All my life, I've believed in miracles. I believe that if you truly have faith, your dream will come true. And now after 39 years of waiting, the miracle is happening. The Chicago Cubs are on their way to a National League pennant. [Laughter]

I have to tell you what that means to me personally. I was broadcasting the Cubs in 1935 when the only mathematical chance they had to win the pennant was to win the last 21 games of the season -- [laughter] -- and they did! [Laughter] And it still stands today as an unequaled record. When I'm in the presence of such greatness, how can I feel intimidated by a little challenge like running for President? [Laughter]

And if you share my belief that all things come together for good, then how can we not believe the success of the Cubs bodes well for our nation's heartland?

Permit me to commend AmeriTrust Corporation and its fine chairman, Jerry Jarrett, for your leadership in sponsoring ``Choosing a Future'' for mid-America. Your survey identifying the significant economic difficulties we know your region faces, as well as strategies for overcoming them, represents a far-reaching and impressive private sector economic development initiative.

``Choosing a Future'' reflects the spirit of partnership between government and industry essential to lasting industrial or economic growth in human progress. And it portrays a people with the realism to see clearly and the courage and confidence to go far.

When we talk about the great changes in America in recent years we often describe them in statistical ways, and I'll be guilty of that before I finish. But I think the most significant change, a good and hopeful one, has been the change in America's attitude -- our renewed confidence and the higher value that we place on the truly important things in our lives.

Ben Franklin once said that, ``When the well's dry, we know the worth of water.'' Well, 1980 marked such a moment for America. It was, in a sense, a great moment of truth; a time in our history when it seemed to many that America's well finally had run dry from a philosophy of bigger and bigger government. It was time to begin putting back what we had lost.

For half a century, we'd been giving government greater power over our lives. We did this with the best and most honorable of intentions. But by 1980 the full impact of distorting our economy, of draining spirit from the heart of our people, and of permitting our traditional values of faith, family, and work, neighborhood, and freedom to be undermined -- all of this had come home to roost.

The worst trauma was not the breakdown in our economy or the humiliating setbacks that we suffered abroad. Being sick was bad, but the worst thing was when they told us we couldn't get well; that the problems were just too big, and government wasn't to blame, we were to blame.

Can you imagine what the fate of England would have been if before the Battle of Britain in World War II, the English had not heard those words: ``We shall fight them on the beaches, we shall fight them in the streets,'' but, instead, had been told: It's no use, you suffer from a malaise?

Well, Americans didn't give up hope; we just hadn't been allowed to hope. And that's why in 1981 we said let's renew our faith and hope. We have every right to dream heroic dreams. Let us make a new beginning with one revolutionary idea -- freedom.

From day one, the driving force behind everything we've done in economic policy from reducing the growth of Federal spending, which soared over 17 percent in 1980 alone, to lowering tax rates and providing new incentives for business investment, to cutting back the jungle of regulations, to supporting stable monetary policies has been to put our future back in the people's hands, so working Americans could make America great again.

And somebody out there must be doing something right -- 21 straight months of economic growth, with the monster of inflation still locked in his cage. Today one industrial nation in the world has the strongest economic growth, 7.6 percent for the last quarter; inflation of only 4.1 percent for the last year; labor force participation at an all-time high; the fastest rate of job creation, 6\1/2\ million more people working in the last 19 months alone; a record 600,000 business incorporations last year; the fastest rate of business investment in 40 years; robust productivity gains; the largest increase in real, after-tax personal income since 1973; and leadership in developing jobs and markets for the future in science and high technology, both on Earth and in outer space. Well, I think you know the one nation I'm describing: Its initials are U.S.A.!

America is on the move again. But I repeat today what I said in 1981: Our challenge is to move America forward and to make sure that nobody gets left behind. One continuing challenge for the future must be to clear away the remaining roadblocks to economic growth without inflation, and do it for all Americans.

We do not believe, as some propose, that higher taxes on income, capital, and labor is the way to reduce budget deficits. That idea was bad policy before, and it's bad policy today. Entrepreneurs must not be discouraged; they must be encouraged.

So, we must move forward into the future with an historic simplification of the tax system, a tax system more fair and easier to understand, so we can bring everybody's income tax rates further down, not up. Strong economic growth will keep deficits coming down and, make no mistake, the deficit is coming down, and it would come down even faster if the Congress would give us a constitutional amendment mandating government spend no more than government takes in, and a line-item veto, so that a President could veto specific spending requests without vetoing an entire appropriations bill. [Applause] Well, bless you for that. I had it for 8 years as Governor of California, and I miss it. [Laughter]

Another reform could bring hope and opportunity to depressed neighborhoods in Chicago and pockets of despair throughout the Midwest. Imagine an abandoned ghetto with people working again in shops and firms and restaurants. Imagine their families living in more secure neighborhoods with less crime. Well, we can and will have this rebirth in America if the House of Representatives would just give us a vote on our enterprise zones proposal.

Less than a year ago, Spiegel, Inc., dropped the idea of moving to the Sun Belt and announced a $20 million renovation project on Chicago's South Side that preserves thousands of jobs and can lead to many more. They stayed because of a State-sponsored enterprise zone plan. With enactment of our enterprise zone legislation, there could be more and more such stories.

We understand, too, the challenges your agricultural and industrial regions face. We've tried to help you meet those challenges in a number of ways -- by ending a totally unfair, wrongheaded grain embargo; by restoring grain sales to the Soviet Union -- over 22 million metric tons since August of 1983; by reaching an agreement with Japan that will virtually double our beef exports over the next 4 years; by accepting an understanding with Japan permitting our auto industry to get back on its feet after the killer interest rates in 1980; by working aggressively for more open markets and by opposing protectionist legislation like ``domestic content,'' which would revive inflation, provoke retaliation, and destroy American jobs and farm exports.

May I suggest that the most productive food growers in the world -- the kind of leaders who once invented the assembly line, who manufacture our cars, and who have given us the hard-hat spirit and the expertise that made American business second to none -- can outproduce, outcompete, outsell anybody, anytime, anywhere in the world.

We can and we must go forward, all of us together, building an economy that spurs the initiative and ingenuity to create sunrise industries and make older ones more competitive. To do this, we must meet the challenge of developing our next frontiers in science, technology, space, and education.

In my travels across this land, I've seen a vision of America's future too often ignored in Washington, an America unafraid, pushing back those frontiers with courage and leadership, becoming once again America unsurpassed. A new revolution is rising from the deepest yearnings of our nation's spirit to challenge the limits of knowledge and to put the power of discovery at the service of our most noble and generous impulses for decency, for progress and, yes, for peace.

I saw that in Decatur, Illinois -- men and women not only processing corn and soybeans to produce food products that feed a hungry world but putting into practice breakthroughs in the field of hydroponics and pioneering work in ethanol to increase demand for farm products, create new jobs, and give greater energy security to our country. America's heartland is on the cutting edge of progress.

I saw us meeting that challenge on the assembly lines in Kansas City and Detroit, where investments to modernize and the introduction of robotics are helping the American automobile industry come back stronger than ever, and where engineers are using lightweight, super strong, plastic-like materials to reduce the weight of modern cars, and consumers are getting the benefits from more miles to the gallon.

I saw us meeting that challenge when the people at Goddard Space Flight Center showed us how practical applications of space and aeronautical technology are transforming our lives -- from life-saving vests for firemen to sophisticated aerial scanning techniques to locate and identify everything from schools of fish to mineral deposits to agricultural resources.

I saw the vision of technology with a human face. Miraculous medical wonders like PIMS, the programmable implantable medication system, can administer medication automatically within the body. HTS, the human tissue simulator, can send electric impulses through wire leads to targeted nerve centers or areas of the brain, giving relief from pain.

Who could put a price tag on the value of these human benefits? Even more dazzling opportunities lie ahead, if only we have the faith and courage to keep pushing on. Each technological breakthrough enables us to work from a newer, higher plateau of knowledge, and each breakthrough opens the door to a new leap in productivity considered impossible only a few decades ago.

The great untold story of the technological revolution is the awesome potential for productivity power. If we meet the challenge of building a manned space station, for example, we can manufacture in 1 month's time life-saving medicines that would take 30 years to manufacture on Earth. We can manufacture crystals of exceptional purity that could enable us to produce larger, faster computers, the super computers, and achieve even greater productivity gains throughout our economy.

My friends, we can create a bounty of new opportunities, technologies, and improvements in the quality of life surpassing anything we've ever before dreamed or imagined. Our vision is not an impossible dream; it's a waking dream. If we cultivate the art of seeing things impossible, if we challenge the limits of growth, we'll have the strength and knowledge to make America a rocket of hope shooting to the stars.

I believe we will be the leaders in space because the American people would rather reach for the stars than reach for excuses why we shouldn't. And as our technology transforms the great, black night of space into a bright new world of opportunities, we can use that knowledge to create an American opportunity society here at home. We can ensure that every person has not only an equal chance, but a much greater chance to pursue the American dream.

I promise you we'll do our part. We'll support high tech, not high taxes. We'll constantly endeavor to strengthen the private economy, to support tax credits for incremental research and development, strive to lessen concerns that cooperative R&D ventures between companies may violate antitrust statutes, and continue our strong commitment to support basic research and development, particularly in universities, to train tomorrow's industrial scientists and academic scientists and engineers, and build our nation's intellectual capital.

You know, the more we look at our changing world, the more we see that the problems and challenges we face are interrelated. The American opportunity society will blossom from the progress of a growth economy. That progress will hinge on our ability to push back the frontiers of science, technology, and space. Meeting those challenges depends on education. And our success in education will depend on what kind of people we have in our schools, what values we absorb and bring forward into the future with us. The world of learning and the world of work must not only come into better harmony, they must strengthen and enrich each other.

So, our vision of education must be as forward-looking as our vision of the rest of American life: a school system that teaches our children how to enrich their lives using telecommunications as educational tools; that shows them how to educate themselves so they will be able to keep their skills current in an ever-changing job market; and that gives them an appreciation of the arts and humanities that give life meaning.

The sense of our boundless potential and the spirit of excellence are rising again in America. In every State in the Union in the past 3 years, there has been a resurgence of interest in our schools and a resurgence of commitment to excellence. SAT scores are turning up again, and the back-to-basics movement has proved itself not old-fashioned, but indispensable to progress. We've come far in just a few years, but it isn't enough. We've got to do more and we will.

In the past few decades, many of us turned away from the enduring values, from faith, the work ethic, and the central importance of the family. We had something of a hedonistic heyday. But it's passing. We've righted ourselves, and across the country there's a rebirth of the traditional values that guided our fathers and mothers and guided our nation. We affirm this trend, not to return to some mythical past, but to build on proven strengths for a creative future.

There's another challenge for us to think about. In the history of our nation we've had problems with ill-spirited divisiveness -- one race thinking it was better than another, one generation thinking it was superior to another. We've had religious divisions. We've had our share of bigotry. We've had tensions between this class or this group and that. And one of the good changes of recent years is that we've outgrown a lot of that nonsense. But we must commit ourselves to doing better. We are and must remain a pluralistic society, but we're also one nation together. We're brothers and sisters equal in the eyes of God and equal under the law.

No one group in this country is better than another. No one race or religion or sex or color is better than another. And no region is better or worse than another. It's time we erased the last vestiges of intolerance, bigotry, and unkindness from our hearts. Decency demands this and so does our history.

There's a final challenge. It may seem remote from issues of regional economic development, but it's a most fundamental challenge, for if we ever failed to meet it, the value of our economic progress and our spiritual progress, too, would be lost. It's the challenge to maintain peace in the world, peace with our neighbors and our allies and our adversaries. I think you well know my feelings on this; they've been shared by most American Presidents down through our history. Simply stated: If we're strong, we will discourage those who would disrupt peace. If we maintain our strength, we will maintain peace, and there is no threat to the world in this.

America has always been a peaceable country. We've never loved war. We're the least warlike powerful nation in the history of the world. We can be trusted with the military power that is our responsibility to hold. We maintain it only for the good, never for territorial gain or imperialist desires. We work for peace by staying strong, so that we may be a nation at peace with ourselves and at peace with the world.

If we keep these things in mind, if we retain our economic strength, help our children, strengthen the bonds that keep us together, and work for peace, then the well will not run dry again. We will have replenished it -- and more. We'll move forward. The future will be bright and shining; our nation will continue to be what it's always been -- a place of refuge for those who come from places that are not free and not fair, a place of great hope and endless possibilities.

Winston Churchill surveyed the Western World, and he said, ``We have not journeyed all this way across the centuries, across the oceans, across the mountains, across the prairies, because we're made of sugar candy.'' Well, like many of you, I share his spirit. We can do anything when we set our minds to it.

The dream of America is much more than who we are or what we do; the dream is what we will be. We must always be the New World, the world of discovery, the world that reveres the great truths of its past but that pushes on with unending faith toward the promise of the future. In my heart, I know we have that faith. The dream lives on. America will remain future's child, the golden hope of all mankind.

Thank you for welcoming us here today. And thank you for all that you give us. And thank you for your courage to dream great dreams. God bless you all.

Mr. Thomas. As I indicated earlier, President Reagan has indicated that he'd be willing to take a few questions from our audience. We have collected your cards. Our committee has reviewed them and tried to distill the essence of them into a few succinct questions which I have. So, I'll ask the President to come back to the podium at this time, and I'll address those questions to him.

Mr. President, looking over the questions, this audience is very concerned about four things, I would say in this order -- the federal deficit, interest rates, our international competitive position, and the Chicago Cubs. Now, you've already dealt with the last one -- [laughter] -- so we'll get on with the others.

And the first one deals with our Midwest economy. We had an excellent panel discussion this morning, and I think we all would agree we have challenges and opportunities here. But one of our very significant problems in the Midwest is the very substantial net outflow of tax dollars to other, faster-growing regions of this country. Now, what might you suggest that we do to reverse this trend, if you have any thoughts on that particular subject?

The President. Federal tax dollars going -- --

Mr. Thomas. Federal tax dollars going from the Midwest to other parts of this country. Substantial net deficit -- or net outflow.

The President. Well, we have been trying a thing that we call federalism, and we've run into some of the same kind of opposition we've written on some of the -- or we've run into on some of the other things we tried. One of the things that we would like to see more of is block grants, where that's all that we can resort to, instead of the Federal Government dictating and spending the money.

It's true that there are, oh, probably someplace between a dozen and 20 States that are considered to be the rich ones, and they must help support the others. What we would like to do, even rather than block grants, and what we have not done as much of as we would like, and that is to wherever possible turn back to the States and local communities tax sources that presently are held by the Federal Government, and turn back with them the responsibility for functions that properly should be administered at State and local level that the Federal Government is not as well equipped to perform as they are.

And I think in this way there would be some help with what you're saying. I know it has to seem unfair when you're in one of those States. Recently, some years ago, when New York was having its great problems with bankruptcy, I thought at the time that it was pretty ironic that New York was considered way up at the top of the list as one of the States that could afford to help out the other States.

Mr. Thomas. Thank you. Next question: Given your position on personal income taxes, what do you propose to do to tackle the deficit?

The President. Well, I know that I'm accused of not being very specific on this. I think we've been more specific than almost any administration that I can remember, if you will look at the program that we started to implement when we first came here.

Now, what we're going to continue to do are two things in attacking the deficits. One of them is look at the deficit as being partly structural and partly the result of the economic slump. Now, as you bring back the economy and it expands, even at the lower tax rates that we put in as an incentive to help bring back the economy, your revenues grow. They don't shrink. So, we are reducing the deficit right now. The one for this year will probably be some 20-odd billion dollars less than we had estimated ourselves that it was going to be, simply because of the economic recovery. That is one thing.

The other thing is reducing government spending. I still think that a federal government has a higher overhead than is necessary. We haven't made all the gains that we wanted. As a matter of fact, had we gotten all that we asked for in our first submission of our program, the deficit would be between $40 billion and $50 billion less right now.

But we see the deficit as one in which, as the economy improves -- and that brings up revenues without increasing the actual rates on the individual -- and if, at the same time, we can continue -- we have 2,478 specific recommendations by the Grace commission, where they came in and looked at all of government and made recommendations, as businessmen and women, as to where government could be run more like a productive business -- we have a team looking at those. We have already implemented by administrative decree some 17 percent of those.

Now, as we bring government costs down, the share that government is taking from the private sector, and as the recovery brings income up, there must be a point out here at which those two will meet. Now, if they don't -- and this is what I mean by those today who are saying that the first resort is increased taxes. We say it is the last resort. If you come to a point where you've done all you can do with regard to economic recovery, and the revenues fall short of that line, and you've done all you can do to bring government down to be as efficient and economical as it should be and still perform the services that we can expect of government and those two are apart, then you have to look at your tax system to bridge that difference.

But today, to suggest a tax increase simply for the cure of the deficit -- we've had any number of tax increases over the last 50 years, and we have had regularly deficits every year for 50 years, every year since World War II. Well, we had them during the war, but that's the kind of deficit we could expect, and then you'd pay off in the years following the war. But in the 5 years before we came here to office, the taxes doubled in those 5 years and the deficits increased.

The deficit we have to face is an effect, not a cause. The cause is when government takes too big a percentage from the private sector, you're going to have economic troubles. Government is going to become a drag on the economy. And this is what we're trying to cure.

Mr. Thomas. Thank you, Mr. President. Next question: What changes do you foresee in the administration's stance with respect to protectionism if reelected? Specifically, do you favor import restrictions to help our steel industry, keeping in mind on the one hand that imports account for about 25 or 30 percent of total usage in this country while, on the other hand, our midwestern manufacturers must be able to buy steel at world prices in order to be competitive. It's an easy question, sir. [Laughter]

The President. Well, it isn't easy. We do know that sometimes -- and our law provides for this -- that sometimes there are emergency situations in which an industry has suffered unfairly, and temporarily you can give that industry some help to get it back on its feet.

Basically, however, I think we have to be opposed in principle to protectionism because it's a two-way street. Having looked for my first job in the depths of the Great Depression -- graduating in 1932 -- I, looking back, have some idea of what the Smoot-Hawley tariff bill did to the Depression worldwide. And I think that free trade is the best answer. But free trade must also be fair trade. And what you have recited there is that many times the protectionism can help heal a particular segment, but no one pays any attention to the disaster or the depression that is created over here in other areas.

And this is true in some places where fabricators find themselves at odds with the mineral producers. Now we're studying this very carefully, because it is true, free trade must be fair trade. And it is true that in some instances the competition is unfair, that things like steel had been sent into this country that are subsidized by a foreign government and are selling below their cost of production, which our people can't do. And there we have rules and have invoked them in these 3\1/2\ years at times to prevent that. And we'll continue to do that.

Mr. Thomas. Next question: Is there a real possibility that the line-item veto that you mentioned in your address will be approved in your next term?

The President. Oh, we're going to fight hard for that, and we need all your help and support.

I said yesterday out in Salt Lake City, we need, in Washington, your input to some of the people there who balk at some of these progressive measures. It isn't necessary to make them see the light, you must make them feel the heat. [Laughter]

I'm going to look down here at the end where Jim is.

Jim, do you have line-item veto?

Governor Thompson. Yes, sir.

The President. See? Forty-three States. I had it as Governor of California, and I inherited a situation out there where, in spite of a constitutional provision that we could not have a deficit, I walked into office in the middle of the fiscal year and we already had a deficit.

The line-item veto -- I invoked it more than 900 times in those 8 years, and we didn't have an unbalanced budget very long. We solved that problem. It's absolutely necessary; it's the most vital tool.

Now, the Congress has the right to overcome that veto, to override it, if they feel strongly enough to do it. You know, in all of my more than 900 vetoes, the legislature that had passed the bills to begin with never once overrode one of those vetoes. They never once dared stand up and publicly vote for that single item that they had agreed to put into another bill.

So, please write letters, send wires, twist arms. We need the line-item veto, and we're going to try for it, all out.

Mr. Thomas. We have one last question. This is a little different thrust, but very important, nevertheless. Affirmative action and job training have been of great assistance to minorities. Since your administration has reduced the impact of these programs, what do you propose to do to replace them?

The President. What we are opposed to is not affirmative action so much as a quota system. And having grown up, as I did, in a time when there were prejudices of all kinds, you find that the quota can be used, actually, as an instrument of discrimination, not to cure it. We have in place today throughout the country a job training program that we believe encompasses the proper ideas, and that is that as a team between the Federal Government, local authorities, and local businesses to train people in those areas for the jobs that are available in those areas.

The Federal Government in the past, with many of its job training programs, they really were just make-work programs. They didn't train anyone, really, for a specific job, and there was no relationship between the area where the training was taking place and the residence of the people and whether there were jobs once they were trained, that there would be jobs in those areas. Now, this program of ours -- incidentally, the CETA program, only about 18 cents out of each dollar actually went into job training in that program. That's why we don't have it anymore. In this program, over 70 cents of every dollar is being spent on actual job training, and already we're seeing tens of thousands of people going through that program and almost immediately out into productive jobs.

Now, I know that there's been a lot of criticism that somehow I am opposed to civil rights. My mother and father would come back and jump on my back if I ever did. I was raised to believe that there's no sin greater than prejudice or bigotry. And I grew up that way. In fact, back in those days, broadcasting the Cubs and all, I was one of the handful of sports commentators throughout the country that was even then campaigning for an elimination of the rules that had kept minorities out of organized baseball, and, finally, there was triumph in that.

I was fighting for civil rights before they called it civil rights. And so any translation of this criticism of the management of some of the affirmative action programs in an attempt to make that look as if I'm not supportive of the elimination -- the goal in this country must be, and we haven't completely reached it yet, but it must be the day will come when whatever is done to someone, or for someone, is neither because of nor in spite of any difference in race or religion.

Mr. Thomas. I was given the signal that that was the last one.

The President. Thank you all very much. They tell me that I have to leave now; I'm due back in Washington. There's a Senator down there that knows that's because today the Congress is coming back, and I can't leave them there by themselves. [Laughter]

So, thank you all. This has been a great pleasure.

Note: The President spoke at 9:39 a.m. in the Grand Ballroom of the Hyatt Regency Hotel. He was introduced by Richard Thomas, president of the Economic Club of Chicago, the sponsor of the conference.

Earlier in the day, the President met at the hotel with local Republican leaders. Following his remarks, the President returned to Washington, DC.