Ladies and gentlemen of the United States Chamber of Commerce, it's an honor to join you for your annual meeting. No organization has done more to foster the spirit of enterprise in America. And you have my heartfelt thanks for your support as our administration has worked to push back government and restore to our country its rightful economic freedom and vigor.

Van Smith, as chairman you deserve a particular note of thanks. It's been hard work, I know, but your time and skill have been deeply appreciated.

There's another person here today who gives this annual meeting special meaning, and this is the 10th anniversary of his leadership. And in that time, I know, he's transformed this organization into not just a dynamic voice in America but one of the premier voices for economic freedom throughout the world. He and the chamber's board of directors have brought about a revolutionary change in the effectiveness of the federation. So, Dick Lesher, president of the U.S. Chamber, would you mind standing up so I can personally -- -- [applause]. Congratulations. Congratulations, and I'm glad now that all of us had a chance to salute you.

Now, I know that you're all too busy to get in the game of golf. But that was just a sneaky way of indicating that I got a little story about golf I'd like to tell you. [Laughter]

Seems there was a fellow who had a little trouble connecting with the ball. And on one tee, he happened to put the ball next to an anthill. And when he took his first swing, he missed the ball and hit the anthill -- sent a few hundred of them into orbit. Then he took a second swing, and again he missed and hit the anthill. As he wound up for a third try, one ant said to the other: ``You know, it's about time we got on the ball.'' [Laughter]

And that was just a sneaky way for me to say that it's time we got on the ball -- as I said in my address to the Nation on Wednesday night -- got on the ball with regard to the budget. And permit me to say a few words about the budget to you now.

We came to office in 1981. With your assistance, we took the first steps in decades to restrain the growth and the power of government and to bring to an end its encroachment on American enterprise. We cut the growth of spending and regulations, supported a sound monetary policy, put in place new incentives for business investment, and enacted a personal income tax rate cut of nearly 25 percent.

Our reasoning on the tax cut was simple. Throughout the seventies, effective tax rates had risen relentlessly, eroding economic incentives, and thereby driving millions to choose leisure over work, conformity over innovation, and immediate gratification over saving and investment. The impact of inflation on outdated depreciation schedules, meanwhile, was undermining capital investment. We believed that a tax cut would reverse the process, producing wide and lasting economic growth.

At the time, you'll remember, our policies were received with something less than universal acclaim. In October 1982 John Kenneth Galbraith stated, ``We have . . . an unprecedented experiment in economic policy, and it has failed.''

Well, Mr. Galbraith was correct that it was an experiment. He simply should have waited for the results. As of this April, the economy has been growing for 29 straight months. The recovery of business investment has been the strongest in 35 years. Productivity has risen, bringing to an end the stagnation that characterized the ending of the last decade. Inflation is at the lowest rate in almost two decades, and the economy has been creating new jobs at the rate of nearly 300,000 each month.

My friends, forgive me, but I still believe that with all of us pitching in together, you ain't seen nothin' yet. And you know, I said this before, but I'm going to repeat it, I was certain our program was working when they stopped calling it Reaganomics. [Laughter]

As for government revenues -- despite the impression that many have to the contrary -- they're actually on the rise. In 1984 Federal receipts increased 11 percent -- a healthy gain of 7 percent even after accounting for inflation. This fiscal year that remarkable pace is being sustained.

The effects of our tax cut are now, by now, unmistakable. The American people have rising incomes and new opportunities. Business is growing, and government is actually watching its revenues rise.

John Kenneth Galbraith, where art thou now? [Laughter]

Our tax cut program has worked so well that next month I will unveil our plan to go farther. This plan will simplify the tax code, broaden the tax base, and cut both personal and corporate tax rates. And by adding to tax incentives, or the incentives our first tax cuts provided, the new plan could widen the economic expansion.

When I announce our new proposal next month, I hope you'll study it carefully; judge it in its entirety; ask whether it will make our economy as a whole still stronger, our tax code fairer, and whether it will provide new incentives that will foster economic growth in which all of us can share. My friends, I can assure you the answer will be yes.

The promise of our economic future is great, and the achievements of recent years have been historic. But both have been cast in shadow by a problem that could wipe them out -- the Federal deficit. It's important to be clear about the source of the deficit. It has not arisen as a result of the tax cut. On the contrary, as I have said, government revenues are actually on the rise. The deficit problem is a problem of spending -- spending without direction or discipline, spending that in the past 20 years has burgeoned absolutely out of control. In 1966 Great Society programs cost $16 billion; by 1975 that figure had risen to $78 billion; by 1981 to a staggering $148 billion.

Now, this cannot go on. We must reduce the deficit, and do so at once. According to some, there are four options for doing so.

Option one is a tax increase. This would squander our progress by placing a new damper on economic activity. Over time, it might even increase the deficit by cutting government revenues. My friends, I have a feeling you and I agree about the next sentence I'm about to speak. A tax increase, any tax increase, is out. Matter of fact, the only way they'll pass a tax increase is over my dead body. [Laughter] Not that I want of give my opponents any ideas. [Laughter]

Option two is to make radical cuts in defense spending. In consultation with the Senate leadership, we have agreed to cut our proposed increase in defense spending down to 3 percent. But we've concluded that it be cut no further. The military might of the Soviets is growing. We simply cannot afford to break off our program to modernize our forces, and we dare not place in jeopardy weapons systems that are central to American security. Keeping our country secure is government's first job, and as long as I'm President, I intend to see that job gets done.

Option three is to shrink the safety net for the needy. Yet it's the duty of the government to care for those in genuine need. In 1981, moreover, programs that provide income, food, housing, medical aid were reformed and are now targeted only at those who need them. Shrinking the safety net is out.

And that brings us to option four: cuts in a vast number of subsidies and entitlements that are out of date, serve only special interest groups, result from bureaucratic attempts at redistribution and social engineering or give funds to those who do not need them.

As George Bush told you, it's here that the Senate leadership and our administration decided we must concentrate our cuts. In brief, we went after the fat. As I mentioned on television last Wednesday night, our taxpayers' protection plan will reduce deficits by $300 billion over 3 years and bring us within reach of a balanced budget by 1990. It asks fundamental questions and acts on the conclusions.

Is it fair to force all taxpayers to subsidize the travel of a few? Of course not. So, our plan will cut Federal subsidies to Amtrak, which at present costs taxpayers $35 per passenger every time a train leaves the station.

I know this might strike a little close to home, but is it fair to force small businesses to subsidize their competitors or to force taxpayers to subsidize our biggest corporations? No, it is not. So, our plan will deal with both those inequities.

The need for our plan is obvious, but you can count on it to run into stiff opposition. It cuts across an array of special interests. It'll cause many to make difficult adjustments by paring back middle class entitlements and curtailing subsidies to business.

Indeed, many of you may find that the rollback in business subsidies will affect the enterprises that you lead, and yet we're calling for sacrifices at a time when they can be most easily borne. As I said earlier, the economy is healthy and growing. When we put our plan into effect, it is certain to grow still stronger.

While Churchill may have had nothing to offer but blood, sweat, toil, and tears, what we have to offer is, in a word, prosperity. But I need your help to knock some sense into the spenders. Can I count on you? [Applause]

Thank you. You've made my day. To put our plan into effect, we'll have to let the opposition know that the American people have had enough. The budget this year is more than a matter of balance sheets; it'll decide whether spending will make us all government servants or whether the American people can once again master the governmental process. In a fundamental sense, what is at stake is nothing less than our democracy itself.

Now, I know the chamber has already been hard at work getting out the word, and I thank you from the bottom of my heart. By the way, I'm a little surprised that Dick Lesher was able to get off the phone long enough to be here. Dick, when this is over, you can make up for it by skipping lunch. [Laughter]

This week will prove crucial. Critical votes will take place in the Senate, and there'll be long days and late nights. It so happens that while all this is taking place, I will be away in Europe.

Now, Dick and ladies and gentlemen, would you please hold a few feet to the fire for me? And like the Gipper said: Whereever I am, I'll know about it, and I'll be happy. [Laughter]

It's been a pleasure to join you this morning to talk about the budget and, in a wider sense, the cause that unites us -- economic growth. Growth is what we have already fostered. Growth is what we continue to seek, and growth, I'm confident to say, is what together we shall achieve.

Thank you. God bless you all.

Note: The President spoke at 11:27 a.m. at DAR Constitution Hall.