I'm delighted to have another chance to speak with the National League of Cities. As you probably remember -- some of you at least -- when we met in this room 3 years ago this week, I didn't have much good news to give you. The United States faced the worst mess since the Great Depression. Our national economy was nearing the breaking point, and so were our cities.

We'd paid a steep price for years of good intentions badly misdirected. Families felt helpless in the face of double-digit inflation, 21\1/2\-percent prime interest rates, and a virtual halt in economic growth.

Cities were especially hard hit. The eroding tax base had widened the cost-revenue gap of city budgets. As labor costs increased, services were cut. Doubling of tax exempt bond rates knocked local governments out of the bond market, so you had to delay your infrastructure projects. And the private sector couldn't provide much help because high taxes and the high cost of borrowing had drained them of money and flexibility. Decades of Federal programs costing billions of dollars hadn't done the job. And the dramatic increase of Federal participation in local government complicated urban problems and threatened the foundation of our federal system.

We'd begun to lose sight of the fact of how our cities first became great, and that loss of vision may well have been our worst urban problem. Ingenuity and innovation built our cities and made them centers of commerce and education, of culture and communication, and of progress and opportunity. But the gradual shift of power toward the Federal Government moved us away from the very principles which kept our cities on a sound footing for most of our history.

Back when I was getting a degree in economics, taxes -- Federal, State, and local -- were taking a dime out of every dollar earned. And two-thirds of that went to State and local government. Today government is taking more than four times that much, and two-thirds of that is the Federal Government's share.

Communities had lost control of some of the most basic decisions affecting everyday life. Local policymakers became less able to respond to the needs of their community as the Federal Government became ever more intrusive. The growing burden of Federal oversight did little but put cities in handcuffs.

We knew America could not get back on its feet without -- or with our cities flat on their backs. And that's why we appealed for your support to embark on a new course. Our compass would be those time-tested principles which have never failed us when we've lived up to them.

I think we're beginning to make headway both in addressing the causes of urban decline and in lifting your cities toward a new era of prosperity and stability. We believe there are four keys to success:

First, strong and steady economic growth. A healthy economy is our most powerful tool for revitalizing urban America.

Second, federalism. By sorting out who does what best, we can return power to levels of government closer to the people.

And third, public-private partnerships. We want to pool government and private sector resources through positive incentives and enterprise zones so that we can harness the power and creativity of the marketplace.

And fourth, a return to basic values. We seek to promote a renewal of community life and to strengthen the social fabric of the city -- excellence in the classrooms, voluntarism, a sense of responsibility, and safety on the streets.

We should be confident. We are the same people who put our ambitions and skills to work and built the best cities in the world. If our program is fully enacted, today's problems can be overcome.

Now, I know that success will not come easy. It'll take great effort and patience. But it can and it will be done. Rebuilding cities begins with economic growth, and I believe our economic recovery is the most important urban renewal program in America today. The breadth and strength of this economic expansion are carrying fresh breezes of hope and opportunity to more and more urban areas.

Industrial production has increased for 14 straight months. Factory orders, factory utilization, and residential construction are all gaining strength. The growth of service industries continues to expand. Last year auto sales were at a 5-year high. More than 100,000 auto workers have been recalled. And with real, fixed business investment up by 13 percent -- that was last year -- the biggest gain of any recovery in the past 30 years, we see a bright future with more growth and jobs, and that's good news for the cities.

One example sums up the difference between the old policies of government pump-priming and our approach that begins with trusting people. Last year, there were demands for us to support an old-style, $3\1/2\ billion training program that was meant to place 300,000 people in make-work jobs. We turned it down so that economic recovery could do the job. Well, this recovery has put as many people back to work each month as they claimed their program would have done in a year. We have added 300,000 jobs every single month for the past 14 months. That's more than 4 million new workers on the job and paying taxes.

The second key to success is a renewed emphasis on federalism. We believe that when it comes to running cities, local officials can do a better job from city hall than bureaucrats can from Washington. [Applause] You tempt me to quit right there. [Laughter]

In our discussions, you said you wanted regulatory relief and reform, general revenue sharing, and block grants. Well, we agree. We want to make programs more responsible for the people that they're -- and more responsive to the people that they're meant to help. And we want to put an end to cumbersome administration and spiraling costs at the Federal level.

Well, we're beginning to do this. We supported general revenue sharing and the surface transportation act which provides dedicated capital funding for mass transit. We've consolidated 56 narrow-purpose categorical grant programs into eight block grants, and we replaced two regulation-burdened programs -- CETA and Title XX -- with flexible block grants.

The cut in wasteful overhead has been dramatic: 647 pages of regulations have been eliminated. And your paperwork burden at State and local levels has been cut by 90 percent. We estimate that local governments were spared $2 billion in annual costs and between $4 billion and $6 billion in startup costs.

Our current budget proposes further grant consolidations to let State and local levels determine their own priorities, transfer funds to high priority areas, and further reduce overhead. This new flexibility for the States is now being felt at the local level. Six States have consolidated portions of their health block grants into mini-blocks for their local governments. Now, admittedly, that's only a start; we'd like to see more States doing the same thing. Federalism can't stop at the State capital.

Public-private partnerships are the third important key for sparking economic opportunity and development of urban areas. Partnerships can take advantage of every opportunity available, and they can use these opportunities in a most efficient and productive way to meet local needs. No single sector of our nation -- government, business, labor, or nonprofit organizations -- can solve our urban problems alone. But by working together, pooling our resources, and building on our strengths, we can accomplish great things.

Starting with a $2 million CDBG grant, Columbus, Ohio's partnership with lending institutions, a community housing group, and a local management company revitalized a neighborhood that was threatened with displacement. The project generated over $24 million in private investment. And the neighborhood of low- and moderate-income families was saved.

In Wilkes-Barre, Pennsylvania, a public economic development agency used its $1.7 million grant to create a revolving loan fund. The fund generated over $12 million in private capital to revive the downtown area and begin development of the city's industrial park. Nearly a thousand jobs have been either created or saved, and Wilkes-Barre's tax revenues have increased by more than $500,000.

Long Beach, California, used its CDBG and UDAG grants for a major downtown redevelopment program. And the private sector contributed $100 million to build a regional shopping center. City leaders tell us this partnership has sparked $1.2 billion in new commercial and residential development, 1,200 new jobs, and a major increase in tax revenues.

Partnerships produce jobs. The Job Training Partnership Act gives local government new flexibility, and by using private industry councils it matches local needs with sensible training. The program will train over a million permanently displaced blue-collar workers per year for productive jobs. CETA did just the opposite. It spent $53 billion to find private sector jobs for only 15 percent of the participants. Well, CETA's days are over. Our commitment is to a genuine partnership for real jobs with a real future.

While I'm talking about jobs, let me mention that more and more people recognize the minimum wage puts unskilled young people at a disadvantage in finding that crucial first job. Our youth employment opportunity wage bill will give a much needed boost to those looking for their first summertime job, and it deserves your support.

There's one more initiative that could mean exciting renewal for urban areas of hardcore unemployment and blight. Fifteen months ago, at your annual convention in Los Angeles, I talked about our enterprise zone legislation. Well, it's been on Capitol Hill now for more than 2 years. The Senate has passed it. The House continues to bottle it up. How in the world can some people give speeches about creating jobs and hope when they refuse to take action on a bill that's designed to provide just that? Enterprise zones encourage growth where we need it most -- in areas of high youth and minority unemployment, in urban areas where the tax base has been hit the hardest. And our legislation will give cities the flexibility they need to make this innovative idea work.

Twenty-one States have already passed their own enterprise zone programs, and the results are very encouraging. Success stories are coming in from cities nationwide. And I'm told that after your unanimous endorsement of this initiative last December, you placed it on your 1984 priorities list. Well, now, all of you will be on Capitol Hill this week. Permit me to make one request. Please tell those people to look at the evidence and give our enterprise zones bill a chance. I've said it before and I'll say it again: They don't have to see the light; they have to feel the heat. [Laughter]

The fourth and final key to a stronger, more prosperous, and stable urban America is a strengthening of basic values through renewal of community life. People coming together in a spirit of neighborhood is what makes cities worth living in. It's what keeps businesses and attracts new ones. And it's what keeps faith with the fine traditions of the past while enabling us to build the future with confidence. Shakespeare said, ``The people are the cities.'' And if our cities can create thriving neighborhoods that offer excellence in education, efficiency and affordability, safety on -- but drugs and crime off -- our streets, then they can become great centers of growth, diversity, and excitement, filled with sound, colors, warmth, and delight.

For too many years, crime and the fear of crime robbed our cities of their strength and vitality and frightened away the business community. Well, common sense is beginning to pay off. In 1982 the crime rate dropped by 4.2 percent -- the biggest decline in a decade. And all over the country people are banding together and working with law enforcement agencies in thousands of crime prevention programs. We're cracking down on habitual criminals, organized crime, and the drugpushers. Federal task forces are stepping up the pressure. And we're working hard to improve the criminal justice treatment of the innocent victims of crime.

But formidable challenges remain. The scales of criminal justice are still tilted toward protecting the rights of criminals. I believe it's high time we restore a proper balance and start doing more to protect our law-abiding citizens. Lenient judges are only lenient on crooks; they're very hard on society.

The way to get along -- or to get long overdue reform begins with passage of our comprehensive crime control act. It passed the Senate last month. But here again, the House continues to wait. When you're on Capitol Hill this week, maybe you could give our friends in the House another message. When it comes to putting dangerous criminals behind bars, when it comes to keeping our people safe in their homes and neighborhoods, there should be no Republicans or Democrats, only Americans working for the common good.

We should also work together to improve the quality of American education. The report by the Commission on Excellence in Education made it clear that nothing short of a grassroots revolution would bring back quality education to our classrooms. Total expenditures for our schools rose more than 600 percent between 1960 and 1980, but Scholastic Aptitude Test scores were in a steady decline, and 13 percent of our 17-year-olds were functional illiterates.

We should take a lesson from New Hampshire. In fact, I'm a little -- not just what happened recently -- [laughter]. In fact, I'm a little surprised so few people noticed, during all the time they spent there in recent weeks, New Hampshire ranks 50th, dead last in State aid to education. But New Hampshire ranks first in Scholastic Aptitude Tests in those States where at least half the students take the test. And it's maintained that honor for more than 10 years. Very simple, why: In New Hampshire control of education remains in the hands of the people at the community level.

I believe that education already is playing its part in America's renewal. Parents, teachers, administrators, local officeholders, and school boards are finally getting back to fundamentals. They're providing leadership, working harder, and thinking smarter.

Today all 50 States have education task forces, and major reforms are being adopted in academic standards, discipline, curriculum, and basic values. We're seeing signs of improvement in test scores. Excellence in education is on its way back.

This spirit of renewal is the American spirit, and we see that spirit everywhere we look, from the healthy rise in corporate and private giving to thousands of exciting private sector initiatives, and from neighbors helping neighbors to a welcome return to our basic values.

Now, I know that over the last 3 years we've had to make some tough decisions, and there are still some tough ones to come. I appreciate that the cities you represent have felt the pain of reducing the growth of Federal spending. But to continue down that path that America was on would have meant disaster. We all want what is best for those who live in our cities. They deserve no less. And together we can make it happen. And with your leadership, and with our partnership, it will happen.

Thank you, and God bless you all.

Note: The President spoke at 3:12 p.m. in the International Ballroom at the Washington Hilton Hotel.