This week the Congress adjourned for the holidays, and today I'd like you to join me in considering the main legislative achievements of 1985. There were many, including the passage of a vital farm bill, but I'd like to draw your attention to three of truly historic importance.

None is of greater significance than the passage 4 days ago in the House of a tax reform bill, a bill which calls for the most sweeping overhaul of the income tax system in more than 40 years. The House bill is broadly based upon the proposal first put forward by our administration. It includes sharp cuts in both personal and corporate income tax rates, a large increase in the standard deduction, and an enlargement of the personal exemption. To help the needy, the bill would remove some 6 million low-income workers from the income tax rolls altogether. It's clear that in working on this bill, the House took to heart what I said in my speeches and you said in your thousands of letters and telegrams: It's time to promote economic growth and give the family a break. Historic as it is, the House bill, unfortunately, contains serious flaws; these the Senate must deal with when the Congress returns to Washington early in 1986. I know you join me in looking to the Senate to perform its work quickly and to make absolutely certain that the final bill is unequivocally profamily, projobs, and profuture.

The passage of the Gramm-Rudman-Hollings amendment, a measure to bring Federal spending under control once and for all, represented a second historic achievement. This legislation mandates steady decreases in the Federal budget deficit every year for 5 years, with the result that in 1991 the Federal Government will have a balanced budget at last. All my political life I've urged the Government to stop spending more than it takes in. So, it was with great pleasure that I signed this measure into law just 9 days ago. It's my hope that history will record that day as the moment when the relentless expansion of the Government was finally brought to a halt. But although Gramm-Rudman-Hollings tells us that we must cut the deficit, it does not altogether tell us how to do so. And that means we still have our work cut out for us.

Will we fund wasteful, pork barrel programs at the expense of our national defense? Will we kill off our prosperity with a tax increase? No matter how intense the political pressures become, the answer to both of these questions must and will remain an unmistakable no. Defense spending must depend not upon this or that guideline, but one consideration alone: the size of the threat with which our adversaries confront us. To sacrifice our defenses in order to balance the budget would be to abdicate the paramount duty of the Government to the people.

As for a tax hike, the lesson is clear: When government raises taxes, incentives for achievement are undermined and economic growth is stifled. My friends, we simply cannot allow that to happen again. I want you to know that my veto pen is inked up and ready to go. I'm just waiting for the first tax hike that has the temerity to come across my desk. We intend to meet the Gramm-Rudman-Hollings requirements in the only proper way -- by seeing to it that government fulfills its few and legitimate functions more efficiently at the same time that we eliminate government waste.

The final legislative achievement I want to mention concerns foreign affairs. It involves the emergence in the Congress of a new mood, a new point of view. During this past year, the Congress repudiated isolationism and weakness and reasserted America's legitimate world role on behalf of human freedom. Indeed, in July, Congress voted aid to freedom fighters in Cambodia, Afghanistan, and Nicaragua and repealed a ban on aid to the freedom fighters in Angola. This effort marked the appearance of a sober-minded realism, a new willingness to see clearly and to confront the dread effects of Communist expansion upon innocent peoples like those of Afghanistan and Nicaragua. And it's especially significant that aid to freedom fighters was also approved by the Democrat-controlled House. I'm convinced that a new, bipartisan foreign policy consensus is emerging, one based upon realism and which unites Democrats and Republicans alike in support of a strong national defense and help for freedom fighters around the globe.

As so many of us prepare to celebrate Christmas, we can take comfort in the knowledge that, although we must continue our efforts to improve it, the legislative process established by the Founding Fathers is still working. Yes, as 1985 draws to a close, we Americans can take stock of our nation with pride: inflation is down, jobs are up, our country is at peace, and the American spirit is proud and bright.

From the Reagan family to your family, Merry Christmas. And until next week, thanks for listening, and God bless you.

Note: The President spoke at 12:06 p.m. from Camp David, MD.