I want to take this opportunity to thank some people who mean a lot to me and mean a lot to our Republican Party. Chet and Virginia Upham, thanks so much for all that you have done.

Now, I know it's not easy to corral Texans into a political party. It's always an experience coming down here to be with you Texas Republicans. Everything is so big, and I hesitate, but I'm going to dare the fates. I know that there aren't very many stories about the size of Texas that aren't known to all Texans, but maybe there are some outlanders here who might not have heard it.

There was a Texan who was visiting in Maine, and he was visiting a farmer up there. And the Texan asked this old boy about his farm and what might be the extent of it. And the old fellow said, ``Well, it runs to that clump of trees and then over to that hill and then down to the creek and over to here. How big is your spread in Texas?'' And the Texan looked at him and said, ``Well, oldtimer, sometimes I get in my car and I can drive for an hour and a half before I get to the boundary of my farm.'' And the old fellow from Maine looked at him for a minute and then says, ``I know exactly what you mean. I had a car like that myself once.'' [Laughter]

But seriously, though, as much as people joke about big Texas, your ``Lone Star State'' plays an increasingly important role in directing the future of this country. And there's one great service that Texas can render to the United States next year: Return to the United States Senate the man who's proven himself second-to-none in his determination to improve America's economic well-being and to improve her national security -- your Senator, John Tower.

I've known and admired John Tower for many years, but it wasn't until I got into my current job that I fully appreciated his many talents. In the '80 election, we pledged to make America strong again, militarily and economically. Well, I can tell you without any hesitation, Senator John Tower has been indispensable in putting us on the road toward success in both those fields.

Over the years, John has stood firm -- sometimes like a voice in the wilderness -- against the tax-tax, spend-spend philosophy that pushed America to the brink of disaster. And since the '80 election, when we finally managed to get some leverage, he has provided the expertise and the leadership that was needed to deal with the economic crisis that we inherited.

Every time I come to Texas I feel like a kid showing his report card to his family. I just want you to know that before I start, in all the areas in which we've scored A's, we couldn't have done it without John Tower.

I know it's getting difficult to remember -- we're told that political memories are very short -- but it wasn't that long ago when inflation was public enemy number one. We were told that it would be more than a decade before we could ever hope to conquer inflation. Well, it has come down from 12.4 percent to 3.6 percent last year, and for the first 6 months, or the last 6 months, I should say, it has been down to one-half of 1 percent, and it hasn't been there for 22 years.

I hear a lot about compassion in Washington from those who want us to return to the policies of the past, but it's about time we take a close look at what would have happened had we permitted the inflation, caused by their policies, to remain double digit. If inflation had continued as it was, not increased, just stayed where it was, before we all took office, a family of four on a fixed income of $20,000 would be more than $1,500 poorer in purchasing power today, but also they would have been further impoverished by much higher taxes.

And what was inflation doing to our economy? Savings and investment sank as the people, trying to protect what they could, put their money into nonproductive inflation hedges and those who could afford it, into tax shelters. With inflation running double digits for 2 years back-to-back, interest rates shot right through the roof, knocking the wind out of construction, automobile, and other major industries -- a blow from which they're just now beginning to recover. Consumer spending hit the skids when, again, because of inflation and over-taxation, the real income of our working people began to drop, a total reversal of anything we'd ever experienced in the American history.

Anybody who tries to tell you that we can return to tax, tax, and spend and spend and not reignite inflation better stay away from Texas.

And I get a little irritated with that constant refrain about compassion. I got an unsigned valentine in February, and I'm sure it was from Fritz Mondale. [Laughter] The heart on it was bleeding. [Laughter]

By getting control of inflation, we've channeled savings back into stocks and other productive investments. The stock market, reflecting the new confidence that's spreading throughout the country, has shot up 400 points, reaching an alltime high, and it's still rising. The interest rates are down from the 21\1/2\ percent when we took off, to 10\1/2\ percent now. And I think we're going to knock them down even lower in the very near future.

But even now, homebuilding and auto sales are far above what they were only a year ago. Real wages are up, as is productivity and consumer spending. The leading economic indicators rose again in March for the seventh straight month. And, of course, as John told you already, I think the greatest and most positive indicator of all is they aren't calling it Reaganomics anymore. [Laughter] They never should have called it that. It was the result of that Republican majority that we finally have in the Senate after more than a quarter of a century of living in the wilderness and a combination of good, sound, and prominent Democratic Congressmen and Republicans in the House that made that economic plan go into effect.

You remember when they were calling what was ailing America as a ``malaise.'' And now, former Vice President Malaise is running for President, promising he can do everything just like they did before. [Laughter]

Well, just as the A's on our report card reflect the degree of proficiency of our economic accomplishments, they can be attributed to skill and hard work, as well as to right thinking. Luckily, we had a professor from Wichita Falls teaching us how to do it. The formula was no secret: We reduced the rate of growth in Federal spending.

The budget was growing at a rate of 17\1/2\ percent in 1980. We've cut it by 40 percent. Taxes and regulations were strangling incentive and tying the hands of our most productive citizens. As of July, we will have cut personal tax rates 25 percent. And I can assure you tonight, we're not going to retreat one iota on the tax rate reduction or indexing.

The quickest way to short circuit this recovery would be to increase the taxes on our people. We don't have a trillion-dollar debt because you weren't taxed enough. We have a debt of that size because government has been spending too much.

We can never underestimate the role of dedicated individuals like Senator Tower and the support of a courageous band of conservative Democrats. And isn't it great to have Congressman Phil Gramm on our side and not theirs? I think everyone here understands, he didn't change philosophy, he just changed labels. [Laughter]

You, the Republican activists, deserve the lion's share of the credit when we succeed. Keeping the pressures on Capitol Hill made all the difference before, and it will again. When you hold their feet to the fire, you don't have to make them see the light, just feel the heat. [Laughter]

I think we can be rightfully proud that we've set in place a program that should deliver America a strong and sustained non-inflationary economic progress -- or program. And I realize that many problems remain. Areas long dependent on the old smokestack industries are still suffering from dislocation that comes with technological transition. We're trying to help with training programs for those without skills, or whose skills are no longer in demand.

In south Texas, the people are also suffering in this time from something which no American can control -- the peso devaluation and the economic crisis in Mexico. Senator Tower has a program to help the people in south Texas who are bearing the brunt of this problem. And I can assure you, we are now seriously examining his proposals at the White House at this time.

But getting our economy back on its feet is only half the job. It won't matter how prosperous we become unless we're at peace and secure from foreign aggression. And that's another reason I'm proud to be here tonight. I can think of no other United States Senator -- not one -- who has contributed more to the security needs of the United States than Senator John Tower.

I won't go into all the details. I think you know, though, that during most of the seventies, the security needs of America were neglected. During that time, the real national defense spending dropped 21.6 percent. Our Navy went from nearly 1,000 ships to under 500. Research and development was cut back. Weapons systems were cancelled. And by the end of the decade, our military personnel depended on weapons and equipment that had been designed by and for a previous generation.

By 1980 morale in the Armed Forces was at a low ebb, reflecting a serious erosion of military pay and, just as important, a seeming lack of appreciation for the job our soldiers, sailors, airmen, and marines were doing.

And at this same time when we voluntarily reduced our military commitment, the Soviets went into high gear, increasing their military capability -- conventionally and strategically -- beyond any legitimate defensive requirements.

This administration has received a good deal of criticism for our defense proposals. But, just like the domestic program, we're simply trying to make up for the irresponsibility of the past. Now, let me make one thing plain: We will not tolerate waste in the defense budget, but neither will we permit the Communist dictatorship to militarily dominate this planet.

We can't ask the brave young men and women in our Armed Forces to protect America with second-rate equipment and bargain-basement weapons. If they can put their lives on the line to protect our way of life, we can afford to give them the weapons and equipment they need to do the job right.

And now, to those who always are so in haste to say that's warlike and that we want a war, you can't look, as I do so often, at the faces of those young men and women in our uniform and ever think for 1 minute that you would want to send them into combat. They are there as peacemakers to deter any possible attack, to preserve the peace, simply because of their ability and their dedication to this country.

There come many thrilling moments in a job like mine, but none has exceeded the thrill that I feel at the dedication, the esprit de corps, the morale of our people in uniform today, in contrast to what it was no more than 2\1/2\ years ago.

I tell, every opportunity I can get, one little story, and I'm going to tell it again. And that is, our Ambassador from Luxemburg wrote me a letter one day. He'd been up on the East German frontier. He'd been visiting the 2d armored cavalry regiment. And he said that when he finished and went to his helicopter, a young 19-year-old trooper followed him over there and asked him if he thought he could get a message to the President. Well, being an Ambassador, he allowed as how he could. And the kid stood up there at attention then and said, ``Well, will you tell the President that we're proud to be here and we ain't scared o' nothin'.'' [Laughter]

But more recently, I received something else. With all of our talk about the budget and the sacrifice that we're asking people in government to make, and no pay increases and so forth, and no cost-of-living increases for a period while we attempt to get this budget under control, and that included the military -- and I opened a letter one day, and it was signed by over a hundred marines stationed in Italy. And they told me very briefly over their signatures, if this is what it takes to help the country, count them in. They will be happy to do without a pay raise.

Our national security rests as much on willpower as firepower. This generation of Americans faces tremendous responsibilities. There's nothing I want more than verifiable agreement with the Soviet Union to reduce the levels of strategic weapons. In the long run, that's the best way to lower the growth in defense spending. But the Soviets will only bargain in good faith if they understand we're determined to defend freedom. And I'm determined they will understand that. And if I ever, for 1 second, thought I would weaken in that determination, I will just turn to John Tower, and I know that he'll take care of that. [Laughter]

In case you hadn't heard, I addressed the Congress a few nights ago on the subject of Central America. The challenge we face there is not some threat in some distant land; it's a brush fire that's burning in our neighborhood. And you tonight know the truth of something I told the Congress: Texas is closer to El Salvador than it is to Massachusetts. And like it or not, the future freedom and peace of mankind rests on our shoulders.

If we try to take the easy way out, our children will suffer. In Central America, which is so close to home, we must be willing to counter aggression -- at the very least with financial and military aid -- or no one anywhere in the world will believe the word of the United States.

Now, there are those who suggest that because our friends in Central America are not perfect, we must back away and permit those armed-to-the-teeth by the Soviets shoot their way into power. The only alternative the American people have been presented is a ``prescription for disaster.''

Today we have the opportunity to avert crisis by giving our friends support they need to defend themselves and to develop their economies and their democratic institutions. But we can't succeed if we're paralyzed by indecision. An old preacher once said to a young man asking advice, ``In life, you must believe your beliefs and have your doubts, but not the other way around.'' Today, while we recognize that honest people do have doubts, we, as a nation firmly grounded in individual freedom and representative government, must have the courage to believe our beliefs and act upon them.

The United States remains the last, best hope for mankind plagued with tyranny and deprivation. America is no stronger than its people, and that means you and me, all of us.

Over the first 2\1/2\ years, it's never been clearer to me that the future of a free people doesn't depend so much on those who hold elected office. It depends on those outside the government -- on you at the grassroots. And while the history books may record events as they happened during this or that administration, the direction of a country is determined not so much by the leader as by the character of its people.

By being here tonight, you're demonstrating there's still reason to be optimistic about our future. You're doing your part so we can pass on to our children an America as free as the one that was given to us. And I thank you for doing your part.

God bless you, and thank you very much.

Note: The President spoke at 9:52 p.m. in the East Hall at the Albert Thomas Convention Center.

Prior to the dinner, the President attended a private reception and a reception for the National Republican Senatorial Committee at the center. Following the dinner, the President went to the Houston Hyatt Regency Hotel, where he remained overnight.