And President Donald Treadwell and President-elect David Roberts, members of the board of directors, before I say anything, I want to take this opportunity to thank all of you for the support that you've given our efforts over the last 3 years to cut spending and get taxing under control. You were rock solid even when the going got rough. I'll never forget your encouragement and support here in Washington and throughout the cities and towns of America.

And I guess nothing less can be expected from individuals who represent the best of our country. When it comes to free enterprise and competition, you represent the innovation, creativity, energy, and community spirit so much a part of small and independent business in America. The principle of private property and its relationship to personal liberty is not theory with you. It's everyday business.

Small business today, as it has always been, is the mainspring of American well-being. And, of course, there are a few individuals in small business who aren't as efficient as we'd like them to be. There's the story of a fellow -- and if I've told this story to you before, just be kind -- [laughter] -- remember that when you pass 40, you begin to have a tendency toward lumbago and telling the same story over and over again. [Laughter]

But this fellow was so successful that he was opening a branch office, and he decided to order a floral decoration for the occasion. When he got to opening, he was shocked to see that the inscription on the flowers read, ``Rest in peace.'' [Laughter] On his way home, he stopped at the flower shop to register a complaint. And the shopowner heard him out and then said, ``Well, take it easy. Things aren't that bad. Just remember that someplace today there's somebody opening something up, and its says, `Good luck in your new location.''' [Laughter]

But America's greatest assets are among the men and women who manage private sector businesses of every kind. And the profit motive to spur them on -- they, or I should say, you are providing this country with goods and services with a higher quality and a lower price than ever imagined by the central planners of socialist economies.

There's been talk about having more centralized planning for our economy. Well, that's not the American way, and it doesn't work. The American miracle is a product of freeing the energies of our people, not harnessing them to some central plan or bureaucratic program.

Jefferson once said, ``Were we directed from Washington when to sow and when to reap, we would soon want for bread.'' The Founding Fathers were right. As far as I'm concerned, the best thing the Government can do to keep our country growing is get out of the way and let the people run their own affairs.

You know, my favorite story having to do with your business came from a fellow that was building his own home, and it happens to be right near my own neighborhood in California. And he got so fed up one day that he took all the various forms that he had had to fill out with regard to all the regulations all the way up through the branches of government, pasted them all together, and strung them in front of his half-built house on two poles. The ribbon was 250 feet long. You know all about that.

Well, during the last decade, we strayed far from the principles that built our great nation. By the end of the 1970's, we were overtaxed and overregulated. The policies of tax, tax, spend and spend gave us economic stagnation and ruinous double-digit inflation. A spirit of pessimism, totally inconsistent with the American character, permeated the land. And by the time we got to Washington, the prime interest rate was shooting through the roof at 21\1/2\ percent, knocking the legs from under our basic industries. Being in the industry you're in, I don't have to remind you of that.

When we got here, the pressure was on. We didn't go for a quick, short-lasting fix, as you've been told. Instead, I think we've made some fundamental changes in direction. The funny thing was to hear our opponents labeling our efforts a failure and blaming us for America's economic difficulties even before our program went into effect, had time to work.

Well, I'd listen to them, and then I'd remember that old Robert Frost saying: ``The brain is a wonderful organ. It starts working the moment you get up in the morning and doesn't stop until you get to the office.'' [Laughter]

Seriously, though, the first 2 years of my or any Presidency is spent, to one degree or another, in transition from a predecessor's policies. It isn't until the third year that the seeds planted by a new administration begin to bloom. And if you will forgive me for saying this, I think I've been seeing a few economic blossoms springing up here and there.

By keeping taxes stable with a 25-percent across-the-board cut in income tax rates, by reducing the growth rate of Federal spending, by chipping away at the heavy burden of excessive Federal regulation, and by bringing inflation under control, we put our country back on the road to stable progress. Overall economic growth last year was a robust 6 percent. After a burst of economic activity in the first quarter, we believe America is well on the road this year to lasting expansion.

The savings rate is on the way up again, which will make available new funds for investment. In contrast to the gloom and doom of 4 years ago, there's a spirit of optimism alive in the land. And why not?

Real wages rose for the first time -- 1982 -- for 3 years and continued to rise in 1983. Productivity, which also fell in the years before we took office, rose over 3 percent last year. Laying the foundation for future prosperity, venture capital, which only rose a billion dollars in 1980, shot up to $4 billion last year.

The economic expansion is bringing unemployment down and generating unprecedented new opportunities in small business, where two out of three new jobs are created. Last year, 600,000 new businesses were incorporated -- an all-time high. Each one of these is a tiny part of the economy, but together, they represent a dynamo of energy and innovation that is opening a whole new era of opportunity and freedom.

The housing industry, building and selling, is an integral part of the progress that we're witnessing. First, reinvigorated companies, after a period of entrenchment, are beginning to move employees to different parts of the country. The Employee Relocation Council says that 35 percent of its member companies are expecting a higher transfer volume in 1984 over 1983. The ERC predicts transfer volume will be up at least 10 percent. I know that that is music to your ears.

There is also good news in new housing. When our program was put in place in the fall of 1981, housing starts were at an annual rate of 840,000. Now they've jumped to more than 1.6 million. Building permits were only 730,000 back in the fall of '81. They've risen to more than 1.7 million.

The rebound in your industry, as in the rest of the economy, is no accident. When the last administration took over, inflation was running at about 5 percent, and the prime interest rate -- and, my, it's painful to say this -- was under 7 percent. But then everything went haywire. You can't have policies that run 5 percent inflation up to 12.4 and take the prime from 7 to 21\1/2\ percent and expect that housing or any other business, or the country, for that matter, is going to prosper. In the case of the housing industry, the average monthly mortgage payment rose from $256 to 598 during the 4 years of the previous administration.

I firmly believe that the opportunity to own a home is part of the American dream. Almost a hundred years ago, the poet Walt Whitman knew this when he wrote: ``The final culmination of this vast and varied republic will be the production and perennial establishment of millions of comfortable city homesteads . . . healthy and independent, single separate ownership, fee simple, life in them complete but cheap, within reach of all.'' Well, our country was moving toward the fulfillment of that vision when the policies of tax, spend, and inflate destroyed the dream for millions of Americans.

I pledge you today that this administration will continue working tirelessly to create an expanding economy in which, as Walt Whitman said, ``ownership of one's home is in reach of all.''

We've made progress. Bringing inflation under control has helped. The increase in personal income has helped. A trimming of Federal regulations has helped. And -- I bet you didn't think I was going to mention this -- and we all know the overall decline of interest rates, notwithstanding the recent upticks, has also helped. But let me assure you, we are not pleased with the recent increases in interest rates, and, frankly, there is no satisfactory reason for them.

Of course, our economic problems have to be attacked from many directions. I believe institutional reforms are badly needed. We can start with something that will give the Chief Executive the power to cut porkbarrel projects that have been attached to needed legislation. Forty-three Governors have, and I think the Chief Executive of this country should have, a line-item veto. [Applause] The Capitol dome just shook. [Laughter]

We could also use an amendment to the Constitution that requires a balanced Federal budget. Do you know that as long ago as right after the adoption of the Constitution, Thomas Jefferson, who had so much to do with it, said it had one glaring lack. ``A constitution,'' he said, ``should have an article prohibiting the federal government from having the right to borrow.''

Well, one basic reform that's long overdue is a complete overhaul of our tax system to make it more fair and provide greater incentives for everyone to work, save, and invest. We need to broaden the base so we can bring income tax rates down. In that connection, I know some of you've heard questions raised about whether there might be some plan to do away with the home mortgage interest deduction, which has played such an important role in helping Americans fulfill their dream of homeownership. I'm afraid that story was just another example of someone trying to read into my remarks things that weren't there.

At that time, I was trying to emphasize that the Treasury Department's study of ways to simplify and reform the tax code, which I consider a real priority, is supposed to look at every aspect of the tax structure. However, in saying that, I also stressed that I strongly agreed with the home mortgage interest deduction, which is so vital to millions of hard-working Americans. And in case there's still any doubt, I want you to know we will preserve that part of the American dream. I could've said that first and saved you listening to a lot of speech, couldn't I? [Laughter]

Well, that is the thing, that deduction, that symbolizes, I think, that American dream. And I'll be the first one to admit that there are good ways and bad ways of simplifying the tax code. Not long ago, someone sent me a proposed new tax form which wasn't exactly to my liking. It had two lines on it. The first one said, ``What did you make last year?'' And the second one said, ``Send it.'' [Laughter]

We aren't waiting for the Congress or for institutional change. In the executive branch, we're already moving forward where we can. The Grace commission, for example, provided us with 2,478 cost-saving suggestions, brought in by more than 2,000 businessmen who volunteered their help. Many of these are being evaluated right now throughout the departments and agencies.

We also have gone a long way to clean up what was an unacceptable level of waste in the Department of Defense. Now, let me mention here that many of you are aware of the horror stories emerging from the Department of Defense about the incredible high cost of certain items, like a single bolt that maybe cost a hundred dollars. Well, these, for the most part, are not stories originating from investigative journalists. These are our figures. These are success stories on where our antiwaste program is uncovering and correcting these wasteful situations. And more progress can and will be made. But don't let anyone tell you that it is business as usual in any department, especially the Department of Defense. They are the ones who found out that that other thing had been going on and are correcting it. There have been hundreds of indictments. There have been refunds of hundreds of millions of dollars. There have been convictions for fraud.

Recently, I accepted a compromise in reducing defense spending. I did this reluctantly and in good faith that substantial cuts in other areas will be made. Those pushing for further defense cuts are rolling dice with the security needs of this country and, at the same time, undercutting any chance for tangible arms reduction agreements with the Soviets.

The Congress is now facing a decision on Central America that could well chart our country's future for decades to come. As I mentioned last night on television, if we are to avert a monumental crisis in Central America, a crisis that would affect the lives of each and every American citizen, we must act. The flood of refugees and loss of innocent life that always results from Communist takeovers can be averted. With the balanced program we've proposed of supporting the economic progress, democratic development, and security needs of our neighbors and friends, we can succeed. And now is the time for the Congress to act. We can prove democracy works and that when it comes to our country's safety, there are no Republicans or Democrats, just Americans.

If we're to have peace, we must stand together in the face of the threats to our freedom and security. We must act responsibly when it comes to allocating our resources. After all, today's expenditures pay for tomorrow's security -- the security of our children and our children's children.

We're now living with -- or, more accurately, I'd say, making up for decisions made during the last decade. We should do better by our next generation than what was passed to us. The 1970's, in many ways, was a period of irresponsibility. Basic American values were made light of and spoken of as if they were relics of the past. Things like family, God, and love of country were mocked. Well, I think some of those who were so flippant about our traditions have grown up a bit in the last few years. America is finding itself again, and we've got every reason to hold our heads high.

Our greatest strength, the most powerful force for good on this planet, is the character of the American people. And I'd like to take this opportunity to thank you, all of you, for all that you're doing in the many cities and towns from coast to coast, to make this a better country.

I know about your many ``Make America Better'' projects. And I'm proud of each of you. I know about the realtors in Raleigh who are responsible for putting smoke detectors in the homes of the elderly. I know about the Dogwood Trail Days project, with which Birmingham realtors beautified their city; about the help of Manchester, New Hampshire, realtors have been to the Junior Olympics; about the emergency food and shelter the Asheboro-Randolph realtors have provided to people in distress; about the help the Fond du Lac, Wisconsin, realtors have been to the Toys for Tots program; about all the help the Baton Rouge, Louisiana, realtors have been in establishing a home for abused children in their community; about the patriotism projects and the nonpartisan voter registration drive you're planning.

I've often described America as a compact of good and decent people who came here from every corner of the world to live together in freedom. In a free country, what kind of society it is does not depend on the government; it depends on we, the people. Your good citizenship is showing others what Americanism is all about.

Recently, I met with Pope John Paul II on my way back from China. And there in the chilled air of the Fairbanks Airport, he spoke to me and the other citizens who had gathered there to greet him -- some of them Eskimos from faraway villages, some of them city dwellers, others frontiersmen and women from many parts of our country who were there living on the last American frontier. And this Polish Pope, a symbol of courage and conviction to so many millions, knows how important our country is to the future of human liberty. And his parting words to the crowd were, ``God bless America.''

Working together and standing together, we will and we can keep America the shining light of liberty and opportunity that God intended it to be -- the last, best hope of mankind.

Thank you, really, for all that you're doing. And thank you for having me with you again, and God bless you.

Note: The President spoke at 1:32 p.m. in the International Ballroom at the Washington Hilton Hotel.