When I was Governor of California, I especially enjoyed the camaraderie of other Governors. And I've changed jobs since those days, yet I still feel that as chief executives there is a special bond between us.

In the early days of the Republic, those holding our jobs weren't so certain of what our relationship should be. They knew that every decision they made would set precedents, especially concerning the sovereignty of State government in relation to the Federal Government. And Frank Chodorov, a man of liberating insight, wrote of the time when George Washington was to make his first visit as President to Massachusetts. And according to Chodorov, Governor Hancock of Massachusetts was beside himself over a matter of protocol. Would it be proper to meet President Washington on his arrival? Or would it be more appropriate for the President to call at the State capitol? What Hancock did, he thought, might be taken as an acknowledgment of the supremacy of the Federal Government or simply as a matter of courtesy.

It was a difficult decision, and finally the day of Washington's arrival was at hand. And Hancock boldly made the decision: He pleaded illness. [Laughter] Wouldn't it be nice if feigning illness would substitute for making some of the hard decisions that we face?

Today, of course, that's not an alternative. The challenges before us, especially concerning tax simplification and spending restraint, will require great courage and effort and extraordinary cooperation between us. I hope that I can count on you to continue to work with me in a spirit of good will in the months ahead. I've sought and appreciated your advice and will continue to do so.

The Federal-State relationship should strive to maximize the benefits of limited resources, to eliminate waste, to further reduce the Federal regulatory burden, and to preserve the strength and vitality of our nation's economy. A vigorous and expanding economy must be priority number one. As Governors you know that better than most. Low inflation and high growth have cut your costs and increased your tax base. No Federal program is more important to the viability of State government than economic expansion.

Today the people no longer look to Washington as an Emerald City with magic solutions to every problem. I've been here going on 5 years now, and I can tell you it's more like the Twilight Zone than the Land of Oz. [Laughter] But this new view of the Federal Government, a more realistic understanding of its limitations as well as its potentials, has been a great boon to our country.

Now, all over America we hear stories of the success of innovative and creative State and local enterprises. Only a few years ago people were waiting for the Federal Government to act. Well, today they're taking the initiative, taking the future in their hands, and in doing so, accomplishing things that would never have happened if encumbered by Federal redtape and another layer of bureaucratic entanglement.

We in this room, as chief executives, are lucky to be holding office during a period of great change. It's a difficult time, and what we do will lay the foundation for a better future. Let us not be afraid to make these historic decisions -- consulting openly and honestly, one with another.

All of us seek the same goal: America, as our God and our forefathers intended her to be, a land of limited government and unlimited opportunity, a land of prosperity and freedom. And you know -- just to convince you that I do understand, having been there where you presently are -- I remember once as Governor, shortly after I'd taken office, and on the way to the office -- and the problems seemed to be multiplying as the days went by -- and then, on the way in, the car radio was on. And I heard a disc jockey in Sacramento, who became my instant hero, because, for whatever reason he said it -- I don't know -- but all of a sudden between records, he said: ``Every man should take unto himself a wife, because sooner or later something is bound to happen that you can't blame on the Governor.'' [Laughter]

So, I offer you a toast: To the Governors of the sovereign States of this federation of United States.

Thank you.

Note: The President spoke at 9:30 p.m. in the State Dining Room at the White House.