Part 5

The time has now come for a fundamentally different approach for a new realism that is true to the great principles upon which this Nation was founded.

We must introduce a new balance to our economy--a balance that favors not only sound, active government but also a much more vigorous, healthy economy that can create new jobs and hold down prices.

We must introduce a new balance in the relationship between the individual and the government--a balance that favors greater individual freedom and self-reliance.

We must strike a new balance in our system of federalism--a balance that favors greater responsibility and freedom for the leaders of our State and local governments.

We must introduce a new balance between the spending on domestic programs and spending on defense--a balance that ensures we will fully meet our obligation to the needy while also protecting our security in a world that is still hostile to freedom.

And in all that we do, we must be more honest with the American people, promising them no more than we can deliver and delivering all that we promise.

The genius of America has been its incredible ability to improve the lives of its citizens through a unique combination of governmental and free citizen activity.

History and experience tells us that moral progress cannot come in comfortable and in complacent times, but out of trial and out of confusion. Tom Paine aroused the troubled Americans of 1776 to stand up to the times that try men's souls because the harder the conflict, the more glorious the triumph.

Just a year ago I reported that the state of the Union was not good. Tonight, I report that the state of our Union is better--in many ways a lot better--but still not good enough.

To paraphrase Tom Paine, 1975 was not a year for summer soldiers and sunshine patriots. It was a year of fears and alarms and of dire forecasts--most of which never happened and won't happen.

As you recall, the year 1975 opened with rancor and with bitterness. Political misdeeds of the past had neither been forgotten nor forgiven. The longest, most divisive war in our history was winding toward an unhappy conclusion. Many feared that the end of that foreign war of men and machines meant the beginning of a domestic war of recrimination and reprisal. Friends and adversaries abroad were asking whether America had lost its nerve. Finally, our economy was ravaged by inflation--inflation that was plunging us into the worst recession in four decades. At the same time, Americans became increasingly alienated from big institutions. They were steadily losing confidence, not just in big government but in big business, big labor, and big education, among others. Ours was a troubled land.

And so, 1975 was a year of hard decisions, difficult compromises, and a new realism that taught us something important about America. It brought back a needed measure of common sense, steadfastness, and self-discipline.

Americans did not panic or demand instant but useless cures. In all sectors, people met their difficult problems with the restraint and with responsibility worthy of their great heritage.

Add up the separate pieces of progress in 1975, subtract the setbacks, and the sum total shows that we are not only headed in a new direction, a direction which I proposed 12 months ago, but it turned out to be the right direction.

It is the right direction because it follows the truly revolutionary American concept of 1776, which holds that in a free society the making of public policy and successful problem-solving involves much more than government. It involves a full partnership among all branches and all levels of government, private institutions, and individual citizens.

Common sense tells me to stick to that steady course.

Take the state of our economy. Last January, most things were rapidly getting worse. This January, most things are slowly but surely getting better.

The worst recession since World War II turned around in April. The best cost-of-living news of the past year is that double-digit inflation of 12 percent or higher was cut almost in half. The worst--unemployment remains far too high.

Today, nearly 1,700,000 more Americans are working than at the bottom of the recession. At year's end, people were again being hired much faster than they were being laid off.

Yet, let's be honest. Many Americans have not yet felt these changes in their daily lives. They still see prices going up far too fast, and they still know the fear of unemployment.

We are also a growing nation. We need more and more jobs every year. Today's economy has produced over 85 million jobs for Americans, but we need a lot more jobs, especially for the young.

My first objective is to have sound economic growth without inflation.

We all know from recent experience what runaway inflation does to ruin every other worthy purpose. We are slowing it. We must stop it cold.

For many Americans, the way to a healthy, noninflationary economy has become increasingly apparent. The Government must stop spending so much and stop borrowing so much of our money. More money must remain in private hands where it will do the most good. To hold down the cost of living, we must hold down the cost of government.

In the past decade, the Federal budget has been growing at an average rate of over 10 percent a year. The budget I am submitting Wednesday cuts this rate of growth in half. I have kept my promise to submit a budget for the next fiscal year of $395 billion. In fact, it is $394.2 billion.

By holding down the growth of Federal spending, we can afford additional tax cuts and return to the people who pay taxes more decisionmaking power over their own lives.

Last month I signed legislation to extend the 1975 tax reductions for the first 6 months of this year. I now propose that effective July 1, 1976, we give our taxpayers a tax cut of approximately $10 billion more than Congress agreed to in December.

My broader tax reduction would mean that for a family of four making $15,000 a year, there will be $227 more in take-home pay annually. Hardworking Americans caught in the middle can really use that kind of extra cash.