionment and the Voting Rights Act have eradicated once and for all the most glaring inequities in State representation. In fact, today, black Americans are better represented in State and local governments than they are in the national Congress.

David Broder of the Washington Post has said, ``. . . the contrast between the stumbling of the National Government and the improving performance of State and local government is a largely unreported story. Individual States have moved out ahead of the Federal Government, justifying again their claim to be `laboratories of democracy.'''

Well, as you probably know, our plan to restore the proper State-Federal balance has two major components. Starting in fiscal 1984, the Federal Government will assume full responsibility for the cost of the rapidly growing Medicaid program, in exchange for the States picking up Aid to Families with Dependent Children and food stamps. Now, the other aspect of the plan is a turnback of responsibilities to the States for over 40 Federal programs in education, community development, transportation, and social services -- along with the resources to pay for them. 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 States. By 1988 the States will be in full control of these grant programs.

Now, we're not wedded to every detail of this proposal. We want a dialog. And I've been very grateful to have Governor James' strong support. And you'll be pleased to know that when the other Governors met with me in Washington recently, they were in broad agreement with what we're trying to do.

One thing we're not trying to do is balance the Federal budget on the backs of the States. There will be no need for net tax increases on citizens at the local level. Also, our proposal will not cause needy Americans to migrate to States with high welfare benefits. People migrate for jobs, for a handup, not a handout. Low-income Americans want more opportunity; they need more opportunity. And if we work together, we'll make sure they get it.

We will return government to the governed, and we will not retreat from our program to give this economy back to the people who pay our bills and yearn to save for their future again.

Last year we put together a bipartisan coalition, and for the first time in half a century, we charted a new course for the country. We're coming out of a long night of government mismanagement and blunders which caused this recession. Those who are unemployed are living a tragedy, and I want nothing more than to see them working again. But I'm convinced the course we've embarked on offers the best hope, and I cannot accept the idea that a program which is just beginning, and which in fact began after the recession was already underway, is somehow responsible for that recession.

There will always be room for improvement in any budget or economic policy, but we must have a budget. Where further savings are to be found or a better way of meeting agreed-upon goals can be worked out, I pledge my full cooperation to the Members of Congress on both sides of the aisle, and I want to hear from them. But I have little time for parade-walkers who march out to denounce the projected deficit on television, and then slip back behind closed doors to bust the budget in their committees.

A propaganda campaign would have us believe that we have high deficits because Americans are not taxed enough. Well, taxes doubled between 1976 and 1981, and the deficits grew and grew. Then, after pressure from the Congress last year, the first part of the tax cut was delayed and reduced so much that taxes rose again. Now, this only aggravated the recession, causing more unemployment spending and a bigger deficit.

Now, let me explain. Our original plan called for a 10-percent reduction across the board in income taxes, retroactive to January 1st, 1981. Well, to get the program we had to compromise, reducing that first cut to only 5 percent, not effective until October 1st, 1981. Three months later, there was an automatic increase in the social security tax which almost nullified that 5-percent cut.

Americans today need strong backs and deep pockets to shoulder the highest tax burden in peacetime history. And yet some in Washington still want more. Now, we don't have deficits because our people live too well and are not taxed enough; we have big deficits because government lives too well and spends too much.

And those big tax increases I just mentioned never balanced the budget, because Federal spending tripled in the last decade alone. The more Congress taxed, the more it spent, and the more it went further and further into the red. In fact, government spending increased faster than the growth of our economy and even faster than the paychecks of the working people.

The solution is as obvious as it is urgent: Reduce government's share of the gross national product by slowing the growth of spending and help the economy grow by rewarding Americans who produce, save, and invest.

Now, I think that's what we've begun to do. We didn't really slash spending; we just cut, nearly in half, the inflationary increase in spending, which was climbing at the rate of 17 percent a year in 1980. We reduced the growth of new regulations by a third, and we enacted a strong program of tax incentives. Now critics charge that it's too large, but as I've explained, it barely offsets the built-in payroll tax increases that were adopted in 1977.

Our tax program is just beginning. Most of the benefits will go to average citizens in your hometowns. The 25-percent tax rate reduction, indexing of tax rates to prevent bracket creep, and strong new incentives for retirement savings will provide major tax savings. Accelerated depreciation schedules for business, both big and small, will encourage the investment we need to make our products and workers more competitive. Productivity growth -- producing more and better for less -- is the basis for all real gains in wages and living standards.

Most new jobs in America are created by small business, and most small businesses pay their taxes by the personal rates, not the corporate rates. So the personal tax cut will create jobs. Those who oppose it would only handcuff employers and further hurt the unemployed. We also address a special problem for farmers and family-owned businesses. It's not right that widows and children must lose, just to pay Uncle Sam what generations of love and toil have created. So the estate tax exemption will increase to $600,000 by 1987, and of even greater help, there will be no estate tax for a surviving spouse -- the widower or widow.

Forgive me, but I'm not only proud of this tax program, I happen to believe it's the best darn thing that's been done for working and middle-income people in nearly 20 years.

Now, I'd like to say something here to ``Main Street'' America -- to the millions who work so hard to support their families and keep our country together, but who sometimes feel like forgotten Americans. You know, we hear an awful lot about compassion -- in the guise of who has it and who doesn't have it. Well, I believe that a safety net is essential for people who cannot help themselves. And I believe that most of us in this country have a real compassion for such people. We're the most generous people on Earth. But how about having a little compassion left over for those Americans who sit around the table at night after dinner, trying to figure out how to pay their own bills, keep the kids in school, and keep up with higher inflation and higher taxes year after year? I realize that our cure for the mess we inherited is not always easy or popular or painless. But I must say this: It is an honest cure, not a quick fix; it's the only way we'll produce a lasting economy, a lasting recovery, without a new burst of inflation.

We've brought inflation down dramatically. Last year's drop in inflation meant that a family of four, here in Alabama, if they were around the $20,000-level of earnings, had a $626 increase in purchasing power than they would have had if inflation had not come down. And this would vary with incomes, on down to the poverty-level incomes, and their purchasing power was increased. We must continue to reduce inflation until it is eliminated, and that means getting Federal spending control -- permanently.

If I could interject here for just a moment and call something to your attention. I know we talk a lot, and we're very proud of the fact that we have brought inflation down to where for the last 5 months it's been averaging less than 5 percent. When we started, it was up around 13 percent. And yet, the people don't recognize it. All they know is when they go to the store, the prices are still up from what they were before. Now, they're not up as much as they would be if we hadn't lowered this, but our goal has to be to bring inflation to an end, so they start going in and finding that the dollar buys just as much as it bought last month or last year when they went in.

To the members of the business and financial community, let me say: I have a weapon of my own in this whole struggle, the Presidential veto, and I will not hesitate to use it.

Lower inflation has pushed interest rates down and will push them down more. But we must also replenish the savings pool by encouraging people to take full advantage of our tax incentives.

There is one other obligation that all of us as citizens must face up to if we are to preserve our freedom: We must restore the security of America. Without that security, survival itself is in doubt.

I want to thank the people of Alabama for the tremendous contributions you make to our volunteer forces. And I have to tell you the spirit and the morale and the patriotism among those forces is higher than has been seen in years. I got a letter from a kid in a submarine. He took the trouble to write to me and say, ``Look, we may not be the biggest navy in the world anymore, but we're the best.''

The bulk of our defense buildup is for manpower, maintenance, and readiness. I know that some would have us get at the deficit by reducing defense spending. I'm sure some savings can be made in any government program just by improved efficiency -- and we have a plan to do that, beginning with the Defense Department -- but not by eliminating weapons systems, the planes that we've ordered, the tanks that are on order, the missiles, et cetera. If we canceled outright all those weapons systems, canceled them all, we'd only reduce next year's budget by $6\1/2\ billion, and we would also send a very dangerous signal to the world that we were unilaterally disarming again.

It wasn't long ago that we had fighter planes that couldn't fly for lack of spare parts, fully half of them; navy ships that couldn't leave port; a rapid deployment force that was neither rapid nor deployable and not much of a force. For the sake of our children and their children, I consider it my duty as President, and all of our duties as citizens, to make sure that America is strong enough to remain free and at peace.

And I know here that you will agree with me that standing up for America also means standing up for the God, who has so blessed our land. I believe this country hungers for a spiritual revival. I believe it longs to see traditional values reflected in public policy again. To those who cite the first amendment as reason for excluding God from more and more of our institutions and everyday life, may I just say: The first amendment of the Constitution was not written to protect the people of this country from religious values; it was written to protect religious values from government tyranny.

Thank you for inviting me into your house today. You are the public servants who offer us the best hope for our future. America has given us so much, but now it is she who needs us. Will you answer her call? I believe in you, and I believe that together we can restore the faith of our people in their government and that we will rebuild this blessed land. And then, when our work is done, we can say that we've fought the good fight, we've finished the race, we have kept the faith. And to our children and our children's children, we can say we did all that could be done in this moment that was given us here on Earth.

Thank you, and God bless you.

Note: The President spoke at 11 a.m. in the House Chamber of the Capitol. His address was transmitted live via satellite to State legislatures in Georgia, Mississippi, and South Carolina, and to a group in Washington, D.C. The Republican National Committee was responsible for the plans for the satellite broadcast and the cost of transmission.

Following his address, the President attended a fundraising reception for the Alabama Republican Party at the Montgomery Civic Center. He then traveled on Air Force One to Nashville, Tenn.