(FOOTNOTE) \1\Prior to the President's remarks, George Miller, president of the association, presented the President with an apple pie, which he said was symbolic of the fact that ``small towns and local townships believe in local control'' and ``look forward to their fair share of the Federal pie.''

Well, it's a pleasure for me to be here with you today. Growing up as I did, as you were told, in Dixon Township, I know well the role that towns and townships play in America. Incidentally, between Tampico and Dixon there were two other small towns in Illinois in which I lived before I was about 8 years old. Those towns are the cradle of democracy. And if anyone has any doubts about the vitality of American liberty, I would suggest that they visit some of your town meetings. I'm sure that Patrick Henry and Thomas Jefferson would feel right at home.

One aspect of town government is that people know each other. Some are even related. [Laughter] There's a story about townfolk. You know, usually if you're going to tell a joke, you try to tie it into something that has to do with what you're talking about. The closest I can come is that this story is kind of typical of the humor and the flavor of smalltown America. It's about a fellow named Elmer. In his town, he fished, and he made a living selling fish to the local restaurant. But he was able to provide so many fish every day that the game warden got a little suspicious. And the sheriff, being Elmer's cousin, he went to him and said, ``Why don't you go fishing with him and find out how he's doing this?'' So they did. And they got out in the middle of the lake in a rowboat, and the sheriff threw his line in and Elmer reached down in the tackle box and pulled out a stick of dynamite, lit the fuse, tossed it overboard, and with the explosion up came the fish, belly up. And the sheriff said, ``Elmer, do you realize you've just committed a felony?'' Elmer reached down into the tackle box, took out another stick of dynamite, lit it, handed it to the sheriff, and said, ``Did you come here to fish or talk?'' [Laughter]

But this gathering here today is testimony to the fundamental change that's taking place in our country, change for which many are unaware -- or of which many are unaware, and yet it's altering the face of America. What we're experiencing is nothing less than a renaissance of smalltown life. I'm here to tell you that this administration recognizes it and that the days when your role in our country was taken for granted are over.

Small towns and townships have always played a vital part in American life, and yet about the time of the Civil War, urban areas began to grow at a faster clip. I wasn't around at the time -- [laughter] -- but a little later I was witness to that move to the urban areas. Now, I'm certain that all of you are aware that that trend has reversed itself. In the 1970's some rural areas continued to -- or grew at a rate that was far above the growth -- 50 percent faster than the growth in urban centers. Now, today, one out of four of our citizens lives in nonmetropolitan areas, and some polls indicate that 60 percent of the American people would join them if they could find work in those smaller towns.

The influx of people into small towns and rural areas reflects not just the material well-being or desire of that, but the desire for a better, different quality of life. During the 1960's, there were those who scoffed at smalltown values -- at family, the talk of family and God and neighborhood. And they said those things in which we believe are old-fashioned and corny. Well, there's been some growing up in this country in the last few years, and people are discovering that those basic values we hold so dear are stronger than the fads that make a big splash one day and evaporate the next.

Many of the problems we face today are the results of drifting away from principles that kept our country on a sound footing through most of its history. Our Forefathers believed that government should be limited and power should be decentralized. Calvin Coolidge, a President I deeply admire, put it well. ``Our country,'' he said, ``was conceived in the theory of local self-government. It has been dedicated by long practice to that wise and beneficent policy. It is the foundation principle of our system of liberty.''

There are people that down through the years have not expressed much admiration for Cal Coolidge, but I remember something that I think would strike all of you as typical of him. It was the summer, and his son had a job working on the farm up in New Hampshire. It was hard and hot work, and one day another kid that was working there at lunch time said to him, as they were sitting there eating out of their brown paper bags, he said, ``Boy, if my father were President, I wouldn't be doing this.'' And Cal's son said, ``If your father were my father, you would.'' [Laughter]

The American system, decentralized and based on guaranteed individual rights, served our country well. And yet, in the last two decades or more something went haywire. The people began turning to Washington with greater and greater frequency. Every problem became something of Federal concern. Worst of all, we were to believe that Federal money came free, and it's taken quite a while for us to realize that Federal money came out of the same pockets as did local and State taxes -- our pockets.

On the other end, well-intentioned individuals thought if they were only given the power they could right every wrong. As I said, they were well-intentioned, but there's a well-known road paved with good intentions. No one likes to go where it takes you.

There's a story about a young fellow riding a motorcycle. He had good intentions, too. The wind was kind of chilly and coming through the buttonholes on his jacket, and so he got this idea. He stopped and put his jacket on backward and that eliminated the chill factor through the buttonholes, but it kind of restricted his arm movement. And down the road, his motorcycle hit a patch of ice. He skidded into a tree. When the police got there, a crowd had gathered. And they elbowed their way through and they said, ``What happened?'' And one of them said, ``Well, we don't know. When we got here he seemed to be all right, but by the time we got his head turned around straight, he was dead.'' [Laughter]

I think that has a tie-in with some of the things that the government does. [Laughter] But in the last two decades, government expanded with the best of intentions, but we paid a steep price. By the end of the 1970's, average citizens trying to solve even the simplest problems were frustrated by a conglomeration of interlocking jurisdictions and an absence of accountability. Unelected Washington officials were making decisions that rightfully should be made by local people working and talking together. Americans felt that they'd lost control of essential services like schools, welfare, and roads.

The idealistic goals of those who centralized American government didn't change the nature of what we confronted. Supreme Court Justice Louis Brandeis once said that ``Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.''

In the end, the growth of Federal power complicated our problems and threatened our freedom. Nowhere was that clearer than the grants-in-aid program. In 1950 the Federal Government had 132 categorical grant programs costing $7 billion. Twenty years later, by 1970, the number had tripled to more than 400, costing $90 billion. And it took 166 congressional committees just to keep track of this mishmash of programs, including 13 programs for energy, 36 for pollution control, 66 for social services, and 90 for education.

The frustration of dealing with faraway bureaucracy wasn't the only price that we were paying. Between 1976 and 1981, the Federal tax doubled, draining the private sector of money it needed for investment and the creation of jobs. And by the time the Federal tax vacuum was done, there was little left for local and State government.

The growth of Federal power was stagnating our economy and destroying our hopes for a better future. By 1980 inflation was running at double-digit levels for the second year in a row, robbing our senior citizens of the value of their savings. The poor and middle-class working people saw their real wages and their standard of living begin to shrink.

The spirit of optimism, long the hallmark of our people, turned to pessimism and cynicism. Even our leaders were throwing up their hands, claiming that we were in a malaise and that our problems were unsolvable.

Well, one should never sell the American people short. Once we put our minds to it, there's nothing Americans cannot accomplish if the Federal Government will just get out of the way.

When I got to Washington, we faced the awesome responsibility of changing the direction of government. And that's not easy, and it's not painless. I'd like to take this opportunity to thank George Miller and all of you in the National Association of Towns and Townships for the support that you've given over these 2\1/2\ years. I remember meeting George and your officers in the White House. And believe me, it was expressions of support like the ones I heard that day that kept me going. After our meeting, I told my staff they just had a dose of good old-fashioned grassroots Americanism, and I sense that same spirit in this room today.

It's taken time, but I'm proud to tell you that together we've turned around a desperate situation, and we're never going back to the policies of tax, spend, and inflate that brought our country to the edge of disaster.

Together we've brought inflation from double digits down to 2.4 percent over the last 12 months, and that's the best 12-month record in nearly 17 years. I don't have to tell you what this means to the cost of doing business for our towns and townships.

There's also been progress with interest rates, which are as important to you as they are to business. Just before I took office, they were going through the roof. The prime at the time was 21\1/2\ percent, and today it stands at 11 percent. There will be slight fluctuations in this recovery, but if the Congress acts responsibly interest rates are going to come down even more, and not too far in the future.

We're getting the Federal spending and taxing juggernaut under control. Spending was growing at a rate of 17 percent a year when we got here. We've cut that by nearly 40 percent. And let me say that still isn't good enough.

There's an old saying that in levying taxes, as in shearing sheep, it's best to stop when you get to the skin. [Laughter] Well, by 1980, taxes were making our economy bleed. We've cut the income tax rate of the American people 25 percent across the board. And in 1985 they'll be indexed so that never again will the Federal Government profit from inflation at the people's expense.

There's one part of our tax reform program of which I'm particularly proud, and that is that by raising the exemption on the inheritance tax and by eliminating it altogether for surviving spouses, we've restored the right to American people of passing on their family farm or small business to their children.

From the start, we recognized that excessive Federal regulation was not only strangling American enterprise but preventing you folks at the local level from doing your job. Since we took office, we've freed the business community as well as State and local government of 300 million man-hours -- man- and woman-hours -- [laughter] -- of needless paperwork. And this will save Americans billions of dollars and free you to handle local problems as you see best.

Returning power to levels of government closer to the people has been one of the guiding principles of this administration. Decentralizing remains one of our utmost goals, as George told you, and don't let anyone tell you that we're satisfied with what has been done so far. Phase one of our Federalism program may be accomplished, but that's just phase one.

Again, with your help, we managed to get through the Congress a block grant package that consolidated 57 programs into nine block grants that in 1982 eliminated some 5.4 million hours of work for State and local officials and, in subsequent years, will eliminate some 5.9 million hours a year. We continued this effort with the enactment of the Job Training Partnership Act and the urban mass transportation grants program. This year we've proposed legislation that will consolidate over $22 billion of spending in 34 programs into four block grants. Included among these is the Rural Housing Block Grant, which will give you more control and flexibility over programs costing $850 million annually.

The significance of the block grant, as most of you well know, is that it isn't tied with all the rules and regulations and specifics as to how the program must be managed, as is true in the individual or specific grants. It gives you the flexibility to set the priorities and determine how best that money can be spent.

The biggest resistance to our efforts has been from politicians who simply don't believe that local government is competent to do the job. Their opposition seems to be based on the notion that the Federal bureaucracy has a monopoly on compassion and efficiency, which I think you'd find mighty strange. It's been said that ``A man's intelligence does not increase as he acquires power. What does increase is the difficulty in telling him that.'' [Laughter]

If it was ever true that Federal employees had greater capabilities than their local counterparts, those days are rapidly coming to an end. Today, modern technology is opening up greater and greater opportunities for State and local government. Even small towns have computer services available to them that were out of reach only a decade ago. I know your own organization is moving forward with great training and communications programs that will open up broad new horizons at the local level.

Today, local government across the country is proving itself efficient and responsive to the will of the people. I'd like to see some of the politicians here in Washington who don't think you can do the job try to handle some of your responsibilities. Bart Russell tells me that as head of a local township, you've got to be a parliamentarian, bookkeeper, business manager, ombudsman, and government liaison expert -- all at the same time. And plus, you've got to do all that while keeping the hometown folks happy. [Laughter] And I thought dealing with Capitol Hill was hard. [Laughter]

Well, I can assure you that this administration knows and appreciates the job you are doing. We're taking every care so that in transferring programs back to levels of government closer to the people, you also receive the resources necessary to get the job done.

I have a dream that some day we can provide you with the revenue sources that have been co-opted by the Federal Government, so that local money no longer has to make a round trip through Washington before you can use it back in your local area -- minus a certain carrying charge. [Laughter] In the meantime, you can count on us to be sensitive to current obligations. I continue to support general revenue sharing and will oppose any changes -- [applause] -- I will oppose any changes in the general revenue sharing formula that unduly impact on towns and townships. And if I remembered all the lessons of my previous occupation, I'd quit right there after that response. [Laughter]

Of course, transferring revenues is not going to bring lasting change. Real progress will come as a result of creative approaches that harness the power of the marketplace. With this in mind, we've proposed legislation to create enterprise zones to encourage private business to locate in disadvantaged areas. And one-third of the 75 zones in the bill that we've suggested would be in rural areas.

There's enormous support for this concept. Already, 20 States have passed State enterprise zone legislation. The Senate has already passed this bill once, and although it was dropped in conference, we're confident they'll support it again. And in the House we have 181 Members, nearly a majority, who have cosponsored the legislation this time. So far, of course, the House has failed to act, and only recently has the House leadership even agreed to hold hearings. I'd like to take this opportunity to ask you to join us in escalating efforts to pry this legislation out of the House. Just remember, we don't have to make them see the light, just make them feel the heat. [Laughter]

I'll square that with present company later. [Laughter]

It's about time that you had a fair say in the Federal policies that affect you. I want to assure you that I continue to support strongly, legislation that would provide for a member nominated by your organization to be placed on the Advisory Commission on Intergovernmental Relations.

Over the last 2\1/2\ years, we've had to make some tough decisions. And I fully appreciate that the townships you represent have felt the pain of reducing the growth of Federal spending. We couldn't have gone on the way things were, and you've done more than your share. As we move forward, I've instructed my staff to be diligent that your good citizenship is not taken advantage of and when it comes to budget control, towns and townships are treated equally with other segments of American society.

We must always remember that on our shoulders rests the responsibility of our country's future. In less free societies, the burden rests only on the head of state. The freedom to enjoy places a heavy burden on all of us, in and out of government. Together we've overcome an economic threat that could well have destroyed the America that we know and love. The signs suggest that we're over the hump, but as is engraved on our National Archives building, ``Eternal vigilance is the price of liberty.''

There is every reason for us to be confident. We are still the same people who conquered a wilderness and turned it into a dynamo of freedom and abundance. I think that today there is a greater understanding of the miracle of America, of what made her great and kept her free.

John Foster Dulles once said that, ``If we are faithful to our past, we shall not have to fear our future.'' Well, together we've proven that we can do what is necessary to keep faith with those who came before.

I thank you for all that you've done, and I thank you for having me here with you today. Thank you all, and God bless you all.

Note: The President spoke at 10:13 a.m. in the Presidential Ballroom at the Capital Hilton Hotel.

The National Association of Towns and Townships is a local government membership organization that represents more than 13,000 local entities nationwide.