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President[ Jimmy Carter

         Date[ January 16, 1981

To the Congress of the United States:

The State of the Union is sound. Our economy is recovering from a

recession. A national energy plan is in place and our dependence on foreign

oil is decreasing. We have been at peace for four uninterrupted years.

But, our Nation has serious problems. Inflation and unemployment are

unacceptably high. The world oil market is increasingly tight. There are

trouble spots throughout the world, and 52 American hostages are being held

in Iran against international law and against every precept of human

affairs.

However, I firmly believe that, as a result of the progress made in so many

domestic and international areas over the past four years, our Nation is

stronger, wealthier, more compassionate and freer than it was four years

ago. I am proud of that fact. And I believe the Congress should be proud as

well, for so much of what has been accomplished over the past four years

has been due to the hard work, insights and cooperation of Congress. I

applaud the Congress for its efforts and its achievements.

In this State of the Union Message I want to recount the achievements and

progress of the last four years and to offer recommendations to the

Congress for this year. While my term as President will end before the 97th

Congress begins its work in earnest, I hope that my recommendations will

serve as a guide for the direction this country should take so we build on

the record of the past four years.

RECORD OF PROGRESS

When I took office, our Nation faced a number of serious domestic and

international problems:

--no national energy policy existed, and our dependence on foreign oil was

rapidly increasing;

--public trust in the integrity and openness of the government was low;

--the Federal government was operating inefficiently in administering

essential programs and policies;

--major social problems were being ignored or poorly addressed by the

Federal government;

--our defense posture was declining as a result of a defense budget which

was continuously shrinking in real terms;

--the strength of the NATO Alliance needed to be bolstered;

--tensions between Israel and Egypt threatened another Middle East war;

and

--America's resolve to oppose human rights violations was under serious

question.

Over the past 48 months, clear progress has been made in solving the

challenges we found in January of 1977:

--almost all of our comprehensive energy program have been enacted, and the

Department of Energy has been established to administer the program;

confidence in the government's integrity has been restored, and respect for

the government's openness and fairness has been renewed;

--the government has been made more effective and efficient: the Civil

Service system was completely reformed for the first time this century;

--14 reorganization initiatives have been proposed to the Congress,

approved, and implemented;

--two new Cabinet departments have been created to consolidate and

streamline the government's handling of energy and education problems;

--inspectors general have been placed in each Cabinet department to combat

fraud, waste and other abuses;

--the regulatory process has been reformed through creation of the

Regulatory Council, implementation of Executive Order 12044 and its

requirement for cost-impact analyses, elimination of unnecessary

regulation, and passage of the Regulatory Flexibility Act;

--procedures have been established to assure citizen participation in

government;

--and the airline, trucking, rail and communications industries are being

deregulated;

--critical social problems, many long ignored by the Federal government,

have been addressed directly;

--an urban policy was developed and implemented to reverse the decline

in our urban areas;

--the Social Security System was refinanced to put it on a sound financial

basis;

--the Humphrey-Hawkins Full Employment Act was enacted;

--Federal assistance for education was expanded by more than 75 percent;

--the minimum wage was increased to levels needed to ease the effects of

inflation;

--affirmative action has been pursued aggressively; more blacks, Hispanics

and women have been appointed to senior government positions and to

judgeships than at any other time in our history;

--the ERA ratification deadline was extended to aid the ratification effort;

--and minority business procurement by the Federal government has more than

doubled;

--the Nation's first sectoral policies were put in place, for the auto and

steel industries, with my Administration demonstrating the value of

cooperation between the government, business and labor;

--reversing previous trends, real defense spending has increased every year

since 1977;

--the real increase in FY 1980 defense spending is well above 3 percent

and I expect FY 1981 defense spending to be even higher;

--looking ahead, the defense program I am proposing is premised on a real

increase in defense spending over the next five years of 20 percent or

more;

--the NATO Alliance has proven its unity in responding to the situations in

Eastern Europe and Southwest Asia and in agreeing on the issues to be

addressed in the review of the Helsinki Final Act currently underway in

Madrid;

--the peace process in the Middle East established at Camp David and by the

Peace Treaty between Egypt and Israel is being buttressed on two fronts:

steady progress in the normalization of Egyptian-Israeli relations in many

fields, and the commitment of both Egypt and Israel, with United States'

assistance, to see through to successful conclusion the autonomy

negotiations for the West Bank and Gaza;

--the Panama Canal Treaties have been put into effect, which has helped to

improve relations with Latin America;

--we have continued this Nation's strong commitment to the pursuit of human

rights throughout the world, evenhandedly and objectively;

--our commitment to a worldwide human rights policy has remained firm;

--and many other countries have given high priority to it;

--our resolve to oppose aggression, such as the illegal invasion of the

Soviet Union into Afghanistan, has been supported by tough action.

I. ENSURING ECONOMIC STRENGTH ECONOMY

During the last decade our Nation has withstood a series of economic shocks

unprecedented in peacetime. The most dramatic of these has been the

explosive increases of OPEC oil prices. But we have also faced world

commodity shortages, natural disasters, agricultural shortages and major

challenges to world peace and security. Our ability to deal with these

shocks has been impaired because of a decrease in the growth of

productivity and the persistence of underlying inflationary forces built up

over the past 15 years.

Nevertheless, the economy has proved to be remarkably resilient. Real

output has grown at an average rate of 3 percent per year since I took

office, and employment has grown by 10 percent. We have added about 8

million productive private sector jobs to the economy. However,

unacceptably high inflation--the most difficult economic problem I have

faced--persists.

This inflation--which threatens the growth, productivity, and stability of

our economy--requires that we restrain the growth of the budget to the

maximum extent consistent with national security and human compassion. I

have done so in my earlier budgets, and in my FY '82 budget. However, while

restraint is essential to any appropriate economic policy, high inflation

cannot be attributed solely to government spending. The growth in budget

outlays has been more the result of economic factors than the cause of

them.

We are now in the early stages of economic recovery following a short

recession. Typically, a post-recessionary period has been marked by

vigorous economic growth aided by anti-recessionary policy measures such as

large tax cuts or big, stimulation spending programs. I have declined to

recommend such actions to stimulate economic activity, because the

persistent inflationary pressures that beset our economy today dictate a

restrained fiscal policy.

Accordingly, I am asking the Congress to postpone until January 1, 1982,

the personal tax reductions I had earlier proposed to take effect on

January 1 of this year.

However, my 1982 budget proposes significant tax changes to increase the

sources of financing for business investment. While emphasizing the need

for continued fiscal restraint, this budget takes the first major step in a

long-term tax reduction program designed to increase capital formation. The

failure of our Nation's capital stock to grow at a rate that keeps pace

with its labor force has clearly been one cause of our productivity

slowdown. Higher investment rates are also critically needed to meet our

Nation's energy needs, and to replace energy-inefficient plants and

equipment with new energy-saving physical plants. The level of investment

that is called for will not occur in the absence of policies to encourage

it.

Therefore, my budget proposes a major liberalization of tax allowances for

depreciation, as well as simplified depreciation accounting, increasing the

allowable rates by about 40 percent. I am also proposing improvements in

the investment tax credit, making it refundable, to meet the investment

needs of firms with no current earnings.

These two proposals, along with carefully-phased tax reductions for

individuals, will improve both economic efficiency and tax equity. I urge

the Congress to enact legislation along the lines and timetable I have

proposed.

THE 1982 BUDGET

The FY 1982 budget I have sent to the Congress continues our four-year

policy of prudence and restraint. While the budget deficits during my term

are higher than I would have liked, their size is determined for the most

part by economic conditions. And in spite of these conditions, the relative

size of the deficit continues to decline. In 1976, before I took office,

the budget deficit equalled 4 percent of gross national product. It had

been cut to 2.3 percent in the 1980 fiscal year just ended. My 1982 budget

contains a deficit estimated to be less than 1 percent of our gross

national product.

The rate of growth in Federal spending has been held to a minimum.

Nevertheless, outlays are still rising more rapidly than many had

anticipated, the result of many powerful forces in our society:

We face a threat to our security, as events in Afghanistan, the Middle

East, and Eastern Europe make clear. We have a steadily aging population

and, as a result, the biggest single increase in the Federal budget is the

rising cost of retirement programs, particularly social security. We face

other important domestic needs: to continue responsibility for the

disadvantaged; to provide the capital needed by our cities and our

transportation systems; to protect our environment; to revitalize American

industry; and to increase the export of American goods and services so

essential to the creation of jobs and a trade surplus.

Yet the Federal Government itself may not always be the proper source of

such assistance. For example, it must not usurp functions if they can be

more appropriately decided upon, managed, and financed by the private

sector or by State and local governments. My Administration has always

sought to consider the proper focus of responsibility for the most

efficient resolution of problems.

We have also recognized the need to simplify the system of grants to State

and local governments. I have again proposed several grant consolidations

in the 1982 budget, including a new proposal that would consolidate several

highway programs.

The pressures for growth in Federal use of national resources are great. My

Administration has initiated many new approaches to cope with these

pressures. We started a multi-year budget system, and we began a system for

controlling Federal credit programs. Yet in spite of increasing needs to

limit spending growth, we have consistently adhered to these strong budget

principles:

Our Nation's armed forces must always stand sufficiently strong to deter

aggression and to assure our security. An effective national energy plan is

essential to increase domestic production of oil and gas, to encourage

conservation of our scarce energy resources, to stimulate conversion to

more abundant fuels, and to reduce our trade deficit. The essential human

needs for our citizens must be given the highest priority. The Federal

Government must lead the way in investment in the Nation's technological

future. The Federal Government has an obligation to nurture and protect our

environment--the common resource, birthright, and sustenance of the

American people.

My 1982 budget continues to support these principles. It also proposes

responsible tax reductions to encourage a more productive economy, and

adequate funding of our highest priority programs within an overall policy

of constraint.

Fiscal restraint must be continued in the years ahead. Budgets must be

tight enough to convince those who set wages and prices that the Federal

Government is serious about fighting inflation but not so tight as to choke

off all growth.

Careful budget policy should be supplemented by other measures designed to

reduce inflation at lower cost in lost output and employment. These other

steps include measures to increase investment--such as the tax proposals

included in my 1982 budget--and measures to increase competition and

productivity in our economy. Voluntary incomes policies can also directly

influence wages and prices in the direction of moderation and thereby bring

inflation down faster and at lower cost to the economy. Through a tax-based

incomes policy (TIP) we could provide tax incentives for firms and workers

to moderate their wage and price increases. In the coming years, control of

Federal expenditures can make possible periodic tax reductions. The

Congress should therefore begin now to evaluate the potentialities of a TIP

program so that when the next round of tax reductions is appropriate a TIP

program will be seriously considered.

EMPLOYMENT

During the last four years we have given top priority to meeting the needs

of workers and providing additional job opportunities to those who seek

work. Since the end of 1976:

Almost 9 million new jobs have been added to the nation's economy total

employment has reached 97 million. More jobs than ever before are held by

women, minorities and young people. Employment over the past four years has

increased by: 17% for adult women 11% for blacks, and 30% for Hispanics

employment of black teenagers increased by more than 5%, reversing the

decline that occurred in the previous eight years.

Major initiatives launched by this Administration helped bring about these

accomplishments and have provided a solid foundation for employment and

training policy in the 1980's. In 1977, as part of the comprehensive

economic stimulus program:

425,000 public service jobs were created A $1 billion youth employment

initiative funded 200,000 jobs the doubling of the Job Corps to 44,000

slots began and 1 million summer youth jobs were approved--a 25 percent

increase.

In 1978:

The Humphrey-Hawkins Full Employment Act became law the $400 million

Private Sector Initiatives Program was begun a targeted jobs tax credit for

disadvantaged youth and others with special employment barriers was enacted

the Comprehensive Employment and Training Act was reauthorized for four

years.

In 1979:

A $6 billion welfare reform proposal was introduced with funding for

400,000 public service jobs welfare reform demonstration projects were

launched in communities around the country the Vice President initiated a

nationwide review of youth unemployment in this country.

In 1980:

The findings of the Vice President's Task Force revealed the major

education and employment deficits that exist for poor and minority

youngsters. As a result a $2 billion youth education and jobs initiative

was introduced to provide unemployed youth with the basic education and

work experience they need to compete in the labor market of the 1980's. As

part of the economic revitalization program several steps were proposed to

aid workers in high unemployment communities:

An additional 13 weeks of unemployment benefits for the long term

unemployed. $600 million to train the disadvantaged and unemployed for new

private sector jobs. Positive adjustment demonstrations to aid workers in

declining industries. The important Title VII Private Sector Initiatives

Program was reauthorized for an additional two years.

In addition to making significant progress in helping the disadvantaged and

unemployed, important gains were realized for all workers:

An historic national accord with organized labor made it possible for the

views of working men and women to be heard as the nation's economic and

domestic policies were formulated; the Mine Safety and Health Act brought

about improved working conditions for the nation's 500,000 miners.

substantial reforms of Occupational Safety and Health Administration were

accomplished to help reduce unnecessary burdens on business and to focus on

major health and safety problems; the minimum wage was increased over a

four year period from $2.30 to $3.35 an hour; the Black Lung Benefit Reform

Act was signed into law; attempts to weaken Davis-Bacon Act were defeated.

While substantial gains have been made in the last four years, continued

efforts are required to ensure that this progress is continued:

Government must continue to make labor a full partner in the policy

decisions that affect the interests of working men and women; a broad,

bipartisan effort to combat youth unemployment must be sustained

compassionate reform of the nation's welfare system should be continued

with employment opportunities provided for those able to work; workers in

declining industries should be provided new skills and help in finding

employment.

TRADE

Over the past year, the U.S. trade picture improved as a result of solid

export gains in both manufactured and agricultural products. Agricultural

exports reached a new record of over $40 billion, while manufactured

exports have grown by 24 percent to a record $144 billion. In these areas

the United States recorded significant surpluses of $24 billion and $19

billion respectively. While our oil imports remained a major drain on our

foreign exchange earnings, that drain was somewhat moderated by a 19

percent decline in the volume of oil imports.

U.S. trade negotiators made significant progress over the past year in

assuring effective implementation of the agreements negotiated during the

Tokyo Round of Multilateral Trade Negotiations. Agreements reached with the

Japanese government, for example, will assure that the United States will

be able to expand its exports to the Japanese market in such key areas as

telecommunications equipment, tobacco, and lumber. Efforts by U.S. trade

negotiators also helped to persuade a number of key developing countries to

accept many of the non-tariff codes negotiated during the Multilateral

Trade Negotiations. This will assure that these countries will increasingly

assume obligations under the international trading system.

A difficult world economic environment posed a challenge for the management

of trade relations. U.S. trade negotiators were called upon to manage

serious sectoral problems in such areas as steel, and helped to assure that

U.S. chemical exports will have continued access to the European market.

Close consultations with the private sector in the United States have

enabled U.S. trade negotiators to pinpoint obstacles to U.S. trade in

services, and to build a basis for future negotiations. Services have been

an increasingly important source of export earnings for the United States,

and the United States must assure continued and increased access to foreign

markets.

The trade position of the United States has improved. But vigorous efforts

are needed in a number of areas to assure continued market access for U.S.

exports, particularly agricultural and high technology products, in which

the United States continues to have a strong competitive edge. Continued

efforts are also needed to remove many domestic disincentives, which now

hamper U.S. export growth. And we must ensure that countries do not

manipulate investment, or impose investment performance requirements which

distort trade and cost us jobs in this country.

In short, we must continue to seek free--but fair--trade. That is the

policy my Administration has pursued from the beginning, even in areas

where foreign competition has clearly affected our domestic industry. In

the steel industry, for instance, we have put Trigger Price Mechanism into

place to help prevent the dumping of steel. That action has strengthened

the domestic steel industry. In the automobile industry, we have worked--

without resort to import quotas--to strengthen the industry's ability to

modernize and compete effectively.

SMALL BUSINESS

I have often said that there is nothing small about small business in

America. These firms account for nearly one-half our gross national

product; over half of new technology; and much more than half of the jobs

created by industry.

Because this sector of the economy is the very lifeblood of our National

economy, we have done much together to improve the competitive climate for

smaller firms. These concerted efforts have been an integral part of my

program to revitalize the economy.

They include my campaign to shrink substantially the cash and time

consuming red tape burden imposed on business. They include my

personally-directed policy of ambitiously increasing the Federal

contracting dollars going to small firms, especially those owned by women

and minorities. And they include my proposals to reinvigorate existing

small businesses and assist the creation of new ones through tax reform;

financing assistance; market expansion; and support of product innovation.

Many of my initiatives to facilitate the creation and growth of small

businesses were made in response to the White House Conference on Small

Business, which I convened. My Administration began the implementation of

most of the ideas produced last year by that citizen's advisory body;

others need to be addressed. I have proposed the reconvening of the

Conference next year to review progress; reassess priorities; and set new

goals. In the interim I hope that the incoming Administration and the new

Congress will work with the committee I have established to keep these

business development ideas alive and help implement Conference

recommendations.

MINORITY BUSINESS

One of the most successful developments of my Administration has been the

growth and strengthening of minority business. This is the first

Administration to put the issue on the policy agenda as a matter of major

importance. To implement the results of our early efforts in this field I

submitted legislation to Congress designed to further the development of

minority business.

We have reorganized the Office of Minority Business into the Minority

Business Development Administration in the Department of Commerce. MBDA has

already proven to be a major factor in assisting minority businesses to

achieve equitable competitive positions in the marketplace.

The Federal government's procurement from minority-owned firms has nearly

tripled since I took office. Federal deposits in minority-owned banks have

more than doubled and minority ownership of radio and television stations

has nearly doubled. The SBA administered 8(a) Pilot Program for procurement

with the Army proved to be successful and I recently expanded the number of

agencies involved to include NASA and the Departments of Energy and

Transportation.

I firmly believe the critical path to full freedom and equality for

America's minorities rests with the ability of minority communities to

participate competitively in the free enterprise system. I believe the

government has a fundamental responsibility to assist in the development of

minority business and I hope the progress made in the last four years will

continue.

II. CREATING ENERGY SECURITY

Since I took office, my highest legislative priorities have involved the

reorientation and redirection of U.S. energy activities and for the first

time, to establish a coordinated national energy policy. The struggle to

achieve that policy has been long and difficult, but the accomplishments of

the past four years make clear that our country is finally serious about

the problems caused by our overdependence on foreign oil. Our progress

should not be lost. We must rely on and encourage multiple forms of energy

production--coal, crude oil, natural gas, solar, nuclear, synthetics--and

energy conservation. The framework put in place over the last four years

will enable us to do this.

NATIONAL ENERGY POLICY

As a result of actions my Administration and the Congress have taken over

the past four years, our country finally has a national energy policy:

Under my program of phased decontrol, domestic crude oil price controls

will end September 30, 1981. As a result exploratory drilling activities

have reached an all-time high; Prices for new natural gas are being

decontrolled under the Natural Gas Policy Act--and natural gas production

is now at an all time high; the supply shortages of several years ago have

been eliminated; The windfall profits tax on crude oil has been enacted

providing $227 billion over ten years for assistance to low-income

households, increased mass transit funding, and a massive investment in the

production and development of alternative energy sources; The Synthetic

Fuels Corporation has been established to help private companies build the

facilities to produce energy from synthetic fuels; Solar energy funding has

been quadrupled, solar energy tax credits enacted, and a Solar Energy and

Energy Conservation Bank has been established; A route has been chosen to

bring natural gas from the North Slope of Alaska to the lower 48 states;

Coal production and consumption incentives have been increased, and coal

production is now at its highest level in history; A gasoline rationing

plan has been approved by Congress for possible use in the event of a

severe energy supply shortage or interruption; Gasohol production has been

dramatically increased, with a program being put in place to produce 500

million gallons of alcohol fuel by the end of this year--an amount that

could enable gasohol to meet the demand for 10 percent of all unleaded

gasoline; New energy conservation incentives have been provided for

individuals, businesses and communities and conservation has increased

dramatically. The U.S. has reduced oil imports by 25 percent--or 2 million

barrels per day--over the past four years.

INCREASED DEVELOPMENT OF DOMESTIC ENERGY SOURCES

Although it is essential that the Nation reduce its dependence on imported

fossil fuels and complete the transition to reliance on domestic renewable

sources of energy, it is also important that this transition be

accomplished in an orderly, economic, and environmentally sound manner. To

this end, the Administration has launched several initiatives.

Leasing of oil and natural gas on federal lands, particularly the outer

continental shelf, has been accelerated at the same time as the

Administration has reformed leasing procedures through the 1978 amendments

to the Outer Continental Shelf Lands Act. In 1979 the Interior Department

held six OCS lease sales, the greatest number ever, which resulted in

federal receipts of $6.5 billion, another record. The five-year OCS Leasing

schedule was completed, requiring 36 sales over the next five years.

Since 1971 no general federal coal lease sales were suspended. Over the

past four years the Administration has completely revised the federal coal

leasing program to bring it into compliance with the requirements of 1976

Federal Land Planning and Management Act and other statutory provisions.

The program is designed to balance the competing interests that affect

resource development on public lands and to ensure that adequate supplies

of coal will be available to meet national needs. As a result, the first

general competitive federal coal lease sale in ten years will be held this

month.

In July 1980, I signed into law the Energy Security Act of 1980 which

established the Synthetic Fuels Corporation. The Corporation is designed to

spur the development of commercial technologies for production of synthetic

fuels, such as liquid and gaseous fuels from coal and the production of oil

from oil shale. The Act provides the Corporation with an initial $22

billion to accomplish these objectives. The principal purpose of the

legislation is to ensure that the nation will have available in the late

1980's the option to undertake commercial development of synthetic fuels if

that becomes necessary. The Energy Security Act also provides significant

incentives for the development of gasohol and biomass fuels, thereby

enhancing the nation's supply of alternative energy sources.

COMMITMENT TO A SUSTAINABLE ENERGY FUTURE

The Administration's 1977 National Energy Plan marked an historic departure

from the policies of previous Administrations. The plan stressed the

importance of both energy production and conservation to achieving our

ultimate national goal of relying primarily on secure sources of energy.

The National Energy Plan made energy conservation a cornerstone of our

national energy policy.

In 1978, I initiated the Administration's Solar Domestic Policy Review.

This represented the first step towards widespread introduction of

renewable energy sources into the Nation's economy. As a result of the

Review, I issued the 1979 Solar Message to Congress, the first such message

in the Nation's history. The Message outlined the Administration's solar

program and established an ambitious national goal for the year 2000 of

obtaining 20 percent of this Nation's energy from solar and renewable

sources. The thrust of the federal solar program is to help industry

develop solar energy sources by emphasizing basic research and development

of solar technologies which are not currently economic, such as

photovoltaics, which generate energy directly from the sun. At the same

time, through tax incentives, education, and the Solar Energy and Energy

Conservation Bank, the solar program seeks to encourage state and local

governments, industry, and our citizens to expand their use of solar and

renewable resource technologies currently available.

As a result of these policies and programs, the energy efficiency of the

American economy has improved markedly and investments in renewable energy

sources have grown significantly. It now takes 3 1/2 percent less energy to

produce a constant dollar of GNP than it did in January 1977. This increase

in efficiency represents a savings of over 1.3 million barrels per day of

oil equivalent, about the level of total oil production now occurring in

Alaska. Over the same period, Federal support for conservation and solar

energy has increased by more than 3000 percent, to $3.3 billion in FY 1981,

including the tax credits for solar energy and energy conservation

investments--these credits are expected to amount to $1.2 billion in FY

1981 and $1.5 billion in FY 1982.

COMMITMENT TO NUCLEAR SAFETY AND SECURITY

Since January 1977, significant progress has been achieved in resolving

three critical problems resulting from the use of nuclear energy:

radioactive waste management, nuclear safety and weapons proliferation.

In 1977, the Administration announced its nuclear nonproliferation policy

and initiated the International Fuel Cycle Evaluation. In 1978, Congress

passed the Nuclear Nonproliferation Act, an historic piece of legislation.

In February 1980, the Administration transmitted its nuclear waste

management policy to the Congress. This policy was a major advance over all

previous efforts. The principal aspects of that policy are: acknowledging

the seriousness of the problem and the numerous technical and institutional

issues; adopting a technically and environmentally conservative approach to

the first permanent repository; and providing the states with significant

involvement in nuclear waste disposal decisions by creating the State

Planning Council. While much of the plan can be and is being implemented

administratively, some new authorities are needed. The Congress should give

early priority to enacting provisions for away-from-reactor storage and the

State Planning Council.

The accident at Three Mile Island made the nation acutely aware of the

safety risks posed by nuclear power plants. In response, the President

established the Kemeny Commission to review the accident and make

recommendations. Virtually all of the Commission's substantive

recommendations were adopted by the Administration and are now being

implemented by the Nuclear Regulatory Commission. The Congress adopted the

President's proposed plan for the Nuclear Regulatory Commission and the

Nuclear Safety Oversight Committee was established to ensure that the

Administration's decisions were implemented.

Nuclear safety will remain a vital concern in the years ahead. We must

continue to press ahead for the safe, secure disposal of radioactive

wastes, and prevention of nuclear proliferation.

While significant growth in foreign demand for U.S. steam coal is foreseen,

congestion must be removed at major U.S. coal exporting ports such as

Hampton Roads, Virginia, and Baltimore, Maryland. My Administration has

worked through the Interagency Coal Task Force Study to promote cooperation

and coordination of resources between shippers, railroads, vessel broker/

operators and port operators, and to determine the most appropriate Federal

role in expanding and modernizing coal export facilities, including

dredging deeper channels at selected ports. As a result of the Task Force's

efforts, administrative steps have been taken by the Corps of Engineers to

reduce significantly the amount of time required for planning and economic

review of port dredging proposals. The Administration has also recommended

that the Congress enact legislation to give the President generic authority

to recommend appropriations for channel dredging activities. Private

industry will, of course, play the major role in developing the United

States' coal export facilities, but the government must continue to work to

facilitate transportation to foreign markets.

III. ENHANCING BASIC HUMAN AND SOCIAL NEEDS

For too long prior to my Administration, many of our Nation's basic human

and social needs were being ignored or handled insensitively by the Federal

government. Over the last four years, we have significantly increased

funding for many of the vital programs in these areas; developed new

programs where needs were unaddressed; targeted Federal support to those

individuals and areas most in need of our assistance; and removed barriers

that have unnecessarily kept many disadvantaged citizens from obtaining aid

for their most basic needs.

Our record has produced clear progress in the effort to solve some of the

country's fundamental human and social problems. My Administration and the

Congress, working together, have demonstrated that government must and can

meet our citizens' basic human and social needs in a responsible and

compassionate way.

But there is an unfinished agenda still before the Congress. If we are to

meet our obligations to help all Americans realize the dreams of sound

health care, decent housing, effective social services, a good education,

and a meaningful job, important legislation still must be enacted. National

Health Insurance, Welfare Reform, Child Health Assessment Program, are

before the Congress and I urge their passage.

HEALTH NATIONAL HEALTH PLAN

During my Administration, I proposed to Congress a National Health Plan

which will enable the country to reach the goal of comprehensive, universal

health care coverage. The legislation I submitted lays the foundation for

this comprehensive plan and addresses the most serious problems of health

financing and delivery. It is realistic and enactable. It does not

overpromise or overspend, and, as a result, can be the solution to the

thirty years of Congressional battles on national health insurance. My Plan

includes the following key features:

Nearly 15 million additional poor would receive fully-subsidized

comprehensive coverage; pre-natal and delivery services are provided for

all pregnant women and coverage is provided for all acute care for infants

in their first year of life; the elderly and disabled would have a limit of

$1,250 placed on annual out-of-pocket medical expenses and would no longer

face limits on hospital coverage; all full-time employees and their

families would receive insurance against at least major medical expenses

under mandated employer coverage; Medicare and Medicaid would be combined

and expanded into an umbrella Federal program, Healthcare, for increased

program efficiency, accountability and uniformity; and strong cost

controls and health system reforms would be implemented, including

greater incentives for Health Maintenance Organizations.

I urge the new Congress to compare my Plan with the alternatives--programs

which either do too little to improve the health care needs of Americans

most in need or programs which would impose substantial financial burdens

on the American taxpayers. I hope the Congress will see the need for and

the benefits of my Plan and work toward prompt enactment. We cannot afford

further delay in this vital area.

HEALTH CARE COST CONTROL

Inflation in health care costs remains unacceptably high. Throughout my

Administration, legislation to reduce health care cost inflation was one of

my highest priorities, but was not passed by the Congress. Therefore, my FY

1982 budget proposes sharing the responsibility for health care cost

control with the private sector, through voluntary hospital cost guidelines

and intensified monitoring. In the longer term, the health care

reimbursement system must be reformed. We must move away from inflationary

cost-based reimbursement and fee-for-service, and toward a system of

prospective reimbursement, under which health care providers would operate

within predetermined budgets. This reimbursement reform is essential to

ultimately control inflation in health care costs, and will be a

significant challenge to the new Congress.

HEALTH PROMOTION AND DISEASE PREVENTION

During my Administration, the Surgeon General released "Healthy People," a

landmark report on health promotion and disease prevention. The report

signals the growing consensus that the Nation's health strategy must be

refocused in the 1980's to emphasize the prevention of disease.

Specifically, the report lays out measurable and achieveable goals in the

reduction of mortality which can be reached by 1990.

I urge the new Congress to endorse the principles of "Healthy People," and

to adopt the recommendations to achieve its goals. This will necessitate

adoption of a broader concept of health care, to include such areas as

environmental health, workplace health and safety, commercial product

safety, traffic safety, and health education, promotion and information.

MATERNAL AND CHILD HEALTH

Ensuring a healthy start in life for children remains not only a high

priority of my Administration, but also one of the most cost effective

forms of health care.

When I took office, immunization levels for preventable childhood diseases

had fallen to 70%. As a result of a concerted nationwide effort during my

Administration, I am pleased to report that now at least 90% of children

under 15, and virtually all school-age children are immunized. In addition,

reported cases of measles and mumps are at their lowest levels ever.

Under the National Health Plan I have proposed, there would be no

cost-sharing for prenatal and delivery services for all pregnant women and

for acute care provided to infants in their first year of life. These

preventive services have extremely high returns in terms of improved

newborn and long-term child health.

Under the Child Health Assurance Program (CHAP) legislation which I

submitted to the Congress, and which passed the House, an additional two

million low-income children under 18 would become eligible for Medicaid

benefits, which would include special health assessments. CHAP would also

improve the continuity of care for the nearly 14 million children now

eligible for Medicaid. An additional 100,000 low-income pregnant women

would become eligible for prenatal care under the proposal. I strongly urge

the new Congress to enact CHAP and thereby provide millions of needy

children with essential health services. The legislation has had strong

bipartisan support, which should continue as the details of the bill are

completed.

I also urge the new Congress to provide strong support for two highly

successful ongoing programs: the special supplemental food program for

women, infants and children (WIC) and Family Planning. The food supplements

under WIC have been shown to effectively prevent ill health and thereby

reduce later medical costs. The Family Planning program has been effective

at reducing unwanted pregnancies among low-income women and adolescents.

EXPANSION OF SERVICES TO THE POOR AND UNDERSERVED

During my Administration, health services to the poor and underserved have

been dramatically increased. The number of National Health Service Corps

(NHSC) assignees providing services in medically underserved communities

has grown from 500 in 1977 to nearly 3,000 in 1981. The population served

by the NHSC has more than tripled since 1977. The number of Community

Health Centers providing services in high priority underserved areas has

doubled during my Administration, and will serve an estimated six million

people in 1981. I strongly urge the new Congress to support these highly

successful programs.

MENTAL HEALTH

One of the most significant health achievements during my Administration

was the recent passage of the Mental Health Systems Act, which grew out of

recommendations of my Commission on Mental Health. I join many others in my

gratitude to the First Lady for her tireless and effective contribution to

the passage of this important legislation.

The Act is designed to inaugurate a new era of Federal and State

partnership in the planning and provision of mental health services. In

addition, the Act specifically provides for prevention and support services

to the chronically mentally ill to prevent unnecessary institutionalization

and for the development of community-based mental health services. I urge

the new Congress to provide adequate support for the full and timely

implementation of this Act.

HEALTH PROTECTION

With my active support, the Congress recently passed "Medigap" legislation,

which provides for voluntary certification of health insurance policies

supplemental to Medicare, to curb widespread abuses in this area.

In the area of toxic agent control, legislation which I submitted to the

Congress recently passed. This will provide for a "super-fund" to cover

hazardous waste cleanup costs.

In the area of accidental injury control, we have established automobile

safety standards and increased enforcement activities with respect to the

55 MPH speed limit. By the end of the decade these actions are expected to

save over 13,000 lives and 100,000 serious injuries each year.

I urge the new Congress to continue strong support for all these

activities.

FOOD AND NUTRITION

Building on the comprehensive reform of the Food Stamp Program that I

proposed and Congress passed in 1977, my Administration and the Congress

worked together in 1979 and 1980 to enact several other important changes

in the Program. These changes will further simplify administration and

reduce fraud and error, will make the program more responsive to the needs

of the elderly and disabled, and will increase the cap on allowable program

expenditures. The Food Stamp Act will expire at the end of fiscal 1981. It

is essential that the new Administration and the Congress continue this

program to ensure complete eradication of the debilitating malnutrition

witnessed and documented among thousands of children in the 1960's.

DRUG ABUSE PREVENTION

At the beginning of my Administration there were over a half million heroin

addicts in the United States. Our continued emphasis on reducing the supply

of heroin, as well as providing treatment and rehabilitation to its

victims, has reduced the heroin addict population, reduced the number of

heroin overdose deaths by 80%, and reduced the number of heroin related

injuries by 50%. We have also seen and encouraged a national movement of

parents and citizens committed to reversing the very serious and disturbing

trends of adolescent drug abuse.

Drug abuse in many forms will continue to detract, however, from the

quality of life of many Americans. To prevent that, I see four great

challenges in the years ahead. First, we must deal aggressively with the

supplies of illegal drugs at their source, through joint crop destruction

programs with foreign nations and increased law enforcement and border

interdiction. Second, we must look to citizens and parents across the

country to help educate the increasing numbers of American youth who are

experimenting with drugs to the dangers of drug abuse. Education is a key

factor in reducing drug abuse. Third, we must focus our efforts on drug and

alcohol abuse in the workplace for not only does this abuse contribute to

low productivity but it also destroys the satisfaction and sense of purpose

all Americans can gain from the work experience. Fourth, we need a change

in attitude, from an attitude which condones the casual use of drugs to one

that recognizes the appropriate use of drugs for medical purposes and

condemns the inappropriate and harmful abuse of drugs. I hope the Congress

and the new Administration will take action to meet each of these

challenges.

EDUCATION

The American people have always recognized that education is one of the

soundest investments they can make. The dividends are reflected in every

dimension of our national life--from the strength of our economy and

national security to the vitality of our music, art, and literature. Among

the accomplishments that have given me the most satisfaction over the last

four years are the contributions that my Administration has been able to

make to the well-being of students and educators throughout the country.

This Administration has collaborated successfully with the Congress on

landmark education legislation. Working with the Congressional leadership,

my Administration spotlighted the importance of education by creating a new

Department of Education. The Department has given education a stronger

voice at the Federal level, while at the same time reserving the actual

control and operation of education to states, localities, and private

institutions. The Department has successfully combined nearly 150 Federal

education programs into a cohesive, streamlined organization that is more

responsive to the needs of educators and students. The Department has made

strides to cut red tape and paperwork and thereby to make the flow of

Federal dollars to school districts and institutions of higher education

more efficient. It is crucial that the Department be kept intact and

strengthened.

Our collaboration with the Congress has resulted in numerous other

important legislative accomplishments for education. A little over two

years ago, I signed into law on the same day two major bills--one

benefiting elementary and secondary education and the other, postsecondary

education. The Education Amendments of 1978 embodied nearly all of my

Administration's proposals for improvements in the Elementary and Secondary

Education Act, including important new programs to improve students'

achievement in the basic skills and to aid school districts with

exceptionally high concentrations of children from low-income families. The

Middle Income Student Assistance Act, legislation jointly sponsored by this

Administration and the Congressional leadership, expanded eligibility for

need-based Basic Educational Opportunity Grants to approximately one-third

of the students enrolled in post-secondary education and made many more

students eligible for the first time for other types of grants, work-study,

and loans.

Just three and a half months ago, my Administration and the Congress

successfully concluded over two years of work on a major reauthorization

bill that further expands benefits to postsecondary education. Reflected in

the Education Amendments of 1980 are major Administration recommendations

for improvements in the Higher Education Act--including proposals for

better loan access for students; a new parent loan program; simplified

application procedures for student financial aid; a strengthened Federal

commitment to developing colleges, particularly the historically Black

institutions; a new authorization for equipment and facilities

modernization funding for the nation's major research universities; and

revitalized international education programs.

Supplementing these legislative accomplishments have been important

administrative actions aimed at reducing paperwork and simplifying

regulations associated with Federal education programs. We also launched

major initiatives to reduce the backlog of defaulted student loans and

otherwise to curb fraud, abuse, and waste in education programs.

To insure that the education enterprise is ready to meet the scientific and

technological changes of the future, we undertook a major study of the

status of science and engineering education throughout the nation. I hope

that the findings from this report will serve as a springboard for needed

reforms at all levels of education.

I am proud that this Administration has been able to provide the financial

means to realize many of our legislative and administrative goals. Compared

to the previous administration's last budget, I have requested the largest

overall increase in Federal funding for education in our nation's history.

My budget requests have been particularly sensitive to the needs of special

populations like minorities, women, the educationally and economically

disadvantaged, the handicapped, and students with limited English-speaking

ability. At the same time, I have requested significant increases for many

programs designed to enhance the quality of American education, including

programs relating to important areas as diverse as international education,

research libraries, museums, and teacher centers.

Last year, I proposed to the Congress a major legislative initiative that

would direct $2 billion into education and job training programs designed

to alleviate youth unemployment through improved linkages between the

schools and the work place. This legislation generated bipartisan support;

but unfortunately, action on it was not completed in the final, rushed days

of the 96th Congress. I urge the new Congress--as it undertakes broad

efforts to strengthen the economy as well as more specific tasks like

reauthorizing the Vocational Education Act--to make the needs of our

nation's unemployed youth a top priority for action. Only by combining a

basic skills education program together with work training and employment

incentives can we make substantial progress in eliminating one of the most

severe social problems in our nation--youth unemployment, particularly

among minorities. I am proud of the progress already made through passage

of the Youth Employment and Demonstration Project Act of 1977 and the

substantial increase in our investment in youth employment programs. The

new legislation would cap these efforts.

INCOME SECURITY SOCIAL SECURITY

One of the highest priorities of my Administration has been to continue the

tradition of effectiveness and efficiency widely associated with the social

security program, and to assure present and future beneficiaries that they

will receive their benefits as expected. The earned benefits that are paid

monthly to retired and disabled American workers and their families provide

a significant measure of economic protection to millions of people who

might otherwise face retirement or possible disability with fear. I have

enacted changes to improve the benefits of many social security

beneficiaries during my years as President.

The last four years have presented a special set of concerns over the

financial stability of the social security system. Shortly after taking

office I proposed and Congress enacted legislation to protect the stability

of the old age and survivors trust fund and prevent the imminent exhaustion

of the disability insurance trust fund, and to correct a flaw in the

benefit formula that was threatening the long run health of the entire

social security system. The actions taken by the Congress at my request

helped stabilize the system. That legislation was later complemented by the

Disability Insurance Amendments of 1980 which further bolstered the

disability insurance program, and reduced certain inequities among

beneficiaries.

My commitment to the essential retirement and disability protection

provided to 35 million people each month has been demonstrated by the fact

that without interruption those beneficiaries have continued to receive

their social security benefits, including annual cost of living increases.

Changing and unpredictable economic circumstances require that we continue

to monitor the financial stability of the social security system. To

correct anticipated short-term strains on the system, I proposed last year

that the three funds be allowed to borrow from one another, and I urge the

Congress again this year to adopt such interfund borrowing. To further

strengthen the social security system and provide a greater degree of

assurance to beneficiaries, given projected future economic uncertainties,

additional action should be taken. Among the additional financing options

available are borrowing from the general fund, financing half of the

hospital insurance fund with general revenues, and increasing the payroll

tax rate. The latter option is particularly unpalatable given the

significant increase in the tax rate already mandated in law.

This Administration continues to oppose cuts in basic social security

benefits and taxing social security benefits. The Administration continues

to support annual indexing of social security benefits.

WELFARE REFORM

In 1979 I proposed a welfare reform package which offers solutions to some

of the most urgent problems in our welfare system. This proposal is

embodied in two bills, The Work and Training Opportunities Act and The

Social Welfare Reform Amendments Act. The House passed the second of these

two proposals. Within the framework of our present welfare system, my

reform proposals offer achievable means to increase self-sufficiency

through work rather than welfare, more adequate assistance to people unable

to work, the removal of inequities in coverage under current programs, and

fiscal relief needed by States and localities.

Our current welfare system is long overdue for serious reform; the system

is wasteful and not fully effective. The legislation I have proposed will

help eliminate inequities by establishing a national minimum benefit, and

by directly relating benefit levels to the poverty threshold. It will

reduce program complexity, which leads to inefficiency and waste, by

simplifying and coordinating administration among different programs.

I urge the Congress to take action in this area along the lines I have

recommended.

CHILD WELFARE

My Administration has worked closely with the Congress on legislation which

is designed to improve greatly the child welfare services and foster care

programs and to create a Federal system of adoption assistance. These

improvements will be achieved with the recent enactment of H.R. 3434, the

Adoption Assistance and Child Welfare Act of 1980. The well-being of

children in need of homes and their permanent placement have been a primary

concern of my Administration. This legislation will ensure that children

are not lost in the foster care system, but instead will be returned to

their families where possible or placed in permanent adoptive homes.

LOW-INCOME ENERGY ASSISTANCE

In 1979 I proposed a program to provide an annual total of $1.6 billion to

low-income households which are hardest hit by rising energy bills. With

the cooperation of Congress, we were able to move quickly to provide

assistance to eligible households in time to meet their winter heating

bills.

In response to the extreme heat conditions affecting many parts of the

country during 1980, I directed the Community Services Administration to

make available over $27 million to assist low-income individuals,

especially the elderly, facing life threatening circumstances due to

extreme heat.

Congress amended and reauthorized the low-income energy assistance program

for fiscal year 1981, and provided $1.85 billion to meet anticipated

increasing need. The need for a program to help low-income households with

rising energy expenses will not abate in the near future. The low-income

energy assistance program should be reauthorized to meet those needs.

HOUSING

For the past 14 months, high interest rates have had a severe impact on the

nation's housing market. Yet the current pressures and uncertainties should

not obscure the achievements of the past four years.

Working with the Congress, the regulatory agencies, and the financial

community, my Administration has brought about an expanded and steadier

flow of funds into home mortgages. Deregulation of the interest rates

payable by depository institutions, the evolution of variable and

renegotiated rate mortgages, development of high yielding savings

certificates, and expansion of the secondary mortgage market have all

increased housing's ability to attract capital and have assured that

mortgage money would not be cut off when interest rates rose. These actions

will diminish the cyclicality of the housing industry. Further, we have

secured legislation updating the Federal Government's emergency authority

to provide support for the housing industry through the Brooke-Cranston

program, and creating a new Section 235 housing stimulus program. These

tools will enable the Federal Government to deal quickly and effectively

with serious distress in this critical industry.

We have also worked to expand homeownership opportunities for Americans. By

using innovative financing mechanisms, such as the graduated payment

mortgage, we have increased the access of middle income families to housing

credit. By revitalizing the Section 235 program, we have enabled nearly

100,000 moderate income households to purchase new homes. By reducing

paperwork and regulation in Federal programs, and by working with State and

local governments to ease the regulatory burden, we have helped to hold

down housing costs and produce affordable housing.

As a result of these governmentwide efforts, 5 1/2 million more American

families bought homes in the past four years than in any equivalent period

in history. And more than 7 million homes have begun construction during my

Administration, 1 million more than in the previous four years.

We have devoted particular effort to meeting the housing needs of low and

moderate income families. In the past four years, more than 1 million

subsidized units have been made available for occupancy by lower income

Americans and more than 600,000 assisted units have gone into construction.

In addition, we have undertaken a series of measures to revitalize and

preserve the nation's 2 million units of public and assisted housing.

For Fiscal Year 1982, I am proposing to continue our commitment to lower

income housing. I am requesting funds to support 260,000 units of Section 8

and public housing, maintaining these programs at the level provided by

Congress in Fiscal 1981.

While we have made progress in the past four years, in the future there are

reasons for concern. Home price inflation and high interest rates threaten

to put homeownership out of reach for first-time homebuyers. Lower income

households, the elderly and those dependent upon rental housing face rising

rents, low levels of rental housing construction by historic standards, and

the threat of displacement due to conversion to condominiums and other

factors. Housing will face strong competition for investment capital from

the industrial sector generally and the energy industries, in particular.

To address these issues, I appointed a Presidential Task Force and Advisory

Group last October. While this effort will not proceed due to the election

result, I hope the incoming Administration will proceed with a similar

venture.

The most important action government can take to meet America's housing

needs is to restore stability to the economy and bring down the rate of

inflation. Inflation has driven up home prices, operating costs and

interest rates. Market uncertainty about inflation has contributed to the

instability in interest rates, which has been an added burden to

homebuilders and homebuyers alike. By making a long-term commitment to

provide a framework for greater investment, sustained economic growth, and

price stability, my Administration has begun the work of creating a healthy

environment for housing.

TRANSPORTATION

With the passage of the Airline Deregulation Act of 1978, the Motor Carrier

Act of 1980, and the Harley O. Staggers Rail Act of 1980, my

Administration, working with the Congress, has initiated a new era of

reduced regulation of transportation industries. Deregulation will lead to

increased productivity and operating efficiencies in the industries

involved, and stimulate price and service competition, to the benefit of

consumers generally. I urge the new Administration to continue our efforts

on behalf of deregulation legislation for the intercity passenger bus

industry as well.

In the coming decade, the most significant challenge facing the nation in

transportation services will be to improve a deteriorating physical

infrastructure of roadways, railroads, waterways and mass transit systems,

in order to conserve costly energy supplies while promoting effective

transportation services.

HIGHWAYS

Our vast network of highways, which account for 90 percent of travel and 80

percent by value of freight traffic goods movement, is deteriorating. If

current trends continue, a major proportion of the Interstate pavement will

have deteriorated by the end of the 1980's.

Arresting the deterioration of the nation's system of highways is a high

priority objective for the 1980's. We must reorient the Federal mission

from major new construction projects to the stewardship of the existing

Interstate Highway System. Interstate gaps should be judged on the

connections they make and on their compatibility with community needs.

During this decade, highway investments will be needed to increase

productivity, particularly in the elimination of bottlenecks, provide more

efficient connections to ports and seek low-cost solutions to traffic

demand.

My Administration has therefore recommended redefining completion of the

Interstate system, consolidating over 27 categorical assistance programs

into nine, and initiating a major repair and rehabilitation program for

segments of the Interstate system. This effort should help maintain the

condition and performance of the Nation's highways, particularly the

Interstate and primary system; provide a realistic means to complete the

Interstate system by 1990; ensure better program delivery through

consolidation, and assist urban revitalization. In addition, the Congress

must address the urgent funding problems of the highway trust fund, and the

need to generate greater revenues.

MASS TRANSIT

In the past decade the nation's public transit systems' ridership increased

at an annual average of 1.1% each year in the 1970's (6.9% in 1979).

Continued increases in the cost of fuel are expected to make transit a

growing part of the nation's transportation system.

As a result, my Administration projected a ten year, $43 billion program to

increase mass transit capacity by 50 percent, and promote more energy

efficient vehicle uses in the next decade. The first part of this proposal

was the five year, $24.7 billion Urban Mass Transportation Administration

reauthorization legislation I sent to the Congress in March, 1980. I urge

the 97th Congress to quickly enact this or similar legislation in 1981.

My Administration was also the first to have proposed and signed into law a

non-urban formula grant program to assist rural areas and small communities

with public transportation programs to end their dependence on the

automobile, promote energy conservation and efficiency, and provide

transportation services to impoverished rural communities.

A principal need of the 1980's will be maintaining mobility for all

segments of the population in the face of severely increasing

transportation costs and uncertainty of fuel supplies. We must improve the

flexibility of our transportation system and offer greater choice and

diversity in transportation services. While the private automobile will

continue to be the principal means of transportation for many Americans,

public transportation can become an increasingly attractive alternative.

We, therefore, want to explore a variety of paratransit modes, various

types of buses, modern rapid transit, regional rail systems and light rail

systems.

Highway planning and transit planning must be integrated and related to

State, regional, district and neighborhood planning efforts now in place or

emerging. Low density development and land use threaten the fiscal capacity

of many communities to support needed services and infrastructure.

ELDERLY AND HANDICAPPED TRANSPORTATION

Transportation policies in the 1980's must pay increasing attention to the

needs of the elderly and handicapped. By 1990, the number of people over 65

will have grown from today's 19 million to 27 million. During the same

period, the number of handicapped--people who have difficulty using

transit as well as autos, including the elderly--is expected to increase

from 9 to 11 million, making up 4.5 percent of the population.

We must not retreat from a policy that affords a significant and growing

portion of our population accessible public transportation while

recognizing that the handicapped are a diverse group and will need

flexible, door-to-door service where regular public transportation will not

do the job.

RAILROADS

In addition, the Federal government must reassess the appropriate Federal

role of support for passenger and freight rail services such as Amtrak and

Conrail. Our goal through federal assistance should be to maintain and

enhance adequate rail service, where it is not otherwise available to needy

communities. But Federal subsidies must be closely scrutinized to be sure

they are a stimulus to, and not a replacement for, private investment and

initiative. Federal assistance cannot mean permanent subsidies for

unprofitable operations.

WATERWAYS AND RURAL TRANSPORTATION

There is a growing need in rural and small communities for improved

transportation services. Rail freight service to many communities has

declined as railroads abandon unproductive branch lines. At the same time,

rural roads are often inadequate to handle large, heavily-loaded trucks.

The increased demand for "harvest to harbor" service has also placed an

increased burden on rural transportation systems, while bottlenecks along

the Mississippi River delay grain shipments to the Gulf of Mexico.

We have made some progress:

--To further develop the nation's waterways, my Administration began

construction of a new 1,200 foot lock at the site of Lock and Dam 26 on the

Mississippi River. When opened in 1987, the new lock will have a capacity

of 86 million tons per year, an 18 percent increase over the present

system. The U.S. Army Corps of Engineers has also undertaken studies to

assess the feasibility of expanding the Bonneville Locks. Rehabilitation of

John Day Lock was begun in 1980 and should be completed in 1982. My

Administration also supports the completion of the Upper Mississippi River

Master Plan to determine the feasibility of constructing a second lock at

Alton, Illinois. These efforts will help alleviate delays in transporting

corn, soybeans and other goods along the Mississippi River to the Gulf of

Mexico.

--The Department of Transportation's new Small Community and Rural

Transportation Policy will target federal assistance for passenger

transportation, roads and highways, truck service, and railroad freight

service to rural areas. This policy implements and expands upon the earlier

White House Initiative, "Improving Transportation in Rural America,"

announced in June, 1979, and the President's "Small Community and Rural

Development Policy" announced in December, 1979. The Congress should seek

ways to balance rail branch line abandonment with the service needs of

rural and farm communities, provide financial assistance to rail branch

line rehabilitation where appropriate, assist shippers to adjust to rail

branch line abandonment where it takes place, and help make it possible for

trucking firms to serve light density markets with dependable and efficient

trucking services.

MARITIME POLICY

During my Administration I have sought to ensure that the U.S. maritime

industry will not have to function at an unfair competitive disadvantage in

the international market. As I indicated in my maritime policy statement to

the Congress in July, 1979, the American merchant marine is vital to our

Nation's welfare, and Federal actions should promote rather than harm it.

In pursuit of this objective, I signed into law the Controlled Carrier Act

of 1978, authorizing the Federal Maritime Commission to regulate certain

rate cutting practices of some state-controlled carriers, and recently

signed a bilateral maritime agreement with the People's Republic of China

that will expand the access of American ships to 20 specified Chinese

ports, and set aside for American-flag ships a substantial share (at least

one-third) of the cargo between our countries. This agreement should

officially foster expanded U.S. and Chinese shipping services linking the

two countries, and will provide further momentum to the growth of

Sino-American trade.

There is also a need to modernize and expand the dry bulk segment of our

fleet. Our heavy dependence on foreign carriage of U.S.-bulk cargoes

deprives the U.S. economy of seafaring and shipbuilding jobs, adds to the

balance-of-payments deficit, deprives the Government of substantial tax

revenues, and leaves the United States dependent on foreign-flag shipping

for a continued supply of raw materials to support the civil economy and

war production in time of war.

I therefore sent to the Congress proposed legislation to strengthen this

woefully weak segment of the U.S.-flag fleet by removing certain

disincentives to U.S. construction of dry bulkers and their operation under

U.S. registry. Enactment of this proposed legislation would establish the

basis for accelerating the rebuilding of the U.S.-flag dry bulk fleet

toward a level commensurate with the position of the United States as the

world's leading bulk trading country.

During the past year the Administration has stated its support for

legislation that would provide specific Federal assistance for the

installation of fuel-efficient engines in existing American ships, and

would strengthen this country's shipbuilding mobilization base.

Strengthening the fleet is important, but we must also maintain our

shipbuilding base for future ship construction.

Provisions in existing laws calling for substantial or exclusive use of

American-flag vessels to carry cargoes generated by the Government must be

vigorously pursued.

I have therefore supported requirements that 50 percent of oil purchased

for the strategic petroleum reserve be transported in U.S.-flag vessels,

that the Cargo Preference Act be applied to materials furnished for the

U.S. assisted construction of air bases in Israel, and to cargoes

transported pursuant to the Chrysler Corporation Loan Guarantee Act. In

addition, the deep Seabed Hard Mineral Resources Act requires that at least

one ore carrier per mine site be a U.S.-flag vessel.

Much has been done, and much remains to be done. The FY 1982 budget

includes a $107 million authorization for Construction Differential Subsidy

("CDS") funds which, added to the unobligated CDS balance of $100 million

from 1980, and the recently enacted $135 million 1981 authorization, will

provide an average of $171 million in CDS funds in 1981 and 1982.

COAL EXPORT POLICY

While significant growth in foreign demand for U.S. steam coal is foreseen,

congestion at major U.S. coal exporting ports such as Hampton Roads,

Virginia, and Baltimore, Maryland, could delay and impede exports.

My Administration has worked through the Interagency Coal Task Force Study,

which I created, to promote cooperation and coordination of resources

between shippers, railroads, vessel broker/ operators and port operators,

and to determine the most appropriate Federal role in expanding and

modernizing coal export facilities, including dredging deeper channels at

selected ports.

Some progress has already been made. In addition to action taken by

transshippers to reduce the number of coal classifications used whenever

possible, by the Norfolk and Western Railroad to upgrade its computer

capability to quickly inventory its coal cars in its yards, and by the

Chessie Railroad which is reactivating Pier 15 in Newport News and has

established a berth near its Curtis Bay Pier in Baltimore to decrease

delays in vessel berthing, public activities will include:

--A $26.5 million plan developed by the State of Pennsylvania and Conrail

to increase Conrail's coal handling capacity at Philadelphia;

--A proposal by the State of Virginia to construct a steam coal port on

the Craney Island Disposal area in Portsmouth harbor;

--Plans by Mobile, Alabama, which operates the only publicly owned coal

terminal in the U.S. to enlarge its capacity at McDuffie Island to 10

million tons ground storage and 100 car unit train unloading capability;

--Development at New Orleans of steam coal facilities that are expected to

add over 20 million tons of annual capacity by 1983; and

--The Corps of Engineers, working with other interested Federal agencies,

will determine which ports should be dredged, to what depth and on what

schedule, in order to accommodate larger coal carrying vessels.

Private industry will, of course, play a major role in developing the

United States' coal export facilities. The new Administration should

continue to work to eliminate transportation bottlenecks that impede our

access to foreign markets.

Special Needs

WOMEN

The past four years have been years of rapid advancement for women. Our

focus has been two-fold: to provide American women with a full range of

opportunities and to make them a part of the mainstream of every aspect of

our national life and leadership.

I have appointed a record number of women to judgeships and to top

government posts. Fully 22 percent of all my appointees are women, and I

nominated 41 of the 46 women who sit on the Federal bench today. For the

first time in our history, women occupy policymaking positions at the

highest level of every Federal agency and department and have demonstrated

their ability to serve our citizens well.

We have strengthened the rights of employed women by consolidating and

strengthening enforcement of sex discrimination laws under the EEOC, by

expanding employment rights of pregnant women through the Pregnancy

Disability Bill, and by increasing federal employment opportunities for

women through civil service reform, and flexi-time and part-time

employment.

By executive order, I created the first national program to provide women

businessowners with technical assistance, grants, loans, and improved

access to federal contracts.

We have been sensitive to the needs of women who are homemakers. I

established an Office of Families within HHS and sponsored the White House

Conference on Families. We initiated a program targeting CETA funds to help

displaced homemakers. The Social Security system was amended to eliminate

the widow's penalty and a comprehensive study of discriminatory provisions

and possible changes was presented to Congress. Legislation was passed to

give divorced spouses of foreign service officers rights to share in

pension benefits.

We created an office on domestic violence within HHS to coordinate the 12

agencies that now have domestic violence relief programs, and to distribute

information on the problem and the services available to victims.

Despite a stringent budget for FY 1981, the Administration consistently

supported the Women's Educational Equity Act and family planning

activities, as well as other programs that affect women, such as food

stamps, WIC, and social security.

We have been concerned not only about the American woman's opportunities,

but ensuring equality for women around the world. In November, 1980, I sent

to the Senate the Convention on the Elimination of All Forms of

Discrimination Against Women. This United Nations document is the most

comprehensive and detailed international agreement which seeks the

advancement of women.

On women's issues, I have sought the counsel of men and women in and out of

government and from all regions of our country. I established two panels--

the President's Advisory Committee for Women and the Interdepartmental Task

Force on Women--to advise me on these issues. The mandate for both groups

expired on December 31, but they have left behind a comprehensive review of

the status of women in our society today. That review provides excellent

guidance for the work remaining in our battle against sex discrimination.

Even though we have made progress, much remains on the agenda for women. I

remain committed to the Equal Rights Amendment and will continue to work

for its passage. It is essential to the goal of bringing America's women

fully into the mainstream of American life that the ERA be ratified.

The efforts begun for women in employment, business and education should be

continued and strengthened. Money should be available to states to

establish programs to help the victims of domestic violence. Congress

should pass a national health care plan and a welfare reform program, and

these measures should reflect the needs of women.

The talents of women should continue to be used to the fullest inside and

outside of government, and efforts should continue to see that they have

the widest range of opportunities and options.

HANDICAPPED

I hope that my Administration will be remembered in this area for leading

the way toward full civil rights for handicapped Americans. When I took

office, no federal agency had yet issued 504 regulations. As I leave

office, this first step by every major agency and department in the federal

government is almost complete. But it is only a first step. The years ahead

will require steadfast dedication by the President to protect and promote

these precious rights in the classroom, in the workplace, and in all public

facilities so that handicapped individuals may join the American mainstream

and contribute to the fullest their resources and talents to our economic

and social life.

Just as we supported, in an unprecedented way, the civil rights of disabled

persons in schools and in the workplace, other initiatives in health

prevention, such as our immunization and nutrition programs for young

children and new intense efforts to reverse spinal cord injury, must

continue so that the incidence of disability continues to decline.

This year is the U.N.-declared International Year of Disabled Persons. We

are organizing activities to celebrate and promote this important

commemorative year within the government as well as in cooperation with

private sector efforts in this country and around the world. The

International Year will give our country the opportunity to recognize the

talents and capabilities of our fellow citizens with disabilities. We can

also share our rehabilitation and treatment skills with other countries and

learn from them as well. I am proud that the United States leads the world

in mainstreaming and treating disabled people. However, we have a long way

to go before all psychological and physical barriers to disabled people are

torn down and they can be full participants in our American way of life. We

must pledge our full commitment to this goal during the International Year.

FAMILIES

Because of my concern for American families, my Administration convened

last year the first White House Conference on Families which involved seven

national hearings, over 506 state and local events, three White House

Conferences, and the direct participation of more than 125,000 citizens.

The Conference reaffirmed the centrality of families in our lives and

nation but documented problems American families face as well. We also

established the Office of Families within the Department of Health and

Human Services to review government policies and programs that affect

families.

I expect the departments and agencies within the executive branch of the

Federal government as well as Members of Congress, corporate and business

leaders, and State and local officials across the country, to study closely

the recommendations of the White House Conference and implement them

appropriately. As public policy is developed and implemented by the Federal

government, cognizance of the work of the Conference should be taken as a

pragmatic and essential step.

The Conference has done a good job of establishing an agenda for action to

assure that the policies of the Federal government are more sensitive in

their impact on families. I hope the Congress will review and seriously

consider the Conference's recommendations.

OLDER AMERICANS

My Administration has taken great strides toward solving the difficult

problems faced by older Americans. Early in my term we worked successfully

with the Congress to assure adequate revenues for the Social Security Trust

Funds. And last year the strength of the Social Security System was

strengthened by legislation I proposed to permit borrowing among the

separate trust funds. I have also signed into law legislation prohibiting

employers from requiring retirement prior to age 70, and removing mandatory

retirement for most Federal employees. In addition, my Administration

worked very closely with Congress to amend the Older Americans Act in a way

that has already improved administration of its housing, social services,

food delivery, and employment programs.

This year, I will be submitting to Congress a budget which again

demonstrates my commitment to programs for the elderly. It will include, as

my previous budgets have, increased funding for nutrition, senior centers

and home health care, and will focus added resources on the needs of older

Americans.

With the 1981 White House Conference on Aging approaching, I hope the new

Administration will make every effort to assure an effective and useful

conference. This Conference should enable older Americans to voice their

concerns and give us guidance in our continued efforts to ensure the

quality of life so richly deserved by our senior citizens.

REFUGEES

We cannot hope to build a just and humane society at home if we ignore the

humanitarian claims of refugees, their lives at stake, who have nowhere

else to turn. Our country can be proud that hundreds of thousands of people

around the world would risk everything they have--including their own

lives--to come to our country.

This Administration initiated and implemented the first comprehensive

reform of our refugee and immigration policies in over 25 years. We also

established the first refugee coordination office in the Department of

State under the leadership of a special ambassador and coordinator for

refugee affairs and programs. The new legislation and the coordinator's

office will bring common sense and consolidation to our Nation's previously

fragmented, inconsistent, and in many ways, outdated, refugee and

immigration policies.

With the unexpected arrival of thousands of Cubans and Haitians who sought

refuge in our country last year, outside of our regular immigration and

refugee admissions process, our country and its government were tested in

being compassionate and responsive to a major human emergency. Because we

had taken steps to reorganize our refugee programs, we met that test

successfully. I am proud that the American people responded to this crisis

with their traditional good will and hospitality. Also, we would never have

been able to handle this unprecedented emergency without the efforts of the

private resettlement agencies who have always been there to help refugees

in crises.

Immigrants to this country always contribute more toward making our country

stronger than they ever take from the system. I am confident that the

newest arrivals to our country will carry on this tradition.

While we must remain committed to aiding and assisting those who come to

our shores, at the same time we must uphold our immigration and refugee

policies and provide adequate enforcement resources. As a result of our

enforcement policy, the illegal flow from Cuba has been halted and an

orderly process has been initiated to make certain that our refugee and

immigration laws are honored.

This year the Select Commission on Immigration and Refugee Policy will

complete its work and forward its advice and recommendations. I hope that

the recommendations will be carefully considered by the new Administration

and the Congress, for it is clear that we must take additional action to

keep our immigration policy responsive to emergencies and ever changing

times.

VETERANS

This country and its leadership has a continuing and unique obligation to

the men and women who served their nation in the armed forces and help

maintain or restore peace in the world.

My commitment to veterans, as evidenced by my record, is characterized by a

conscientious and consistent emphasis in these general areas:

First, we have worked to honor the Vietnam veteran. During my

Administration, and under the leadership of VA Administrator Max Cleland, I

was proud to lead our country in an overdue acknowledgement of our Nation's

gratitude to the men and women who served their country during the bitter

war in Southeast Asia. Their homecoming was deferred and seemed doomed to

be ignored. Our country has matured in the last four years and at long last

we were able to separate the war from the warrior and honor these veterans.

But with our acknowledgement of their service goes an understanding that

some Vietnam veterans have unique needs and problems.

My Administration was able to launch a long sought after psychological

readjustment and outreach program, unprecedented in its popularity,

sensitivity and success. This program must be continued. The Administration

has also grappled with the difficult questions posed by some veterans who

served in Southeast Asia and were exposed to potentially harmful

substances, including the herbicide known as Agent Orange. We have launched

scientific inquiries that should answer many veterans' questions about

their health and should provide the basis for establishing sound

compensation policy. We cannot rest until their concerns are dealt with in

a sensitive, expeditious and compassionate fashion.

Second, we have focused the VA health care system in the needs of the

service-connected disabled veteran. We initiated and are implementing the

first reform of the VA vocational rehabilitation system since its inception

in 1943. Also, my Administration was the first to seek a cost-of-living

increase for the recipients of VA compensation every year. My last budget

also makes such a request. The Administration also launched the Disabled

Veterans Outreach Program in the Department of Labor which has successfully

placed disabled veterans in jobs. Services provided by the VA health care

system will be further targeted to the special needs of disabled veterans

during the coming year.

Third, the VA health care system, the largest in the free world, has

maintained its independence and high quality during my Administration. We

have made the system more efficient and have therefore treated more

veterans than ever before by concentrating on out-patient care and through

modern management improvements. As the median age of the American veteran

population increases, we must concentrate on further changes within the VA

system to keep it independent and to serve as a model to the nation and to

the world as a center for research, treatment and rehabilitation.

Government Assistance

GENERAL AID TO STATE AND LOCAL GOVERNMENTS

Since taking office, I have been strongly committed to strengthening the

fiscal and economic condition of our Nation's State and local governments.

I have accomplished this goal by encouraging economic development of local

communities, and by supporting the General Revenue Sharing and other

essential grant-in-aid programs.

GRANTS-IN-AID TO STATES AND LOCALITIES

During my Administration, total grants-in-aid to State and local

governments have increased by more than 40 percent, from $68 billion in

Fiscal Year 1977 to $96 billion in Fiscal Year 1981. This significant

increase in aid has allowed States and localities to maintain services that

are essential to their citizens without imposing onerous tax burdens. It

also has allowed us to establish an unprecedented partnership between the

leaders of the Federal government and State and local government elected

officials.

GENERAL REVENUE SHARING

Last year Congress enacted legislation that extends the General Revenue

Sharing program for three more years. This program is the cornerstone of

our efforts to maintain the fiscal health of our Nation's local government.

It will provide $4.6 billion in each of the next three years to cities,

counties and towns. This program is essential to the continued ability of

our local governments to provide essential police, fire and sanitation

services.

This legislation renewing GRS will be the cornerstone of

Federal-State-local government relations in the 1980's. This policy will

emphasize the need for all levels of government to cooperate in order to

meet the needs of the most fiscally strained cities and counties, and also

will emphasize the important role that GRS can play in forging this

partnership. I am grateful that Congress moved quickly to assure that our

Nation's localities can begin the 1980's in sound fiscal condition.

COUNTER-CYCLICAL ASSISTANCE

Last year, I proposed that Congress enact a $1 billion counter-cyclical

fiscal assistance program to protect States and localities from unexpected

changes in the national economy. This program unfortunately was not enacted

by the [full] Congress. I, therefore, have not included funding for

counter-cyclical aid in my Fiscal Year 1982 budget. Nevertheless, I urge

Congress to enact a permanent stand-by counter-cyclical program, so that

States and cities can be protected during the next economic downturn.

URBAN POLICY

Three years ago, I proposed the Nation's first comprehensive urban policy.

That policy involved more than one hundred improvements in existing Federal

programs, four new Executive Orders and nineteen pieces of urban-oriented

legislation. With Congress' cooperation, sixteen of these bills have now

been signed into law.

ECONOMIC DEVELOPMENT

One of the principal goals of my domestic policy has been to strengthen the

private sector economic base of our Nation's economically troubled urban

and rural areas. With Congress' cooperation, we have substantially expanded

the Federal government's economic development programs and provided new tax

incentives for private investment in urban and rural communities. These

programs have helped many communities to attract new private sector jobs

and investments and to retain the jobs and investments that already are in

place.

When I took office, the Federal government was spending less than $300

million annually on economic development programs, and only $60 million of

those funds in our Nation's urban areas. Since that time, we have created

the Urban Development Action Grant (UDAG) program and substantially

expanded the economic development programs in the Commerce Department. My

FY 1982 budget requests more than $1.5 billion for economic development

grants, loans and interest subsidies and almost $1.5 billion for loan

guarantees. Approximately 60 percent of these funds will be spent in our

Nation's urban areas. In addition, we have extended the 10 percent

investment credit to include rehabilitation of existing industrial

facilities as well as new construction.

I continue to believe that the development of private sector investment and

jobs is the key to revitalizing our Nation's economically depressed urban

and rural areas. To ensure that the necessary economic development goes

forward, the Congress must continue to provide strong support for the UDAG

program and the programs for the Economic Development Administration. Those

programs provide a foundation for the economic development of our Nation in

the 1980's.

COMMUNITY DEVELOPMENT

The partnership among Federal, State and local governments to revitalize

our Nation's communities has been a high priority of my Administration.

When I took office, I proposed a substantial expansion of the Community

Development Block Grant (CDBG) program and the enactment of a new $400

million Urban Development Action Grant (UDAG) program. Both of these

programs have provided essential community and economic development

assistance to our Nation's cities and counties.

Last year, Congress reauthorized both the CDBG and UDAG programs. The CDBG

program was reauthorized for three more years with annual funding increases

of $150 million, and the UDAG program was extended for three years at the

current funding level of $675 million annually. My 1982 budget requests

full funding for both of these programs. These actions should help our

Nation's cities and counties to continue the progress they have made in the

last three years.

NEIGHBORHOODS

During my Administration we have taken numerous positive steps to achieve a

full partnership of neighborhood organizations and government at all

levels. We have successfully fought against red lining and housing

discrimination. We created innovative Self Help funding and technical

resource transfer mechanisms. We have created unique methods of access for

neighborhood organizations to have a participating role in Federal and

State government decision-making. Neighborhood based organizations are the

threshold of the American community.

The Federal government will need to develop more innovative and practical

ways for neighborhood based organizations to successfully participate in

the identification and solution of local and neighborhood concerns. Full

partnership will only be achieved with the knowing participation of leaders

of government, business, education and unions. Neither state nor Federal

solutions imposed from on high will suffice. Neighborhoods are the fabric

and soul of this great land. Neighborhoods define the weave that has been

used to create a permanent fabric. The Federal government must take every

opportunity to provide access and influence to the individuals and

organizations affected at the neighborhood level.

Rural Policy

Since the beginning of my Administration, I have been committed to

improving the effectiveness with which the Federal government deals with

the problems and needs of a rapidly changing rural America. The rapid

growth of some rural areas has placed a heavy strain on communities and

their resources. There are also persistent problems of poverty and economic

stagnation in other parts of rural America. Some rural areas continue to

lose population, as they have for the past several decades.

In December, 1979, I announced the Small Community and Rural Development

Policy. It was the culmination of several years' work and was designed to

address the varying needs of our rural population. In 1980, my

Administration worked with the Congress to pass the Rural Development

Policy Act of 1980, which when fully implemented will allow us to meet the

needs of rural people and their communities more effectively and more

efficiently.

As a result of the policy and the accompanying legislation, we have:

--Created the position of Under Secretary of Agriculture for Small

Community and Rural Development to provide overall leadership.

--Established a White House Working Group to assist in the implementation

of the policy.

--Worked with more than 40 governors to form State rural development

councils to work in partnership with the White House Working Group, and the

Federal agencies, to better deliver State and Federal programs to rural

areas.

--Directed the White House Working Group to annually review existing and

proposed policies, programs, and budget levels to determine their adequacy

in meeting rural needs and the fulfilling of the policy's objectives and

principles.

This effort on the part of my Administration and the Congress has resulted

in a landmark policy. For the first time, rural affairs has received the

prominence it has always deserved. It is a policy that can truly help

alleviate the diverse and differing problems rural America will face in the

1980's.

With the help and dedication of a great many people around the country who

are concerned with rural affairs, we have constructed a mechanism for

dealing effectively with rural problems. There is now a great opportunity

to successfully combine Federal efforts with the efforts of rural community

leaders and residents. It is my hope this spirit of cooperation and record

of accomplishment will be continued in the coming years.

CONSUMERS

In September, 1979, I signed an Executive Order designed to strengthen and

coordinate Federal consumer programs and to establish procedures to improve

and facilitate consumer participation in government decision-making. Forty

Federal agencies have adopted programs to comply with the requirements of

the Order. These programs will improve complaint handling, provide better

information to consumers, enhance opportunities for public participation in

government proceedings, and assure that the consumer point of view is

considered in all programs, policies, and regulations.

While substantial progress has been made in assuring a consumer presence in

Federal agencies, work must continue to meet fully the goals of the

Executive Order. Close monitoring of agency compliance with the

requirements of the Order is necessary. Continued evaluation to assure that

the programs are effective and making maximum use of available resources is

also essential. As a complement to these initiatives, efforts to provide

financial assistance in regulatory proceedings to citizen groups, small

businesses, and others whose participation is limited by their economic

circumstances must continue to be pursued.

It is essential that consumer representatives in government pay particular

attention to the needs and interests of low-income consumers and

minorities. The Office of Consumer Affairs' publication, "People Power:

What Communities Are Doing to Counter Inflation," catalogues some of the

ways that government and the private sector can assist the less powerful in

our society to help themselves. New ways should be found to help foster

this new people's movement which is founded on the principle of

self-reliance.

Science and Technology

Science and technology contribute immeasurably to the lives of all

Americans. Our high standard of living is largely the product of the

technology that surrounds us in the home or factory. Our good health is due

in large part to our ever increasing scientific understanding. Our national

security is assured by the application pate science and technology will

bring.

The Federal government has a special role to play in science and

technology. Although the fruits of scientific achievements surround us, it

is often difficult to predict the benefits that will arise from a given

scientific venture. And these benefits, even if predictable, do not usually

lead to ownership rights. Accordingly, the Government has a special

obligation to support science as an investment in our future.

My Administration has sought to reverse a decade-long decline in funding.

Despite the need for fiscal restraint, real support of basic research has

grown nearly 11% during my term in office. And, my Administration has

sought to increase the support of long-term research in the variety of

mission agencies. In this way, we can harness the American genius for

innovation to meet the economic, energy, health, and security challenges

that confront our nation.

--International Relations and National Security. Science and technology

are becoming increasingly important elements of our national security and

foreign policies. This is especially so in the current age of sophisticated

defense systems and of growing dependence among all countries on modern

technology for all aspects of their economic strength. For these reasons,

scientific and technological considerations have been integral elements of

the Administration's decision-making on such national security and foreign

policy issues as the modernization of our strategic weaponry, arms control,

technology transfer, the growing bilateral relationship with China, and our

relations with the developing world.

Four themes have shaped U.S. policy in international scientific and

technological cooperation: pursuit of new international initiatives to

advance our own research and development objectives; development and

strengthening of scientific exchange to bridge politically ideological, and

cultural divisions between this country and other countries; formulation of

programs and institutional relations to help developing countries use

science and technology beneficially; and cooperation with other nations to

manage technologies with local impact. At my direction, my Science and

Technology Adviser has actively pursued international programs in support

of these four themes. We have given special attention to scientific and

technical relations with China, to new forms of scientific and technical

cooperation with Japan, to cooperation with Mexico, other Latin American

and Caribbean countries and several states in Black America, and to the

proposed Institute for Scientific and Technological Cooperation.

In particular our cooperation with developing countries reflects the

importance that each of them has placed on the relationship between

economic growth and scientific and technological capability. It also

reflects their view that the great strength of the U.S. in science and

technology makes close relations with the U.S. technical community an

especially productive means of enhancing this capability. Scientific and

technological assistance is a key linkage between the U.S. and the

developing world, a linkage that has been under-utilized in the past and

one which we must continue to work to strengthen.

--Space Policy. The Administration has established a framework for a

strong and evolving space program for the 1980's.

The Administration's space policy reaffirmed the separation of military

space systems and the open civil space program, and at the same time,

provided new guidance on technology transfer between the civil and military

programs. The civil space program centers on three basic tenets: First, our

space policy will reflect a balanced strategy of applications, science, and

technology development. Second, activities will be pursued when they can be

uniquely or more efficiently accomplished in space. Third, a premature

commitment to a high challenge, space-engineering initiative of the

complexity of Apollo is inappropriate. As the Shuttle development phases

down, however, there will be added flexibility to consider new space

applications, space science and new space exploration activities.

--Technology Development. The Shuttle dominates our technology development

effort and correctly so. It represents one of the most sophisticated

technological challenges ever undertaken, and as a result, has encountered

technical problems. Nonetheless, the first manned orbital flight is now

scheduled for March, 1981. I have been pleased to support strongly the

necessary funds for the Shuttle throughout my Administration.

--Space Applications. Since 1972, the U.S. has conducted experimental

civil remote sensing through Landsat satellites, thereby realizing many

successful applications. Recognizing this fact, I directed the

implementation of an operational civil land satellite remote sensing

system, with the operational management responsibility in Commerce's

National Oceanic and Atmospheric Administration. In addition, because ocean

observations from space can meet common civil and military data

requirements, a National Oceanic Satellite System has been proposed as a

major FY 1981 new start.

--Space Science Exploration. The goals of this Administration's policy in

space science have been to: (1) continue a vigorous program of planetary

exploration to understand the origin and evolution of the solar system; (2)

utilize the space telescope and free-flying satellites to usher in a new

era of astronomy; (3) develop a better understanding of the sun and its

interaction with the terrestrial environment; and (4) utilize the Shuttle

and Spacelab to conduct basic research that complements earth-based life

science investigations.

DISTRICT OF COLUMBIA

Washington, D.C., is home to both the Federal Government and to more than

half a million American citizens. I have worked to improve the relationship

between the Federal establishment and the Government of the District of

Columbia in order to further the goals and spirit of home rule. The City

controls more of its own destiny than was the case four years ago. Yet,

despite the close cooperation between my Administration and that of Mayor

Barry, we have not yet seen the necessary number of states ratify the

Constitutional Amendment granting full voting representation in the

Congress to the citizens of this city. It is my hope that this inequity

will be rectified. The country and the people who inhabit Washington

deserve no less.

THE ARTS

The arts are a precious national resource.

Federal support for the arts has been enhanced during my Administration by

expanding government funding and services to arts institutions, individual

artists, scholars, and teachers through the National Endowment for the

Arts. We have broadened its scope and reach to a more diverse population.

We have also reactivated the Federal Council on the Arts and Humanities.

It is my hope that during the coming years the new Administration and the

Congress will:

--Continue support of institutions promoting development and understanding

of the arts;

--Encourage business participants in a comprehensive effort to achieve a

truly mixed economy of support for the arts;

--Explore a variety of mechanisms to nurture the creative talent of our

citizens and build audiences for their work;

--Support strong, active National Endowments for the Arts;

--Seek greater recognition for the rich cultural tradition of the nation's

minorities;

--Provide grants for the arts in low-income neighborhoods.

THE HUMANITIES

In recently reauthorizing Federal appropriations for the National Endowment

for the Humanities, the Congress has once again reaffirmed that "the

encouragement and support of national progress and scholarship in the

humanities . . . while primarily a matter for private and local initiative,

is also an appropriate matter of concern to the Federal Government" and

that "a high civilization must not limit its efforts to science and

technology alone but must give full value and support to the other great

branches of man's scholarly and cultural activity in order to achieve a

better understanding of the past, a better analysis of the present, and a

better view of the future."

I believe we are in agreement that the humanities illuminate the values

underlying important personal, social, and national questions raised in our

society by its multiple links to and increasing dependence on technology,

and by the diverse heritage of our many regions and ethnic groups. The

humanities cast light on the broad issue of the role in a society of men

and women of imagination and energy--those individuals who through their

own example define "the spirit of the age," and in so doing move nations.

Our Government's support for the humanities, within the framework laid down

by the Congress, is a recognition of their essential nourishment of the

life of the mind and vital enrichment of our national life.

I will be proposing an increase in funding this year sufficient to enable

the Endowment to maintain the same level of support offered our citizens in

Fiscal Year 1981.

In the allocation of this funding, special emphasis will be given to:

--Humanities education in the nation's schools, in response to the great

needs that have arisen in this area;

--Scholarly research designed to increase our understanding of the

cultures, traditions, and historical forces at work in other nations and in

our own;

--Drawing attention to the physical disintegration of the raw material of

our cultural heritage--books, manuscripts, periodicals, and other

documents--and to the development of techniques to prevent the destruction

and to preserve those materials; and

--The dissemination of quality programming in the humanities to

increasingly large American audiences through the use of radio and

television.

The dominant effort in the Endowment's expenditures will be a commitment to

strengthen and promulgate scholarly excellence and achievement in work in

the humanities in our schools, colleges, universities, libraries, museums

and other cultural institutions, as well as in the work of individual

scholars or collaborative groups engaged in advanced research in the

humanities.

In making its grants the Endowment will increase its emphasis on techniques

which stimulate support for the humanities from non-Federal sources, in

order to reinforce our tradition of private philanthropy in this field, and

to insure and expand the financial viability of our cultural institutions

and life.

INSULAR AREAS

I have been firmly committed to self-determination for Puerto Rico, the

Virgin Islands, Guam, American Samoa and the Northern Mariana Islands, and

have vigorously supported the realization of whatever political status

aspirations are democratically chosen by their peoples. This principle was

the keystone of the comprehensive territorial policy I sent the Congress

last year. I am pleased that most of the legislative elements of that

policy were endorsed by the 96th Congress.

The unique cultures, fragile economies, and locations of our Caribbean and

Pacific Islands are distinct assets to the United States which require the

sensitive application of policy. The United States Government should pursue

initiatives begun by my Administration and the Congress to stimulate

insular economic development; enhance treatment under Federal programs

eliminating current inequities; provide vitally needed special assistance

and coordinate and rationalize policies. These measures will result in

greater self-sufficiency and balanced growth. In particular, I hope that

the new Congress will support funding for fiscal management, comprehensive

planning and other technical assistance for the territories, as well as

create the commission I have proposed to review the applicability of all

Federal laws to the insular areas and make recommendations for appropriate

modification.

IV. REMOVING GOVERNMENTAL WASTE AND INEFFICIENCY

One of my major commitments has been to restore public faith in our Federal

government by cutting out waste and inefficiency. In the past four years,

we have made dramatic advances toward this goal, many of them previously

considered impossible to achieve. Where government rules and operations

were unnecessary, they have been eliminated, as with airline, rail,

trucking and financial deregulation. Where government functions are needed,

they have been streamlined, through such landmark measures as the Civil

Service Reform Act of 1978. I hope that the new administration and the

Congress will keep up the momentum we have established for effective and

responsible change in this area of crucial public concern.

CIVIL SERVICE REFORM

In March 1978, I submitted the Civil Service Reform Act to Congress. I

called it the centerpiece of my efforts to reform and reorganize the

government. With bipartisan support from Congress, the bill passed, and I

am pleased to say that implementation is running well ahead of the

statutory schedule. Throughout the service, we are putting into place the

means to assure that reward and retention are based on performance and not

simply on length of time on the job. In the first real test of the Reform

Act, 98 percent of the eligible top-level managers joined the Senior

Executive Service, choosing to relinquish job protections for the challenge

and potential reward of this new corps of top executives. Though the Act

does not require several of its key elements to be in operation for another

year, some Federal agencies already have established merit pay systems for

GS-13-15 managers, and most agencies are well on their way to establishing

new performance standards for all their employees. All have paid out, or

are now in the process of paying out, performance bonuses earned by

outstanding members of the Senior Executive Service. Dismissals have

increased by 10 percent, and dismissals specifically for inadequate job

performance have risen 1500 percent, since the Act was adopted. Finally, we

have established a fully independent Merit Systems Protection Board and

Special Counsel to protect the rights of whistle-blowers and other Federal

employees faced with threats to their rights.

In 1981, civil service reform faces critical challenges, all agencies must

have fully functioning performance appraisal systems for all employees, and

merit pay systems for compensating the government's 130,000 GS-13-15

managers. Performance bonuses for members of the Senior Executive Service

will surely receive scrutiny. If this attention is balanced and

constructive, it can only enhance the chances for ultimate success of our

bipartisan commitment to the revolutionary and crucial "pay for

performance" concept.

REGULATORY REFORM

During the past four years we have made tremendous progress in regulatory

reform. We have discarded old economic regulations that prevented

competition and raised consumer costs, and we have imposed strong

management principles on the regulatory programs the country needs, cutting

paperwork and other wasteful burdens. The challenge for the future is to

continue the progress in both areas without crippling vital health and

safety programs.

Our economic deregulation program has achieved major successes in five

areas:

Airlines: The Airline Deregulation Act is generating healthy competition,

saving billions in fares, and making the airlines more efficient. The Act

provides that in 1985 the CAB itself will go out of existence.

Trucking: The trucking deregulation bill opens the industry to competition

and allows truckers wide latitude on the routes they drive and the goods

they haul. The bill also phases out most of the old law's immunity for

setting rates. The Congressional Budget Office estimates these reforms will

save as much as $8 billion per year and cut as much as half a percentage

point from the inflation rate.

Railroads: Overregulation has stifled railroad management initiative,

service, and competitive pricing. The new legislation gives the railroads

the freedom they need to rebuild a strong, efficient railroad industry.

Financial Institutions: With the help of the Congress, over the past four

years we have achieved two major pieces of financial reform legislation,

legislation which has provided the basis for the most far-reaching changes

in the financial services industry since the 1930's. The International

Banking Act of 1978 was designed to reduce the advantages that foreign

banks operating in the United States possessed in comparison to domestic

banks. The Depository Institutions Deregulation and Monetary Control Act,

adopted last March, provides for the phased elimination of a variety of

anti-competitive barriers to financial institutions and freedom to offer

services to and attract the savings of consumers, especially small savers.

Recently, I submitted to the Congress my Administration's recommendations

for the phased liberalization of restrictions on geographic expansion by

commercial banks. Last year the Administration and financial regulatory

agencies proposed legislation to permit the interstate acquisition of

failing depository institutions. In view of the difficult outlook for some

depository institutions I strongly urge the Congress to take prompt

favorable action on the failing bank legislation.

Telecommunications: While Congress did not pass legislation in this area,

the Federal Communications Commission has taken dramatic action to open all

aspects of communications to competition and to eliminate regulations in

the areas where competition made them obsolete. The public is benefitting

from an explosion of competition and new services.

While these initiatives represent dramatic progress in economic

deregulation, continued work is needed. I urge Congress to act on

communications legislation and to consider other proposed deregulation

measures, such as legislation on the bus industry. In addition, the

regulatory commissions must maintain their commitment to competition as the

best regulator of all.

The other part of my reform program covers the regulations that are needed

to protect the health, safety, and welfare of our citizens. For these

regulations, my Administration has created a management program to cut

costs without sacrificing goals. Under my Executive Order 12044, we

required agencies to analyze the costs of their major new rules and

consider alternative approaches, such as performance standards and

voluntary codes, that may make rules less costly and more flexible. We

created the Regulatory Analysis Review Group in the White House to analyze

the most costly proposed new rules and find ways to improve them. The

Regulatory Council was established to provide the first Government-wide

listing of upcoming rules and eliminate overlapping and conflicting

regulations. Agencies have launched "sunset" programs to weed out outmoded

old regulations. We have acted to encourage public participation in

regulatory decision-making.

These steps have already saved billions of dollars in regulatory costs and

slashed thousands of outmoded regulations. We are moving steadily toward a

regulatory system that provides needed protections fairly, predictably, and

at minimum cost.

I urge Congress to continue on this steady path and resist the simplistic

solutions that have been proposed as alternatives. Proposals like

legislative veto and increased judicial review will add another layer to

the regulatory process, making it more cumbersome and inefficient. The

right approach to reform is to improve the individual statutes, where they

need change, and to ensure that the regulatory agencies implement those

statutes sensibly.

PAPERWORK REDUCTION

The Federal Government imposes a huge paperwork burden on business, local

government, and the private sector. Many of these forms are needed for

vital government functions, but others are duplicative, overly complex or

obsolete.

During my Administration we cut the paperwork burden by 15 percent, and we

created procedures to continue this progress. The new Paperwork Reduction

Act centralizes, in OMB, oversight of all agencies' information

requirements and strengthens OMB's authority to eliminate needless forms.

The "paperwork budget" process, which I established by executive order,

applies the discipline of the budget process to the hours of reporting time

imposed on the public, forcing agencies to scrutinize all their forms each

year. With effective implementation, these steps should allow further,

substantial paperwork cuts in the years ahead.

TIGHTENING STANDARDS FOR GOVERNMENTAL EFFICIENCY AND INTEGRITY

To develop a foundation to carry out energy policy, we consolidated

scattered energy programs and launched the Synthetic Fuels Corporation; to

give education the priority it deserves and at the same time reduce HHS to

more manageable size, I gave education a seat at the Cabinet table, to

create a stronger system for attacking waste and fraud, I reorganized audit

and investigative functions by putting an Inspector General in major

agencies. Since I took office, we have submitted 14 reorganization

initiatives and had them all approved by Congress. We have saved hundreds

of millions of dollars through the adoption of businesslike cash management

principles and set strict standards for personal financial disclosure and

conflict of interest avoidance by high Federal officials.

To streamline the structure of the government, we have secured approval of

14 reorganization initiatives, improving the efficiency of the most

important sectors of the government, including energy, education, and civil

rights enforcement. We have eliminated more than 300 advisory committees as

well as other agencies, boards and commissions which were obsolete or

ineffective. Independent Inspectors General have been appointed in major

agencies to attack fraud and waste. More than a billion dollars of

questionable transactions have been identified through their audit

activities.

The adoption of business-like cash management and debt collection

initiatives will save over $1 billion, by streamlining the processing of

receipts, by controlling disbursements more carefully, and by reducing idle

cash balances. Finally this Administration has set strict standards for

personal financial disclosure and conflict of interest avoidance by high

Federal officials, to elevate the level of public trust in the government.

V. PROTECTING BASIC RIGHTS AND LIBERTIES

I am extremely proud of the advances we have made in ensuring equality and

protecting the basic freedoms of all Americans.

--The Equal Employment Opportunity Commission (EEOC) and the Office of

Federal Contract Compliance (OFCCP) have been reorganized and strengthened

and a permanent civil rights unit has been established in OMB.

--To avoid fragmented, inconsistent and duplicative enforcement of civil

rights laws, three agencies have been given coordinative and

standard-setting responsibilities in discrete areas: EEOC for all

employment-related activities, HUD for all those relating to housing, and

the Department of Justice for all other areas.

--With the enactment of the Right to Financial Privacy Act and a bill

limiting police search of newsrooms, we have begun to establish a sound,

comprehensive, privacy program.

Ratification of the Equal Rights Amendment must be aggressively pursued.

Only one year remains in which to obtain ratification by three additional

states.

The Congress must give early attention to a number of important bills which

remain. These bills would:

--strengthen the laws against discrimination in housing. Until it is

enacted, the 1968 Civil Rights Act's promise of equal access to housing

will remain unfulfilled;

--establish a charter for the FBI and the intelligence agencies. The

failure to define in law the duties and responsibilities of these agencies

has made possible some of the abuses which have occurred in recent years;

--establish privacy safeguards for medical research, bank, insurance, and

credit records; and provide special protection for election fund transfer

systems.

EQUAL RIGHTS AMENDMENT

I remain committed as strongly as possible to the ratification of the Equal

Rights Amendment.

As a result of our efforts in 1978, the Equal Rights Amendment's deadline

for ratification was extended for three years. We have now one year and

three States left. We cannot afford any delay in marshalling our resources

and efforts to obtain the ratification of those three additional States.

Although the Congress has no official role in the ratification process at

this point, you do have the ability to affect public opinion and the

support of State Legislators for the Amendment. I urge Members from States

which have not yet ratified the Equal Rights Amendment to use their

influence to secure ratification. I will continue my own efforts to help

ensure ratification of the Equal Rights Amendment.

MARTIN LUTHER KING, JR.

Dr. Martin Luther King, Jr. led this Nation's effort to provide all its

citizens with civil rights and equal opportunities. His commitment to human

rights, peace and non-violence stands as a monument to his humanity and

courage. As one of our Nation's most outstanding leaders, it is appropriate

that his birthday be commemorated as a national holiday. I hope the

Congress will enact legislation this year that will achieve this goal.

FAIR HOUSING

The Fair Housing Act Amendments of 1980 passed the House of Representatives

by an overwhelming bipartisan majority only to die in the Senate at the

close of the 96th Congress. The leaders of both parties have pledged to

make the enactment of fair housing legislation a top priority of the

incoming Congress. The need is pressing and a strengthened federal

enforcement effort must be the primary method of resolution.

CRIMINAL CODE

The Federal criminal laws are often archaic, frequently contradictory and

imprecise, and clearly in need of revision and codification. The new

Administration should continue the work which has been begun to develop a

Federal criminal code which simplifies and clarifies our criminal laws,

while maintaining our basic civil liberties and protections.

PRIVACY

As our public and private institutions collect more and more information

and as communications and computer technologies advance, we must act to

protect the personal privacy of our citizens.

In the past four years we acted on the report of the Privacy Commission and

established a national privacy policy. We worked with Congress to pass

legislation restricting wiretaps and law enforcement access to bank records

and to reporters' files. We reduced the number of personal files held by

the government and restricted the transfer of personal information among

Federal agencies. We also worked with the Organization for Economic

Cooperation and Development to establish international guidelines to

protect the privacy of personal information that is transferred across

borders.

VI. PROTECTING AND DEVELOPING OUR NATURAL RESOURCES

Two of our Nation's most precious natural resources are our environment and

our vast agricultural capacity. From the beginning of my Administration, I

have worked with the Congress to enhance and protect, as well as develop

our natural resources. In the environmental areas, I have been especially

concerned about the importance of balancing the need for resource

development with preserving a clean environment, and have taken numerous

actions to foster this goal. In the agricultural area, I have taken the

steps needed to improve farm incomes and to increase our agricultural

production to record levels. That progress must be continued in the 1980's.

ENVIRONMENT

Preserving the quality of our environment has been among the most important

objectives of my Administration and of the Congress. As a result of these

shared commitments and the dedicated efforts of many members of the

Congress and my Administration, we have achieved several historic

accomplishments.

PROTECTION OF ALASKA LANDS

Passage of the Alaska National Interest Lands Conservation Act was one of

the most important conservation actions of this century. At stake was the

fate of millions of acres of beautiful land, outstanding and unique

wildlife populations, native cultures, and the opportunity to ensure that

future generations of Americans would be able to enjoy the benefits of

these nationally significant resources. As a result of the leadership,

commitment, and persistence of my Administration and the Congressional

leadership, the Alaska Lands Bill was signed into law last December.

The Act adds 97 million acres of new parks and refuges, more than doubling

the size of our National Park and National Wildlife Refuge Systems. The

bill triples the size of our national wilderness system, increasing its

size by 56 million acres. And by adding 25 free-flowing river segments to

the Wild and Scenic River System, the bill almost doubles the river mileage

in that system. The Alaska Lands Act reaffirms our commitment to the

environment and strikes a balance between protecting areas of great beauty

and allowing development of Alaska's oil, gas, mineral, and timber

resources.

PROTECTION OF NATURAL RESOURCES

In addition to the Alaska Lands Act, over the past four years we have been

able to expand significantly the national wilderness and parks systems. In

1978, the Congress passed the historical Omnibus Parks Act, which made 12

additions to the National Park System. The Act also established the first

two national trails since the National Trails System Act was passed in

1968. Then, in 1980, as a result of my 1979 Environmental Message, the

Federal land management agencies have established almost 300 new National

Recreational Trails. With the completion of the RARE II process, which

eliminated the uncertainty surrounding the status of millions of acres of

land, we called for over 15 million acres of new wilderness in the nation's

National Forest, in 1980 the Congress established about 4.5 million acres

of wilderness in the lower 48 states. In addition, the Administration

recommended legislation to protect Lake Tahoe, and through an Executive

Order has already established a mechanism to help ensure the Lake's

protection. Finally, in 1980 the Administration established the Channel

Islands Marine Sanctuary.

Administration actions over the past four years stressed the importance of

providing Federal support only for water resource projects that are

economically and environmentally sound. This policy should have a major and

lasting influence on the federal government's role in water resource

development and management. The Administration's actions to recommend to

the Congress only economically and environmentally sound water resource

projects for funding resulted not only in our opposing uneconomic projects

but also, in 1979, in the first Administration proposal of new project

starts in 4 years.

One of the most significant water policy actions of the past four years was

the Administration's June 6, 1978 Water Policy Reform Message to the

Congress. This Message established a new national water resources policy

with the following objectives:

--to give priority emphasis to water conservation;

--to consider environmental requirements and values more fully and along

with economic factors in the planning and management of water projects and

programs;

--to enhance cooperation between state and federal agencies in water

resources planning and management.

In addition, the Executive Office of the President established 11 policy

decision criteria to evaluate the proposed federal water projects, the

Water Resources Council developed and adopted a new set of Principles and

Standards for water projects which is binding on all federal construction

agencies, and improved regulations were developed to implement the National

Historic Preservation Act and the Fish and Wildlife Coordination Act. As a

result, water resource projects must be determined to be economically sound

before the Administration will recommend authorization or appropriation.

Over the years ahead, this policy will help to reduce wasteful federal

spending by targeting federal funds to the highest priority water resource

projects.

In the pursuit of this policy, however, we cannot lose projects. In the

part that sound water resource projects play in providing irrigation,

power, and flood control. We must also recognize the special needs of

particular regions of the country in evaluating the need for additional

projects.

ADDRESSING GLOBAL RESOURCE AND ENVIRONMENTAL PROBLEMS

The Global 2000 Report to the President, prepared in response to my 1977

Environment Message, is the first of its kind. Never before has our

government, or any government, taken such a comprehensive, long-range look

at the interrelated global issues of resources, population, and

environment.

The Report's conclusions are important. They point to a rapid increase in

population and human needs through the year 2000 while at the same time a

decline in the earth's capacity to meet those needs, unless nations of the

world act decisively to alter current trends.

The United States has contributed actively to a series of U.N. conferences

on the environment, population, and resources, and is preparing for

the 1981 Conference on New and Renewable Sources of Energy. Following my

1977 Environmental Message, the Administration development assistance

programs have added emphasis to natural resource management and

environmental protection. My 1979 Environmental Message called attention to

the alarming loss of world forests, particularly in the tropics. An

interagency task force on tropical forests has developed a U.S. government

program to encourage conservation and wise management of tropical forests.

The Administration is encouraging action by other nations and world

organizations to the same purpose. The United States is a world leader in

wildlife conservation and the assessment of environmental effects of

government actions. The January 5, 1979, Executive Order directing U.S.

government agencies to consider the effects of their major actions abroad,

is another example of this leadership.

COMMITMENT TO CONTROL OF POLLUTION AND HAZARDOUS CHEMICALS

Over the past four years, there has been steady progress towards cleaner

air and water, sustained by the commitment of Congress and the

Administration to these important national objectives. In addition, the

Administration has developed several new pollution compliance approaches

such as alternative and innovative waste water treatment projects, the

"bubble" concept, the "offset" policy, and permit consolidation, all of

which are designed to reduce regulatory burdens on the private sector.

One of the most pressing problems to come to light in the past four years

has been improper hazardous waste disposal. The Administration has moved on

three fronts. First, we proposed the Oil Hazardous Substances and Hazardous

Waste Response, Liability and Compensation Act (the Superfund bill) to

provide comprehensive authority and $1.6 billion in funds to clean up

abandoned hazardous waste disposal sites. In November 1980 the Congress

passed a Superfund bill which I signed into law.

Second, the administration established a hazardous waste enforcement strike

force to ensure that when available, responsible parties are required to

clean up sites posing dangers to public health and to the environment. To

date, 50 lawsuits have been brought by the strike force.

Third, regulations implementing subtitle C of the Resource Conservation and

Recovery Act were issued. The regulations establish comprehensive controls

for hazardous waste and, together with vigorous enforcement, will help to

ensure that Love Canal will not be repeated.

THE FUTURE

For the future, we cannot, and we must not, forget that we are charged with

the stewardship of an irreplaceable environment and natural heritage. Our

children, and our children's children, are dependent upon our maintaining

our commitment to preserving and enhancing the quality of our environment.

It is my hope that when our descendants look back on the 1980's they will

be able to affirm:

--that we kept our commitment to the restoration of environmental

quality;

--that we protected the public health from the continuing dangers of toxic

chemicals, from pollution, from hazardous and radioactive waste, and that

we made our communities safer, healthier and better places to live;

--that we preserved America's wilderness areas and particularly its last

great frontier, Alaska, for the benefit of all Americans in perpetuity;

--that we put this nation on a path to a sustainable energy future, one

based increasingly on renewable resources and on energy conservation;

--that we moved to protect America's countryside and coastland from

mismanagement and irresponsibility;

--that we redirected the management of the nation's water resources toward

water conservation, sound development and environmental protection;

--that we faced squarely such worldwide problems as the destruction of

forests, acid rain, carbon dioxide build-up and nuclear proliferation; and

--that we protected the habitat and the existence of our own species on

this earth.

AGRICULTURE THE FARM ECONOMY

The farm economy is sound and its future is bright. Agriculture remains a

major bulwark of the nation's economy and an even more important factor in

the world food system. The demand for America's agricultural abundance,

here and abroad, continues to grow. In the near-term, the strength of this

demand is expected to press hard against supplies, resulting in continued

price strength.

The health and vitality of current-day agriculture represents a significant

departure from the situation that existed when I came to office four years

ago. In January 1977, the farm economy was in serious trouble. Farm prices

and farm income were falling rapidly. Grain prices were at their lowest

levels in years and steadily falling. Livestock producers, in their fourth

straight year of record losses, were liquidating breeding herds at an

unparalleled rate. Dairy farmers were losing money on every hundredweight

of milk they produced. Sugar prices were in a nosedive.

Through a combination of improvements in old, established programs and the

adoption of new approaches where innovation and change were needed, my

Administration turned this situation around. Commodity prices have steadily

risen. Farm income turned upward. U.S. farm exports set new records each

year, increasing over 80 percent for the four year period. Livestock

producers began rebuilding their herds. Dairy farmers began to earn a

profit again.

RECENT POLICY INITIATIVES

Several major agricultural policy initiatives have been undertaken over the

past year. Some are the culmination of policy proposals made earlier in

this Administration; others are measures taken to help farmers offset the

impact of rapid inflation in production costs. In combination, they

represent a significant strengthening of our nation's food and agricultural

policy. These initiatives include:

FOOD SECURITY RESERVE

The Congress authorized formation of a 4 million ton food grain reserve for

use in international food assistance. This reserve makes it possible for

the United States to stand behind its food aid commitment to food deficit

nations, even during periods of short supplies and high prices. This

corrects a serious fault in our past food assistance policy.

COMPREHENSIVE CROP INSURANCE

The Congress also authorized a significant new crop insurance program

during 1980. This measure provides farmers with an important new program

tool for sharing the economic risks that are inherent to agriculture. When

fully operational, it will replace a hodgepodge of disaster programs that

suffered from numerous shortcomings.

SPECIAL LOAN RATES

Another legislative measure passed late in the 2nd session of the 96th

Congress authorizes the Secretary of Agriculture to provide higher loan

rates to farmers who enter their grain in the farmer-owned grain reserve.

This additional incentive to participate will further strengthen the

reserve.

INCREASED LOAN PRICES

In July 1980, I administratively raised loan prices for wheat, feedgrains,

and soybeans to help offset the effects of a serious cost-price squeeze. At

the same time, the release and call prices for the grain reserve were

adjusted upward.

HIGHER TARGET PRICES

The Agricultural Adjustment Act of 1980 raised the target prices for

1980-crop wheat and feed grain crops. This change corrected for

shortcomings in the adjustment formula contained in the Food and

Agriculture Act of 1977.

FUTURE AGENDA

The food and agricultural policies adopted by this Administration over the

past four years, including those described above, will provide a firm

foundation for future governmental actions in this field. Expiration of the

Food and Agriculture Act of 1977 later this year will require early

attention by the Congress. With relatively minor changes, most of the

authorities contained in the 1977 Act should be extended in their present

form. The farmer-owned grain reserve has proven to be a particularly

effective means of stabilizing grain markets and should be preserved in

essentially its present form.

Beyond this, it will be important for the Congress to keep a close eye on

price-cost developments in the farm sector. As noted above, some of the

actions I took last year were for the purpose of providing relief from the

cost-price squeeze facing farmers. Should these pressures continue, further

actions might be required.

My Administration has devoted particular attention to the issues of world

hunger, agricultural land use, and the future structure of American

agriculture. I encourage the Congress and the next Administration to review

the results of these landmark enquiries and, where deemed appropriate, to

act on their recommendations.

Following a careful review of the situation, I recently extended the

suspension of grain sales to the Soviet Union. I am satisfied that this

action has served its purpose effectively and fairly. However, as long as

this suspension must remain in effect, it will be important for the next

Administration and the Congress to take whatever actions are necessary to

ensure that the burden does not fall unfairly on our Nation's farmers. This

has been a key feature of my Administration's policy, and it should be

maintained.

VII. FOREIGN POLICY

From the time I assumed office four years ago this month, I have stressed

the need for this country to assert a leading role in a world undergoing

the most extensive and intensive change in human history.

My policies have been directed in particular at three areas of change:

--the steady growth and increased projection abroad of Soviet military

power, power that has grown faster than our own over the past two decades.

--the overwhelming dependence of Western nations, which now increasingly

includes the United States, on vital oil supplies from the Middle East.

--the pressures of change in many nations of the developing world, in Iran

and uncertainty about the future stability of many developing countries.

As a result of those fundamental facts, we face some of the most serious

challenges in the history of this nation. The Soviet invasion of

Afghanistan is a threat to global peace, to East-West relations, and to

regional stable flow of oil. As the unprecedented relations, an and

overwhelming vote in the General Assembly demonstrated, countries across

the world, and particularly the nonaligned, regard the Soviet invasion as a

threat to their independence and security. Turmoil within the region

adjacent to the Persian Gulf poses risks for the security and prosperity of

every oil importing nation and thus for the entire global economy. The

continuing holding of American hostages in Iran is both an affront to

civilized people everywhere, and a serious impediment to meeting the

self-evident threat to widely-shared common interests, including those of

Iran.

But as we focus our most urgent efforts on pressing problems, we will

continue to pursue the benefits that only change can bring. For it always

has been the essence of America that we want to move on, we understand that

prosperity, progress and most of all peace cannot be had by standing still.

A world of nations striving to preserve their independence, and of peoples

aspiring for economic development and political freedom, is not a world

hostile to the ideals and interests of the United States. We face powerful

adversaries, but we have strong friends and dependable allies. We have

common interests with the vast majority of the world's nations and

peoples.

There have been encouraging developments in recent years, as well as

matters requiring continued vigilance and concern:

--Our alliances with the world's most advanced and democratic states from

Western Europe through Japan are stronger than ever.

--We have helped to bring about a dramatic improvement in relations

between Egypt and Israel and an historic step towards a comprehensive

Arab-Israeli settlement.

--Our relations with China are growing closer, providing a major new

dimension in our policy in Asia and the world.

--Across southern Africa from Rhodesia to Namibia we are helping with the

peaceful transition to majority rule in a context of respect for minority

as well as majority rights.

--We have worked domestically and with our allies to respond to an

uncertain energy situation by conservation and diversification of energy

supplies based on internationally agreed targets.

--We have unambiguously demonstrated our commitment to defend Western

interests in Southwest Asia, and we have significantly increased our

ability to do so.

--And over the past four years the U.S. has developed an energy program

which is comprehensive and ambitious. New institutions have been

established such as the Synthetic Fuels Corporation and Solar Bank. Price

decontrol for oil and gas is proceeding. American consumers have risen to

the challenge, and we have experienced real improvements in consumption

patterns.

The central challenge for us today is to our steadfastedness of purpose. We

are no longer tempted by isolationism. But we must also learn to deal

effectively with the contradictions of the world, the need to cooperate

with potential adversaries without euphoria, without undermining our

determination to compete with such adversaries and if necessary confront

the threats they may pose to our security.

We face a broad range of threats and opportunities. We have and should

continue to pursue a broad range of defense, diplomatic and economic

capabilities and objectives.

I see six basic goals for America in the world over the 1980's:

--First, we will continue, as we have over the past four years, to build

America's military strength and that of our allies and friends. Neither the

Soviet Union nor any other nation will have reason to question our will to

sustain the strongest and most flexible defense forces.

--Second, we will pursue an active diplomacy in the world, working,

together with our friends and allies, to resolve disputes through peaceful

means and to make any aggressor pay a heavy price.

--Third, we will strive to resolve pressing international economic

problems, particularly energy and inflation, and continue to pursue our

still larger objective of global economic growth through expanded trade and

development assistance and through the preservation of an open multilateral

trading system.

--Fourth, we will continue vigorously to support the process of building

democratic institutions and improving human rights protection around the

world. We are deeply convinced that the future lies not with dictatorship

but democracy.

--Fifth, we remain deeply committed to the process of mutual and

verifiable arms control, particularly to the effort to prevent the spread

and further development of nuclear weapons. Our decision to defer, but not

abandon our efforts to secure ratification of the SALT II Treaty reflects

our firm conviction that the United States has a profound national

security interest in the constraints on Soviet nuclear forces which only

that treaty can provide.

--Sixth, we must continue to look ahead in order to evaluate and respond

to resource, environment and population challenges through the end of this

century.

One very immediate and pressing objective that is uppermost on our minds

and those of the American people is the release of our hostages in Iran.

We have no basic quarrel with the nation, the revolution or the people

of Iran. The threat to them comes not from American policy but from Soviet

actions in the region. We are prepared to work with the government of Iran

to develop a new and mutually beneficial relationship.

But that will not be possible so long as Iran continues to hold Americans

hostages, in defiance of the world community and civilized behavior. They

must be released unharmed. We have thus far pursued a measured program of

peaceful diplomatic and economic steps in an attempt to resolve this issue

without resorting to other remedies available to us under international

law. This reflects the deep respect of our nation for the rule of law and

for the safety of our people being held, and our belief that a great power

bears a responsibility to use its strength in a measured and judicious

manner. But our patience is not unlimited and our concern for the

well-being of our fellow citizens grows each day.

ENHANCING NATIONAL SECURITY, AMERICAN MILITARY STRENGTH

The maintenance of national security is my first concern, as it has been

for every president before me.

We must have both the military power and the political will to deter our

adversaries and to support our friends and allies.

We must pay whatever price is required to remain the strongest nation in

the world. That price has increased as the military power of our major

adversary has grown and its readiness to use that power been made all too

evident in Afghanistan. The real increases in defense spending, therefore

probably will be higher than previously projected; protecting our security

may require a larger share of our national wealth in the future.

THE U.S.-SOVIET RELATIONSHIP

We are demonstrating to the Soviet Union across a broad front that it will

pay a heavy price for its aggression in terms of our relationship.

Throughout the last decades U.S.-Soviet relations have been a mixture of

cooperation and competition. The Soviet invasion of Afghanistan and the

imposition of a puppet government have highlighted in the starkest terms

the darker side of their policies, going well beyond competition and the

legitimate pursuit of national interest, and violating all norms of

international law and practice.

This attempt to subjugate an independent, non-aligned Islamic people is a

callous violation of international law and the United Nations Charter, two

fundamentals of international order. Hence, it is also a dangerous threat

to world peace. For the first time since the communization of Eastern

Europe after World War II, the Soviets have sent combat forces into an area

that was not previously under their control, into a non-aligned and

sovereign state.

The destruction of the independence of the Afghanistan government and the

occupation by the Soviet Union have altered the strategic situation in that

part of the world in a very ominous fashion. It has significantly shortened

the striking distance to the Indian Ocean and the Persian Gulf for the

Soviet Union.

It has also eliminated a buffer between the Soviet Union and Pakistan and

presented a new threat to Iran. These two countries are now far more

vulnerable to Soviet political intimidation. If that intimidation were to

prove effective, the Soviet Union could control an area of vital strategic

and economic significance to the survival of Western Europe, the Far East,

and ultimately the United States.

It has now been over a year since the Soviet invasion of Afghanistan dealt

a major blow to U.S.-Soviet relations and the entire international system.

The U.S. response has proven to be serious and far-reaching. It has been

increasingly effective, imposing real and sustained costs on the U.S.S.R.'s

economy and international image.

Meanwhile, we have encouraged and supported efforts to reach a political

settlement in Afghanistan which would lead to a withdrawal of Soviet forces

from that country and meet the interests of all concerned. It is Soviet

intransigence that has kept those efforts from bearing fruit.

Meanwhile, an overwhelming November resolution of the United Nations

General Assembly on Afghanistan has again made clear that the world has not

and will not forget Afghanistan. And our response continues to make it

clear that Soviet use of force in pursuit of its international objectives

is incompatible with the notion of business-as-usual.

BILATERAL COMMUNICATION

U.S.-Soviet relations remain strained by the continued Soviet presence in

Afghanistan, by growing Soviet military capabilities, and by the Soviets'

apparent willingness to use those capabilities without respect for the most

basic norms of international behavior.

But the U.S.-Soviet relationship remains the single most important element

in determining whether there will be war or peace. And so, despite serious

strains in our relations, we have maintained a dialogue with the Soviet

Union over the past year. Through this dialogue, we have ensured against

bilateral misunderstandings and miscalculations which might escalate out of

control, and have managed to avoid the injection of superpower rivalries

into areas of tension like the Iran-Iraq conflict.

POLAND

Now, as was the case a year ago, the prospect of Soviet use of force

threatens the international order. The Soviet Union has completed

preparations for a possible military intervention against Poland. Although

the situation in Poland has shown signs of stabilizing recently, Soviet

forces remain in a high state of readiness and they could move into Poland

on short notice. We continue to believe that the Polish people should be

allowed to work out their internal problems themselves, without outside

interference, and we have made clear to the Soviet leadership that any

intervention in Poland would have severe and prolonged consequences for

East-West detente, and U.S.-Soviet relations in particular.

DEFENSE BUDGET

For many years the Soviets have steadily increased their real defense

spending, expanded their strategic forces, strengthened their forces in

Europe and Asia, and enhanced their capability for projecting military

force around the world directly or through the use of proxies. Afghanistan

dramatizes the vastly increased military power of the Soviet Union.

The Soviet Union has built a war machine far beyond any reasonable

requirements for their own defense and security. In contrast, our own

defense spending declined in real terms every year from 1968 through 1976.

We have reversed this decline in our own effort. Every year since 1976

there has been a real increase in our defense spending, and our lead has

encouraged increases by our allies. With the support of the Congress, we

must and will make an even greater effort in the years ahead.

The Fiscal Year 1982 budget would increase funding authority for defense to

more than $196 billion. This amount, together with a supplemental request

for FY 1981 of about $6 billion, will more than meet my Administration's

pledge for a sustained growth of 3 percent in real expenditures, and

provides for 5 percent in program growth in FY 1982 and beyond.

The trends we mean to correct cannot be remedied overnight; we must be

willing to see this program through. To ensure that we do so I am setting a

growth rate for defense that we can sustain over the long haul.

The defense program I have proposed for the next five years will require

some sacrifice, but sacrifice we can well afford.

The defense program emphasizes four areas:

1. It ensures that our strategic nuclear forces will be equivalent to those

of the Soviet Union and that deterrence against nuclear war will be

maintained; 2. It upgrades our forces so that the military balance between

NATO and the Warsaw Pact will continue to deter the outbreak of war,

conventional or nuclear, in Europe; 3. It provides us the ability to come

quickly to the aid of friends and allies around the globe; 4. And it ensures

that our Navy will continue to be the most powerful on the seas.

STRATEGIC FORCES

We are strengthening each of the three legs of our strategic forces. The

cruise missile production which will begin next year will modernize our

strategic air deterrent. B-52 capabilities will also be improved. These

steps will maintain and enhance the B-52 fleet by improving its ability to

deliver weapons against increasingly heavily defended targets.

We are also modernizing our strategic submarine force. Four more POSEIDON

submarines backfitted with new, 4,000 mile TRIDENT I missiles began

deployments in 1980. Nine TRIDENT submarines have been authorized through

1981, and we propose one more each year.

The new M-X missile program to enhance our land-based intercontinental

ballistic missile force continues to make progress. Technical refinements

in the basing design over the last year will result in operational

benefits, lower costs, and reduced environmental impact. The M-X program

continues to be an essential ingredient in our strategic posture, providing

survivability, endurance, secure command and control and the capability to

threaten targets the Soviets hold dear.

Our new systems will enable U.S. strategic forces to maintain equivalence

in the face of the mounting Soviet challenge. We would however need an even

greater investment in strategic systems to meet the likely Soviet buildup

without SALT.

STRATEGIC DOCTRINE

This Administration's systematic contributions to the necessary evolution

of strategic doctrine began in 1977 when I commissioned a comprehensive net

assessment. From that base a number of thorough investigations of specific

topics continued. I should emphasize that the need for an evolutionary

doctrine is driven not by any change in our basic objective, which remains

peace and freedom for all mankind. Rather, the need for change is driven by

the inexorable buildup of Soviet military power and the increasing

propensity of Soviet leaders to use this power in coercion and outright

aggression to impose their will on others.

I have codified our evolving strategic doctrine in a number of interrelated

and mutually supporting Presidential Directives. Their overarching theme is

to provide a doctrinal basis, and the specific program to implement it,

that tells the world that no potential adversary of the United States could

ever conclude that the fruits of his aggression would be significant or

worth the enormous costs of our retaliation.

The Presidential Directives include:

PD-18: An overview of our strategic objectives PD-37: Basic space policy

PD-41: Civil Defense PD-53: Survivability and endurance for

telecommunications PD-57: Mobilization planning PD-58: Continuity of

Government PD-59: Countervailing Strategy for General War.

These policies have been devised to deter, first and foremost, Soviet

aggression. As such they confront not only Soviet military forces but also

Soviet military doctrine. By definition deterrence requires that we shape

Soviet assessments about the risks of war, assessments they will make using

their doctrine, not ours.

But at the same time we in no way seek to emulate their doctrine. In

particular, nothing in our policy contemplates that nuclear warfare could

ever be a deliberate instrument for achieving our own goals of peace and

freedom. Moreover, our policies are carefully devised to provide the

greatest possible incentives and opportunities for future progress in arms

control.

Finally, our doctrinal evolution has been undertaken with appropriate

consultation with our NATO Allies and others. We are fully consistent with

NATO's strategy of flexible response.

FORCES FOR NATO

We are greatly accelerating our ability to reinforce Western Europe with

massive ground and air forces in a crisis. We are undertaking a major

modernization program for the Army's weapons and equipment, adding armor,

firepower, and tactical mobility.

We are prepositioning more heavy equipment in Europe to help us cope with

attacks with little warning, and greatly strengthening our airlift and

sealift capabilities.

We are also improving our tactical air forces, buying about 1700 new

fighter and attack aircraft over the next five years, and increasing the

number of Air Force fighter wings by over 10 percent.

We are working closely with our European allies to secure the Host Nation

Support necessary to enable us to deploy more quickly a greater ratio of

combat forces to the European theater at a lower cost to the United

States.

SECURITY ASSISTANCE

As we move to enhance U.S. defense capabilities, we must not lose sight of

the need to assist others in maintaining their own security and

independence. Events since World War II, most recently in Southwest Asia,

have amply demonstrated that U.S. security cannot exist in a vacuum, and

that our own prospects for peace are closely tied to those of our friends.

The security assistance programs which I am proposing for the coming fiscal

year thus directly promote vital U.S. foreign policy and national security

aims, and are integral parts of our efforts to improve and upgrade our own

military forces.

More specifically, these programs, which are part of our overall foreign

aid request, promote U.S. security in two principal ways. First, they

assist friendly and allied nations to develop the capability to defend

themselves and maintain their own independence. An example during this past

year was the timely support provided Thailand to help bolster that

country's defenses against the large numbers of Soviet-backed Vietnamese

troops ranged along its eastern frontier. In addition, over the years these

programs have been important to the continued independence of other friends

and allies such as Israel, Greece, Turkey and Korea. Second, security

assistance constitutes an essential element in the broad cooperative

relationships we have established with many nations which permit either

U.S. bases on their territory or access by U.S. forces to their facilities.

These programs have been particularly important with regard to the

recently-concluded access agreements with various countries in the Persian

Gulf and Indian Ocean regions and have been crucial to the protection of

our interests throughout Southwest Asia.

RAPID DEPLOYMENT FORCES

We are systematically enhancing our ability to respond rapidly to non-NATO

contingencies wherever required by our commitments or when our vital

interests are threatened.

The rapid deployment forces we are assembling will be extraordinarily

flexible: They could range in size from a few ships or air squadrons to

formations as large as 100,000 men, together with their support. Our forces

will be prepared for rapid deployment to any region of strategic

significance.

Among the specific initiatives we are taking to help us respond to crises

outside of Europe are:

The development of a new fleet of large cargo aircraft with

intercontinental range; the design and procurement of a force of Maritime

Prepositioning Ships that will carry heavy equipment and supplies for three

Marine Corps brigades; the procurement of fast sealift ships to move large

quantities of men and material quickly from the U.S. to overseas areas of

deployment; increasing training and exercise activities to ensure that our

forces will be well prepared to deploy and operate in distant areas.

In addition, our European allies have agreed on the importance of providing

support to U.S. deployments to Southwest Asia.

NAVAL FORCES

Seapower is indispensable to our global position, in peace and also in war.

Our shipbuilding program will sustain a 550-ship Navy in the 1990's and we

will continue to build the most capable ships afloat.

The program I have proposed will assure the ability of our Navy to operate

in high threat areas, to maintain control of the seas and protect vital

lines of communication, both military and economic and to provide the

strong maritime component of our rapid deployment forces. This is essential

for operations in remote areas of the world, where we cannot predict far in

advance the precise location of trouble, or preposition equipment on land.

MILITARY PERSONNEL

No matter how capable or advanced our weapons systems, our military

security depends on the abilities, the training and the dedication of the

people who serve in our armed forces. I am determined to recruit and to

retain under any foreseeable circumstances an ample level of such skilled

and experienced military personnel. This Administration has supported for

FY 1981 the largest peacetime increase ever in military pay and

allowances.

We have enhanced our readiness and combat endurance by improving the

Reserve Components. All reservists are assigned to units structured to

complement and provide needed depth to our active forces. Some reserve

personnel have also now been equipped with new equipment.

MOBILIZATION PLANNING

We have completed our first phase of mobilization planning, the first such

Presidentially-directed effort since World War II. The government-wide

exercise of our mobilization plans at the end of 1980 showed, first, that

planning pays off and, second, that much more needs to be done.

OUR INTELLIGENCE POSTURE

Our national interests are critically dependent on a strong and effective

intelligence capability. We will maintain and strengthen the intelligence

capabilities needed to assure our national security. Maintenance of and

continued improvements in our multi-faceted intelligence effort are

essential if we are to cope successfully with the turbulence and

uncertainties of today's world.

The intelligence budget I have submitted to the Congress responds to our

needs in a responsible way, providing for significant growth over the

Fiscal Year 1981 budget. This growth will enable us to develop new

technical means of intelligence collection while also assuring that the

more traditional methods of intelligence work are also given proper stress.

We must continue to integrate both modes of collection in our analyses.

REGIONAL POLICIES

Every President for over three decades has recognized that America's

interests are global and that we must pursue a global foreign policy.

Two world wars have made clear our stake in Western Europe and the North

Atlantic area. We are also inextricably linked with the Far East,

politically, economically, and militarily. In both of these, the United

States has a permanent presence and security commitments which would be

automatically triggered. We have become increasingly conscious of our

growing interests in a third area, the Middle East and the Persian Gulf

area.

We have vital stakes in other major regions of the world as well. We have

long recognized that in an era of interdependence, our own security and

prosperity depend upon a larger common effort with friends and allies

throughout the world.

THE ATLANTIC ALLIANCE

In recognition of the threat which the Soviet invasion of Afghanistan posed

to Western interests in both Europe and Southwest Asia, NATO foreign and

defense ministers have expressed full support for U.S. efforts to develop a

capability to respond to a contingency in Southwest Asia and have approved

an extensive program to help fill the gap which could be created by the

diversion of U.S. forces to that region.

The U.S. has not been alone in seeking to maintain stability in the

Southwest Asia area and insure access to the needed resources there. The

European nations with the capability to do so are improving their own

forces in the region and providing greater economic and political support

to the residents of the area. In the face of the potential danger posed by

the Iran-Iraq conflict, we have developed coordination among the Western

forces in the area of the Persian Gulf in order to be able to safeguard

passage in that essential waterway.

Concerning developments in and around Poland the allies have achieved the

highest level of cohesion and unity of purpose in making clear the effects

on future East-West relations of a precipitous Soviet act there.

The alliance has continued to build on the progress of the past three years

in improving its conventional forces through the Long-Term Defense Program.

Though economic conditions throughout Europe today are making its

achievement difficult, the yearly real increase of 3 percent in defense

spending remains a goal actively sought by the alliance.

The NATO alliance also has moved forward during the past year with the

implementation of its historic December 1979 decision to modernize its

Theater Nuclear Force capabilities through deployment of improved Pershing

ballistic missiles and ground-launched cruise missiles in Europe. Our

allies continue to cooperate actively with us in this important joint

endeavor, whose purpose is to demonstrate convincingly to the Soviet Union

the potential costs of a nuclear conflict in Europe. At the same time, we

offered convincing evidence of our commitment to arms control in Europe by

initiating preliminary consultations with the Soviet Union in Geneva on the

subject of negotiated limits on long-range theater nuclear forces. Also,

during 1980 we initiated and carried out a withdrawal from our nuclear

weapons stockpile in Europe of 1,000 nuclear warheads. This successful

drawdown in our nuclear stockpile was a further tangible demonstration of

our commitment to the updating of our existing theater nuclear forces in

Europe.

In the NATO area, we continued to work closely with other countries in

providing resources to help Turkey regain economic health. We regretted

that massive political and internal security problems led the Turkish

military to take over the government on September 12. The new Turkish

authorities are making some progress in resolving those problems, and they

have pledged an early return to civilian government. The tradition of the

Turkish military gives us cause to take that pledge seriously. We welcomed

the reestablishment of Greece's links to the integrated military command

structure of the Atlantic Alliance--a move which we had strongly

encouraged--as a major step toward strengthening NATO's vital southern

flank at a time of international crisis and tension in adjacent areas.

Greek reintegration exemplifies the importance which the allies place on

cooperating in the common defense and shows that the allies can make the

difficult decisions necessary to insure their continued security. We also

welcomed the resumption of the intercommunal talks on Cyprus.

THE U.S. AND THE PACIFIC NATIONS

The United States is a Pacific nation, as much as it is an Atlantic nation.

Our interests in Asia are as important to us as our interests in Europe.

Our trade with Asia is as great as our trade with Europe. During the past

four years we have regained a strong, dynamic and flexible posture for the

United States in this vital region.

Our major alliances with Japan, Australia and New Zealand are now stronger

than they ever have been, and together with the nations of western Europe,

we have begun to form the basic political structure for dealing with

international crises that affect us all. Japan, Australia and New Zealand

have given us strong support in developing a strategy for responding to

instability in the Persian Gulf.

Normalization of U.S. relations with China has facilitated China's full

entry into the international community and encouraged a constructive

Chinese role in the Asia-Pacific region. Our relations with China have been

rapidly consolidated over the past year through the conclusion of a series

of bilateral agreements. We have established a pattern of frequent and

frank consultations between our two governments, exemplified by a series of

high-level visits and by regular exchanges at the working level, through

which we have been able to identify increasingly broad areas of common

interest on which we can cooperate.

United States relations with the Association of Southeast Asian Nations

(ASEAN) have also expanded dramatically in the past four years. ASEAN is

now the focus for U.S. policy in Southeast Asia, and its cohesion and

strength are essential to stability in this critical area and beyond.

Soviet-supported Vietnamese aggression in Indo-china has posed a major

challenge to regional stability. In response, we have reiterated our

security commitment to Thailand and have provided emergency security

assistance for Thai forces facing a Vietnamese military threat along the

Thai-Cambodian border. We have worked closely with ASEAN and the U.N. to

press for withdrawal of Vietnamese forces from Cambodia and to encourage a

political settlement in Cambodia which permits that nation to be governed

by leaders of its own choice. We still look forward to the day when

Cambodia peacefully can begin the process of rebuilding its social,

economic and political institutions, after years of devastation and

occupation. And, on humanitarian grounds and in support of our friends in

the region, we have worked vigorously with international organizations to

arrange relief and resettlement for the exodus of Indo-chinese refugees

which threatened to overwhelm these nations.

We have maintained our alliance with Korea and helped assure Korea's

security during a difficult period of political transition.

We have amended our military base agreement with the Philippines, ensuring

stable access to these bases through 1991. The importance of our Philippine

bases to the strategic flexibility of U.S. forces and our access to the

Indian Ocean is self-evident.

Finally, we are in the process of concluding a long negotiation

establishing Micronesia's status as a freely associated state.

We enter the 1980's with a firm strategic footing in East Asia and the

Pacific, based on stable and productive U.S. relations with the majority of

countries of the region. We have established a stable level of U.S.

involvement in the region, appropriate to our own interests and to the

interests of our friends and allies there.

THE MIDDLE EAST AND SOUTHWEST ASIA

The continuing Soviet occupation of Afghanistan and the dislocations caused

by the Iraq-Iran war serve as constant reminders of the critical importance

for us, and our allies, of a third strategic zone stretching across the

Middle East, the Persian Gulf, and much of the Indian subcontinent. This

Southwest Asian region has served as a key strategic and commercial link

between East and West over the centuries. Today it produces two-thirds of

the world's oil exports, providing most of the energy needs of our European

allies and Japan. It has experienced almost continuous conflict between

nations, internal instabilities in many countries, and regional rivalries,

combined with very rapid economic and social change. And now the Soviet

Union remains in occupation of one of these nations, ignoring world opinion

which has called on it to get out.

We have taken several measures to meet these challenges.

MIDDLE EAST

In the Middle East, our determination to consolidate what has already been

achieved in the peace process--and to buttress that accomplishment with

further progress toward a comprehensive peace settlement--must remain a

central goal of our foreign policy. Pursuant to their peace treaty, Egypt

and Israel have made steady progress in the normalization of their

relations in a variety of fields, bringing the benefits of peace directly

to their people. The new relationship between Egypt and Israel stands as an

example of peaceful cooperation in an increasingly fragmented and turbulent

region.

Both President Sadat and Prime Minister Begin remain committed to the

current negotiations to provide full autonomy to the inhabitants of the

West Bank and Gaza. These negotiations have been complex and difficult, but

they have already made significant progress, and it is vital that the two

sides, with our assistance, see the process through to a successful

conclusion. We also recognize the need to broaden the peace process to

include other parties to the conflict and believe that a successful

autonomy agreement is an essential first step toward this objective.

We have also taken a number of steps to strengthen our bilateral relations

with both Israel and Egypt. We share important strategic interests with

both of these countries.

We remain committed to Israel's security and are prepared to take concrete

steps to support Israel whenever that security is threatened.

PERSIAN GULF

The Persian Gulf has been a vital crossroads for trade between Europe and

Asia at many key moments in history. It has become essential in recent

years for its supply of oil to the United States, our allies, and our

friends. We have taken effective measures to control our own consumption of

imported fuel, working in cooperation with the other key industrial /

nations of the world. However, there is little doubt that the healthy

growth of our American and world economies will depend for many years on

continued safe access to the Persian Gulf's oil production. The denial of

these oil supplies would threaten not only our own but world security.

The potent new threat from an advancing Soviet Union, against the

background of regional instability of which it can take advantage, requires

that we reinforce our ability to defend our regional friends and to protect

the flow of oil. We are continuing to build on the strong political,

economic, social and humanitarian ties which bind this government and the

American people to friendly governments and peoples of the Persian Gulf.

We have also embarked on a course to reinforce the trust and confidence our

regional friends have in our ability to come to their assistance rapidly

with American military force if needed. We have increased our naval

presence in the Indian Ocean. We have created a Rapid Deployment Force

which can move quickly to the Gulf--or indeed any other area of the world

where outside aggression threatens. We have concluded several agreements

with countries which are prepared to let us use their airports and naval

facilities in an emergency. We have met requests for reasonable amounts of

American weaponry from regional countries which are anxious to defend

themselves. And we are discussing with a number of our area friends further

ways we can help to improve their security and ours, both for the short and

the longer term.

SOUTH ASIA

We seek a South Asia comprising sovereign and stable states, free of

outside interference, which can strengthen their political institutions

according to their own national genius and can develop their economies for

the betterment of their people.

The Soviet invasion of Afghanistan has posed a new challenge to this

region, and particularly to neighboring Pakistan. We are engaged in a

continuing dialogue with the Pakistan government concerning its development

and security requirements and the economic burden imposed by Afghan

refugees who have fled to Pakistan. We are participating with other aid

consortium members in debt rescheduling and will continue to cooperate

through the UNHCR in providing refugee assistance. We remain committed to

Pakistan's territorial integrity and independence.

Developments in the broad South/Southwest Asian region have also lent a new

importance to our relations with India, the largest and strongest power in

the area. We share India's interest in a more constructive relationship.

Indian policies and perceptions at times differ from our own, and we have

established a candid dialogue with this sister democracy which seeks to

avoid the misunderstandings which have sometimes complicated our ties.

We attach major importance to strong economic assistance programs to the

countries in the area, which include a majority of the poor of the

non-Communist world. We believe that these programs will help achieve

stability in the area, an objective we share with the countries in the

region. Great progress has been achieved by these countries in increasing

food production; international cooperation in harnessing the great river

resources of South Asia would contribute further to this goal and help to

increase energy production.

We continue to give high priority to our non-proliferation goals in the

area in the context of our broad global and regional priorities. The

decision to continue supply of nuclear fuel to the Indian Tarapur reactors

was sensitive to this effort.

AFRICA

The United States has achieved a new level of trust and cooperation with

Africa. Our efforts, together with our allies, to achieve peace in southern

Africa, our increased efforts to help the poorest countries in Africa to

combat poverty, and our expanded efforts to promote trade and investment

have led to growing respect for the U.S. and to cooperation in areas of

vital interest to the United States.

Africa is a continent of poor nations for the most part. It also contains

many of the mineral resources vital for our economy. We have worked with

Africa in a spirit of mutual cooperation to help the African nations solve

their problems of poverty and to develop stronger ties between our private

sector and African economies. Our assistance to Africa has more than

doubled in the last four years. Equally important, we set in motion new

mechanisms for private investment and trade.

Nigeria is the largest country in Black Africa and the second largest oil

supplier to the United States. During this Administration we have greatly

expanded and improved our relationship with Nigeria and other West African

states whose aspirations for a constitutional democratic order we share and

support. This interest was manifested both symbolically and practically by

the visit of Vice President Mondale to West Africa in July (1980) and the

successful visit to Washington of the President of Nigeria in October.

During Vice President Mondale's visit, a Joint Agricultural Consultative

Committee was established, with the U.S. represented entirely by the

private sector. This could herald a new role for the American private

sector in helping solve the world's serious food shortages. I am pleased to

say that our relations with Nigeria are at an all-time high, providing the

foundation for an even stronger relationship in the years ahead.

Another tenet of this Administration's approach to African problems has

been encouragement and support for regional solutions to Africa's

problems. We have supported initiatives by the Organization of African

Unity to solve the protracted conflict in the western Sahara, Chad, and the

Horn. In Chad, the world is watching with dismay as a country torn by a

devastating civil war has become a fertile field for Libya's exploitation,

thus demonstrating that threats to peace can come from forces within as

well as without Africa.

In southern Africa the United States continues to pursue a policy of

encouraging peaceful development toward majority rule. In 1980, Southern

Rhodesia became independent as Zimbabwe, a multiracial nation under a

system of majority rule. Zimbabwean independence last April was the

culmination of a long struggle within the country and diplomatic efforts

involving Great Britain, African states neighboring Zimbabwe, and the

United States.

The focus of our efforts in pursuit of majority rule in southern Africa has

now turned to Namibia. Negotiations are proceeding among concerned parties

under the leadership of U.N. Secretary General Waldheim. This should lead

to implementation of the U.N. plan for self-determination and independence

for Namibia during 1981. If these negotiations are successfully concluded,

sixty-five years of uncertainty over the status of the territory, including

a seven-year-long war, will be ended.

In response to our active concern with issues of importance to Africans,

African states have cooperated with us on issues of importance to our

national interests. African states voted overwhelmingly in favor of the

U.N. Resolution calling for release of the hostages, and for the U.N.

Resolution condemning the Soviet invasion of Afghanistan. Two countries of

Africa have signed access agreements with the U.S. allowing us use of naval

and air facilities in the Indian Ocean.

Africans have become increasingly vocal on human rights. African leaders

have spoken out on the issue of political prisoners, and the OAU is

drafting its own Charter on Human Rights. Three countries in Africa--

Nigeria, Ghana, and Uganda--have returned to civilian rule during the past

year.

U.S. cooperation with Africa on all these matters represents a strong base

on which we can build in future years.

Liberia is a country of long-standing ties with the U.S. and the site of

considerable U.S. investment and facilities. This past April a coup

replaced the government and a period of political and economic uncertainty

ensued. The U.S. acted swiftly to meet this situation. We, together with

African leaders, urged the release of political prisoners, and many have

been released; we provided emergency economic assistance to help avoid

economic collapse, and helped to involve the IMF and the banking community

to bring about economic stability; and we have worked closely with the new

leaders to maintain Liberia's strong ties with the West and to protect

America's vital interests.

NORTH AFRICA

In early 1979, following a Libyan-inspired commando attack on a Tunisian

provincial city, the U.S. responded promptly to Tunisia's urgent request

for assistance, both by airlifting needed military equipment and by making

clear our longstanding interest in the security and integrity of this

friendly country. The U.S. remains determined to oppose other irresponsible

Libyan aspirations. Despairing of a productive dialogue with the Libyan

authorities, the U.S. closed down its embassy in Libya and later expelled

six Libyan diplomats in Washington in order to deter an intimidation

campaign against Libyan citizens in the U.S.

U.S. relations with Algeria have improved, and Algeria has played an

indispensable and effective role as intermediary between Iran and the U.S.

over the hostage issue.

The strengthening of our arms supply relationship with Morocco has helped

to deal with attacks inside its internationally recognized frontiers and to

strengthen its confidence in seeking a political settlement of the Western

Sahara conflict. While not assuming a mediatory role, the U.S. encouraged

all interested parties to turn their energies to a peaceful and sensible

compromise resolution of the war in the Sahara and supported efforts by the

Organization of African Unity toward that end. As the year drew to a close,

the U.S. was encouraged by evolution in the attitudes of all sides, and is

hopeful that their differences will be peacefully resolved in the year

ahead so that the vast economic potential of North Africa can be developed

for the well-being of the people living there.

LATIN AMERICA AND THE CARIBBEAN

The principles of our policies in this hemisphere have been clear and

constant over the last four years. We support democracy and respect for

human rights. We have struggled with many to help free the region of both

repression and terrorism. We have respected ideological diversity and

opposed outside intervention in purely internal affairs. We will act,

though, in response to a request for assistance by a country threatened by

external aggression. We support social and economic development within a

democratic framework. We support the peaceful settlement of disputes. We

strongly encourage regional cooperation and shared responsibilities within

the hemisphere to all these ends, and we have eagerly and regularly sought

the advice of the leaders of the region on a wide range of issues.

Last November, I spoke to the General Assembly of the Organization of

American States of a cause that has been closest to my heart--human

rights. It is an issue that has found its time in the hemisphere. The cause

is not mine alone, but an historic movement that will endure.

At Riobamba, Ecuador, last September four Andean Pact countries, Costa

Rica, and Panama broke new ground by adopting a "Code of Conduct," that

joint action in defense of human rights does not violate the principles of

nonintervention in the internal affairs of states in this hemisphere. The

Organization of American States has twice condemned the coup that

overturned the democratic process in Bolivia and the widespread abuse of

human rights by the regime which seized power. The Inter-American

Commission on Human Rights has gained world acclaim for its dispassionate

reports. It completed two major country studies this year in addition to

its annual report. In a resolution adopted without opposition, the OAS

General Assembly in November strongly supported the work of the Commission.

The American Convention on Human Rights is in force and an Inter-American

Court has been created to judge human rights violations. This convention

has been pending before the Senate for two years; I hope the United States

this year will join the other nations of the hemisphere in ratifying a

convention which embodies principles that are our tradition.

The trend in favor of democracy has continued. During this past year, Peru

inaugurated a democratically elected government. Brazil continues its

process of liberalization. In Central America, Hondurans voted in record

numbers in their first national elections in over eight years. In the

Caribbean seven elections have returned governments firmly committed to the

democratic traditions of the Commonwealth.

Another major contribution to peace in the hemisphere is Latin America's

own Treaty for the Prohibition of Nuclear Weapons. On behalf of the United

States, I signed Protocol I of this Treaty in May of 1977 and sent it to

the Senate for ratification. I urge that it be acted upon promptly by the

Senate in order that it be brought into the widest possible effect in the

Latin American region.

Regional cooperation for development is gaining from Central America to the

Andes, and throughout the Caribbean. The Caribbean Group for Cooperation in

Economic Development, which we established with 29 other nations in 1977,

has helped channel $750 million in external support for growth in the

Caribbean. The recent meeting of the Chiefs of State of the Eastern

Caribbean set a new precedent for cooperation in that region. Mexico and

Venezuela jointly and Trinidad and Tobago separately have established oil

facilities that will provide substantial assistance to their oil importing

neighbors. The peace treaty between El Salvador and Honduras will hopefully

stimulate Central America to move forward again toward economic

integration. Formation of Caribbean/ Central American Action, a private

sector organization, has given a major impetus to improving

people-to-people bonds and strengthening the role of private enterprise in

the development of democratic societies.

The Panama treaties have been in force for over a year. A new partnership

has been created with Panama; it is a model for large and small nations. A

longstanding issue that divided us from our neighbors has been resolved.

The security of the canal has been enhanced. The canal is operating as well

as ever, with traffic through it reaching record levels this year. Canal

employees, American and Panamanian alike, have remained on the job and have

found their living and working conditions virtually unchanged.

In 1980, relations with Mexico continued to improve due in large measure to

the effectiveness of the Coordinator for Mexican Affairs and the expanded

use of the U.S.-Mexico Consultative Mechanism. By holding periodic meetings

of its various working groups, we have been able to prevent mutual concerns

from becoming political issues. The Secretary of State visited Mexico City

in November, and, along with the Mexican Secretary of Foreign Relations,

reviewed the performance of the Consultative Mechanism. The office of the

Coordinator has ensured the implementation of my directive to all agencies

to accord high priority to Mexican concerns. Trade with Mexico rose by

almost 60 percent to nearly $30 billion, making that country our third

largest trading partner.

These are all encouraging developments. Other problems remain, however.

The impact of large-scale migration is affecting many countries in the

hemisphere. The most serious manifestation was the massive, illegal exodus

from Cuba last summer. The Cuban government unilaterally encouraged the

disorderly and even deadly migration of 125,000 of its citizens in complete

disregard for international law or the immigration laws of its neighbors.

Migrations of this nature clearly require concerted action, and we have

asked the OAS to explore means of dealing with similar situations which may

occur in the future.

We have a long-standing treaty with Colombia on Quita Sueno, Roncador, and

Serrano which remains to be ratified by the Senate.

In Central America, the future of Nicaragua is unclear. Recent tensions,

the restrictions on the press and political activity, an inordinate Cuban

presence in the country and the tragic killing by the security forces of a

businessman well known for his democratic orientation, cause us

considerable concern. These are not encouraging developments. But those who

seek a free society remain in the contest for their nation's destiny. They

have asked us to help rebuild their country, and by our assistance, to

demonstrate that the democratic nations do not intend to abandon Nicaragua

to the Cubans. As long as those who intend to pursue their pluralistic

goals play important roles in Nicaragua, it deserves our continuing

support.

In El Salvador, we have supported the efforts of the Junta to change the

fundamental basis of an inequitable system and to give a stake in a new

nation to those millions of people, who for so long, lived without hope or

dignity. As the government struggles against those who would restore an old

tyranny or impose a new one, the United States will continue to stand

behind them.

We have increased our aid to the Caribbean, an area vital to our national

security, and we should continue to build close relations based on mutual

respect and understanding, and common interests.

As the nations of this hemisphere prepare to move further into the 1980's,

I am struck by the depth of underlying commitment that there is to our

common principles: non-intervention, peaceful settlement of disputes,

cooperation for development, democracy and defense of basic human rights. I

leave office satisfied that the political, economic, social and

organizational basis for further progress with respect to all these

principles have been substantially strengthened in the past four years. I

am particularly reassured by the leadership by other nations of the

hemisphere in advancing these principles. The success of our common task of

improving the circumstances of all peoples and nations in the hemisphere

can only be assured by the sharing of responsibility. I look forward to a

hemisphere that at the end of this decade has proven itself anew as a

leader in the promotion of both national and human dignity.

THE INTERNATIONAL ECONOMY

A growing defense effort and a vigorous foreign policy rest upon a strong

economy here in the United States. And the strength of our own economy

depends upon our ability to lead and compete in the international

marketplace.

ENERGY

Last year, the war between Iraq and Iran led to the loss of nearly 4

million barrels of oil to world markets, the third major oil market

disruption in the past seven years. This crisis has vividly demonstrated

once again both the value of lessened dependence on oil imports and the

continuing instability of the Persian Gulf area.

Under the leadership of the United States, the 21 members of the

International Energy Agency took collective action to ensure that the oil

shortfall stemming from the Iran-Iraq war would not be aggravated by

competition for scarce spot market supplies. We are also working together

to see that those nations most seriously affected by the oil disruption--

including our key NATO allies Turkey and Portugal--can get the oil they

need. At the most recent IEA Ministerial meeting we joined the other

members in pledging to take those policy measures necessary to slice our

joint oil imports in the first quarter of 1981 by 2.2 million barrels.

Our international cooperation efforts in the energy field are not limited

to crisis management. At the Economic Summit meetings in Tokyo and Venice,

the heads of government of the seven major industrial democracies agreed to

a series of tough energy conservation and production goals. We are working

together with all our allies and friends in this effort.

Construction has begun on a commercial scale coal liquefaction plant in

West Virginia co-financed by the United States, Japan and West Germany. An

interagency task force has just reported to me on a series of measures we

need to take to increase coal production and exports. This report builds on

the work of the International Energy Agency's Coal Industry Advisory Board.

With the assurances of a reliable United States steam coal supply at

reasonable prices, many of the electric power plants to be built in the

1980's and 1990's can be coal-fired rather than oil-burning.

We are working cooperatively with other nations to increase energy security

in other areas as well. Joint research and development with our allies is

underway in solar energy, nuclear power, industrial conservation and other

areas. In addition, we are assisting rapidly industrializing nations to

carefully assess their basic energy policy choices, and our development

assistance program helps the developing countries to increase indigenous

energy production to meet the energy needs of their poorest citizens. We

support the proposal for a new World Bank energy affiliate to these same

ends, whose fulfillment will contribute to a better global balance between

energy supply and demand.

INTERNATIONAL MONETARY POLICY

Despite the rapid increase in oil costs, the policy measures we have taken

to improve domestic economic performance have had a continued powerful

effect on our external accounts and on the strength of the dollar. A strong

dollar helps in the fight against inflation.

There has also been considerable forward movement in efforts to improve the

functioning of the international monetary system. The stability of the

international system of payments and trade is important to the stability

and good health of our own economy. We have given strong support to the

innovative steps being taken by the International Monetary Fund and World

Bank to help promote early adjustment to the difficult international

economic problems. Recent agreement to increase quotas by fifty percent

will ensure the IMF has sufficient resources to perform its central role in

promoting adjustment and financing payments imbalances. The World Bank's

new structural adjustment lending program will also make an important

contribution to international efforts to help countries achieve a

sustainable level of growth and development.

SUGAR

In 1980, Congress passed U.S. implementing legislation for the

International Sugar Agreement, thus fulfilling a major commitment of this

Administration. The agreement is an important element in our international

commodity policy with far-reaching implications for our relations with

developing countries, particularly sugar producers in Latin America.

Producers and consumers alike will benefit from a more stable market for

this essential commodity.

COFFEE

At year's end, Congress approved implementing legislation permitting the

U.S. to carry out fully its commitments under International Coffee

Agreement Specifically, the legislation enables us to meet our part of an

understanding negotiated last fall among members of the Agreement, which

defends, by use of export quotas, a price range well below coffee prices of

previous years and which commits major coffee producers to eliminate cartel

arrangements that manipulated future markets to raise prices. The way is

now open to a fully-functioning International Coffee Agreement which can

help to stabilize this major world commodity market. The results will be

positive for both consumers--who will be less likely to suffer from sharp

increases in coffee prices--and producers--who can undertake future

investment with assurance of greater protection against disruptive price

fluctuations in their exports.

NATURAL RUBBER

In 1980, the International Natural Rubber Agreement entered into force

provisionally. U.S. membership in this new body was approved overwhelmingly

by the Senate last year. The natural rubber agreement is a model of its

kind and should make a substantial contribution to a stable world market in

this key industrial commodity. It is thus an excellent example of

constructive steps to improve the operation of the world economy in ways

which can benefit the developing and industrialized countries alike. In

particular, the agreement has improved important U.S. relationships with

the major natural rubber-producing countries of Southeast Asia.

COMMON FUND

The United States joined members of the United Nations Conference on Trade

and Development, both developed and developing nations, in concluding

Articles of Agreement in 1980 for a Common Fund to help international

commodity agreements stabilize the prices of raw materials.

ECONOMIC COOPERATION WITH DEVELOPING NATIONS

Our relations with the developing nations are of major importance to the

United States. The fabric of our relations with these countries has strong

economic and political dimensions. They constitute the most rapidly growing

markets for our exports, and are important sources of fuel and raw

materials. Their political views are increasingly important, as

demonstrated in their overwhelming condemnation of the Soviet invasion of

Afghanistan. Our ability to work together with developing nations toward

goals we have in common (their political independence, the resolution of

regional tensions, and our growing ties of trade for example) require us to

maintain the policy of active involvement with the developing world that we

have pursued over the past four years.

The actions we have taken in such areas as energy, trade, commodities, and

international financial institutions are all important to the welfare of

the developing countries. Another important way the United States can

directly assist these countries and demonstrate our concern for their

future is through our multilateral and bilateral foreign assistance

program. The legislation which I will be submitting to you for FY 82

provides the authority and the funds to carry on this activity. Prompt

Congressional action on this legislation is essential in order to attack

such high priority global problems as food and energy, meet our treaty and

base rights agreements, continue our peace efforts in the Middle East,

provide economic and development support to countries in need, promote

progress on North-South issues, protect Western interests, and counter

Soviet influence.

Our proposed FY 1982 bilateral development aid program is directly

responsive to the agreement reached at the 1980 Venice Economic Summit that

the major industrial nations should increase their aid for food and energy

production and for family planning. We understand that other Summit

countries plan similar responses. It is also important to honor our

international agreements for multilateral assistance by authorizing and

appropriating funds for the International Financial Institutions. These

multilateral programs enhance the efficiency of U.S. contributions by

combining them with those of many other donor countries to promote

development; the proposed new World Bank affiliate to increase energy

output in developing countries offers particular promise. All these types

of aid benefit our long-run economic and political interests.

Progress was made on a number of economic issues in negotiations throughout

the U.N. system. However, in spite of lengthy efforts in the United

Nations, agreement has not been reached on how to launch a process of

Global Negotiations in which nations might collectively work to solve such

important issues as energy, food, protectionism, and population pressures.

The United States continues to believe that progress can best be made when

nations focus on such specific problems, rather than on procedural and

institutional questions. It will continue to work to move the North-South

dialogue into a more constructive phase.

FOOD--THE WAR ON HUNGER

The War on Hunger must be a continuous urgent priority. Major portions of

the world's population continue to be threatened by the specter of hunger

and malnutrition. During the past year, some 150 million people in 36

African countries were faced with near disaster as the result of serious

drought, induced food shortages. Our government, working in concert with

the U.N.'s Food and Agricultural Organization (FAO), helped to respond to

that need. But the problems of hunger cannot be solved by short-term

measures. We must continue to support those activities, bilateral and

multilateral, which aim at improving food production especially in

developing countries and assuring global food security. These measures are

necessary to the maintenance of a stable and healthy world economy.

I am pleased that negotiation of a new Food Aid Convention, which

guarantees a minimum annual level of food assistance, was successfully

concluded in March. The establishment of the International Emergency Wheat

Reserve will enable the U.S. to meet its commitment under the new

Convention to feed hungry people, even in times of short supply.

Of immediate concern is the prospect of millions of Africans threatened by

famine because of drought and civil disturbances. The U.S. plea for

increased food aid resulted in the organization of an international

pledging conference and we are hopeful that widespread starvation will be

avoided.

Good progress has been made since the Venice Economic Summit called for

increased effort on this front. We and other donor countries have begun to

assist poor countries develop long-term strategies to improve their food

production. The World Bank will invest up to $4 billion in the next few

years in improving the grain storage and food-handling capacity of

countries prone to food shortages.

Good progress has been made since the Tokyo Economic Summit called for

increased effort on this front. The World Bank is giving this problem top

priority, as are some other donor countries. The resources of the

consultative Group on International Agricultural Research will be doubled

over a five-year period. The work of our own Institute of Scientific and

Technological Cooperation will further strengthen the search for relevant

new agricultural technologies.

The goal of freeing the world from hunger by the year 2000 should command

the full support of all countries.

The Human Dimension of Foreign Policy

HUMAN RIGHTS

The human rights policy of the United States has been an integral part of

our overall foreign policy for the past several years. This policy serves

the national interest of the United States in several important ways: by

encouraging respect by governments for the basic rights of human beings, it

promotes peaceful, constructive change, reduces the likelihood of internal

pressures for violent change and for the exploitation of these by our

adversaries, and thus directly serves our long-term interest in peace and

stability; by matching espousal of fundamental American principles of

freedom with specific foreign policy actions, we stand out in vivid

contrast to our ideological adversaries; by our efforts to expand freedom

elsewhere, we render our own freedom, and our own nation, more secure.

Countries that respect human rights make stronger allies and better

friends.

Rather than attempt to dictate what system of government or institutions

other countries should have, the U.S. supports, throughout the world, the

internationally recognized human rights which all members of the United

Nations have pledged themselves to respect. There is more than one model

that can satisfy the continuing human reach for freedom and justice:

1980 has been a year of some disappointments, but has also seen some

positive developments in the ongoing struggle for fulfillment of human

rights throughout the world. In the year we have seen:

--Free elections were held and democratic governments installed in Peru,

Dominica, and Jamaica. Honduras held a free election for installation of a

constituent assembly. An interim government was subsequently named pointing

toward national presidential elections in 1981. Brazil continues on its

course of political liberalization.

--The "Charter of Conduct" signed in Riobamba, Ecuador, by Ecuador,

Colombia, Venezuela, Peru, Costa Rica, Panama and Spain, affirms the

importance of democracy and human rights for the Andean countries.

--The Organization of American States, in its annual General Assembly,

approved a resolution in support of the Inter-American Human Rights

Commission's work. The resolution took note of the Commission's annual

report, which described the status of human rights in Chile, El Salvador,

Paraguay and Uruguay; and the special reports on Argentina and Haiti, which

described human rights conditions as investigated during on-site

inspections to these countries.

--The awarding of the Nobel Prize for Peace to Adolfo Perez Esquivel of

Argentina for his non-violent advocacy of human rights.

--The United States was able to rejoin the International Labor

Organization after an absence of two years, as that U.N. body reformed its

procedures to return to its original purpose of strengthening

employer-employee-government relations to insure human rights for the

working people of the world.

The United States, of course, cannot take credit for all these various

developments. But we can take satisfaction in knowing that our policies

encourage and perhaps influence them.

Those who see a contradiction between our security and our humanitarian

interests forget that the basis for a secure and stable society is the bond

of trust between a government and its people. I profoundly believe that the

future of our world is not to be found in authoritarianism: that wears the

mask of order, or totalitarianism that wears the mask of justice. Instead,

let us find our future in the human face of democracy, the human voice of

individual liberty, the human hand of economic development.

HUMANITARIAN AID

The United States has continued to play its traditional role of safehaven

for those who flee or are forced to flee their homes because of persecution

or war. During 1980, the United States provided resettlement opportunities

for 216,000 refugees from countries around the globe. In addition, the

United States joined with other nations to provide relief to refugees in

country of first asylum in Africa, the Middle East, and Asia.

The great majority of refugee admissions continued to be from Indo-china.

During 1980, 168,000 Indo-chinese were resettled in the United States.

Although refugee populations persist in camps in Southeast Asia, and

refugees continue to flee Vietnam, Laos and Kampuchea, the flow is not as

great as in the past. One factor in reducing the flow from Vietnam has been

the successful negotiation and commencement of an Orderly Departure Program

which permits us to process Vietnamese for resettlement in the United

States with direct departure from Ho Chi Minh Ville in an orderly fashion.

The first group of 250 departed Vietnam for the United States in December,

1980.

In addition to the refugees admitted last year, the United States accepted

for entry into the United States 125,000 Cubans who were expelled by Fidel

Castro. Federal and state authorities, as well as private voluntary

agencies, responded with unprecedented vigor to coping with the unexpected

influx of Cubans.

Major relief efforts to aid refugees in countries of first asylum continued

in several areas of the world. In December, 1980, thirty-two nations,

meeting in New York City, agreed to contribute $65 million to the

continuing famine relief program in Kampuchea. Due in great part to the

generosity of the American people and the leadership exercised in the

international arena by the United States, we have played the pivotal role

in ameliorating massive suffering in Kampuchea.

The United States has taken the lead among a group of donor countries who

are providing relief to some two million refugees in the Horn of Africa who

have been displaced by fighting in Ethiopia. U.S. assistance, primarily to

Somalia, consists of $35 million worth of food and $18 million in cash and

kind. Here again, United States efforts can in large part be credited with

keeping hundreds of thousands of people alive.

Another major international relief effort has been mounted in Pakistan. The

United States is one of 25 countries plus the European Economic Community

who have been helping the Government of Pakistan to cope with the problem

of feeding and sheltering the more than one million refugees that have been

generated by the Soviet invasion of Afghanistan.

In April, 1980, the Congress passed the Refugee Act of 1980 which brought

together, for the first time, in one piece of legislation the various

threads of U.S. policy towards refugees. The law laid down a new, broader

definition of the term refugee, established mechanisms for arriving at a

level of refugee admissions through consultation with Congress, and

established the Office of the United States Coordinator for Refugees.

It cannot be ignored that the destructive and aggressive policies of the

Soviet Union have added immeasurably to the suffering in these three tragic

situations.

The Control of Nuclear Weapons

Together with our friends and allies, we are striving to build a world in

which peoples with diverse interests can live freely and prosper. But all

that humankind has achieved to date, all that we are seeking to accomplish,

and human existence itself can be undone in an instant--in the catastrophe

of a nuclear war.

Thus one of the central objectives of my Administration has been to control

the proliferation of nuclear weapons to those nations which do not have

them, and their further development by the existing nuclear powers--

notably the Soviet Union and the United States.

NON-PROLIFERATION

My Administration has been committed to stemming the spread of nuclear

weapons. Nuclear proliferation would raise the spectre of the use of

nuclear explosives in crucial, unstable regions of the world endangering

not only our security and that of our Allies, but that of the whole world.

Non-proliferation is not and can not be a unilateral U.S. policy, nor

should it be an issue of contention between the industrialized and

developing states. The international non-proliferation effort requires the

support of suppliers as well as importers of nuclear technology and

materials.

We have been proceeding on a number of fronts:

--First, we have been seeking to encourage nations to accede to the

Non-Proliferation Treaty. The U.S. is also actively encouraging other

nations to accept full-scope safeguards on all of their nuclear activities

and is asking other nuclear suppliers to adopt a full-scope safeguards

requirement as a condition for future supply.

--Second, the International Nuclear Fuel Cycle Evaluation (INFCE), which

was completed in 1980, demonstrated that suppliers and recipients can work

together on these technically complex and sensitive issues. While

differences remain, the INFCE effort provides a broader international basis

for national decisions which must balance energy needs with

non-proliferation concerns.

--Finally, we are working to encourage regional cooperation and restraint.

Protocol I of the Treaty of Tlatelolco which will contribute to the

lessening of nuclear dangers for our Latin American neighbors ought now to

be ratified by the United States Senate.

LIMITATIONS ON STRATEGIC ARMS

I remain convinced that the SALT II Treaty is in our Nation's security

interest and that it would add significantly to the control of nuclear

weapons. I strongly support continuation of the SALT process and the

negotiation of more far-reaching mutual restraints on nuclear weaponry.

CONCLUSION

We have new support in the world for our purposes of national independence

and individual human dignity. We have a new will at home to do what is

required to keep us the strongest nation on earth.

We must move together into this decade with the strength which comes from

realization of the dangers before us and from the confidence that together

we can overcome them.  The White House, January 16, 1981.

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