 It gives me the greatest of pleasure to introduce President Ronald Reagan. Thank you. Thank you. Thank you very much. Please receive it. Thank you, Ken Duberstein, and thank you all very much. You know, if there's anything I'll miss about this job, it's the warm-up band, aren't they great? Members of the Cabinet and friends, each year we and the administration have gathered here to review our progress and look forward to the work ahead. Today, in keeping with that tradition, I want to talk to you about all that we've achieved on the domestic front during our time in office and about some of the unfinished business before the nation. I can't help finding it hard to believe that this chapter in the American saga is about to end. Yes, there are many things that I'll miss when I'm back at the ranch. The courtly courtesy of Sam Donaldson. Your wish is our command helpfulness of Congress. As soon as I get home to California, I plan to lean back, kick up my feet, and take a long nap. I'll come to think of it. Things won't be all that different after all. But you know I'll rest a whole lot easier knowing that I've left the White House in good hands. There hasn't been a transition like this since inauguration day in 1837 when Andrew Jackson turned the keys to the store over to Martin Van Buren. And no, I don't remember that day. When you get to be my age, you don't remember anything that recent. Our critics on the other side and in the media say that the new president doesn't have a mandate. But I just can't help wondering if their candidate had been the one to win by the second largest margin of any president running for a first term in more than three decades. Would they have said that he didn't have a mandate? Have we ever had a clearer mandate? Strong judges, a strong defense, and even people who can't read lips should have got this one by now. No new taxes. Well, yesterday, as in the past eight years, it's true we are the change. And this year, the American people shouted out loud and clear that they want the change to continue. And I know that under President George Bush it will. What a change it's been for what we've seen and been privileged to participate in these last eight years has been more than the victory of a program or the triumph of a position on this issue or that. A force broader and deeper has moved in our land. A force with the power and fury, the strength and grace of a truth whose time has come. A force that is rooted in the depths of this great and noble experiment we call America. The force of freedom. Yes, we all know that what has been at stake during our time in Washington is the course of an ancient and enduring struggle, a struggle in which we Americans have a special place. At its edges, this struggle is not so much between good and evil, between absolute freedom and immediate slavery, but between hope and despair, between those who shoulder the promise and the burden of freedom and those who would, in the name of a false determinism, take us a mile or two more down that Frederick Hayek called the road to serfdom. History records a few significant turning points in this epic struggle and surely in years to come it will tell that one of those turning points came when, after a generation of gestation, a revolution of ideas became a revolution of governance on January 20th, 1981. Now I know that you've often heard me recall the condition of the country and particularly of the economy before we took office, soaring interest in inflation rates, lagging productivity and investment, falling real family income, growing poverty, and stalled economic growth. But the most remarkable thing about that time, as bad as things were becoming, was not the hardship but the attitude of our leaders. Too many of our leaders told us that America's troubles were the fault of we, the American people, as if somehow we'd let our leaders down and not the other way around. They told us that we'd caught a disease called malaise and then they turned around and told us that even if we reformed there wasn't much that we could do because great historic forces were at work. The problems were all too complicated for solution. Fate and history were against us and America was slipping into an inevitable decline. Well, Whitaker Chambers once wrote that in his words, human societies like human beings live by faith and die when faith dies. Well, there's a special faith that has from our earliest days guided this sweet and blessed land. It was proclaimed in the Declaration of Independence and enshrined in the Constitution. It found a home in even our most remote frontier settlements and from every corner of the globe it has drawn tens of millions of tempest-tossed dreamers to our shores. Yes, it was what our founders meant when they inscribed on our great seal the words that in translation says, a new order for the ages. It is a faith in the wisdom and redeeming power of a free people. And in saying that America has entered an inevitable decline, our leaders of just a decade ago were confessing that in them this faith had died. Well, that's when the American people rounded up a posse swore in this old sheriff and sent us riding into town where the previous administration had said the nation's problems were too complicated to manage. Well, we said of course they are so government should stop trying to manage them. Stop putting its faith in the false God of bureaucracy and trust the genius of the American people instead. Yes, we said it's time to return to the principles of our founders, the principles of the Constitution and the principles of limited government, free enterprise and respect for family, community and faith. And as a first step, we said that the way to restore vitality to the economy was to cut marginal tax rates and cut needless regulations. We did both. We cut the top's tax rate in the 1981 tax act and then we cut it again in the 1986 tax reform. Our cuts in needless regulations have been at least as significant and as with tax cuts, other countries including Japan are rushing to catch up. Of just one of these reforms, the streamlining of the Food and Drug Administration review of new drugs to treat AIDS, cancer and other devastating diseases. The Wall Street Journal wrote almost two years ago, and I'm quoting now, among the initiatives of the Reagan Administration it will rank with tax cuts and the Strategic Defense Initiative. Well, you know the results of what we call in the 1980 campaign our economic recovery program, the longest peacetime economic expansion on record, almost 19 million new jobs created, real family income up over 10%, poverty rate down, interest rates and inflation way down. In fact, Milton Friedman has suggested that when improvements in product quality are taken into account, underlying inflation may have disappeared altogether. Meanwhile, we're in the middle of the greatest boom in entrepreneurship in our history and the greatest explosion of research and new technology in all of the entire industrial revolution. This entire industrial revolution boosted productivity, or that original one did, by a factor of a hundred. But according to Carver Mead, the godfather of the semiconductor, the micro-electronic revolution has already enhanced productivity in information-based technology by a factor of more than a million, and the end isn't in sight yet. Today, America's reinvigorated industries are exporting more than ever before, but that would never have happened if, with the American people behind us, we hadn't kept domestic protectionist forces at bay while we opened markets abroad. Another major achievement. And with the coming implementation of the U.S.-Canada Free Trade Agreement, the century's third try at a free trade agreement between our countries and a new GAT round, we're taking giant steps toward a new era of free and fair trade throughout the world and a new era of growth here at home. World leaders have in my presence shaken their heads in wonderment and spoken with awe of the American miracle. And you know that we're doing something to the way people think when a socialist prime minister of Italy says in public, as happened a while back, that our policies are so successful as to, in his words, make not only Italy, but the whole of Europe, think. And then echoing him, the chief economic spokesman of all things, the Italian Communist Party, added, and again I'm quoting, the old ideas of socialism are in crisis. It is the problem of statism, a program that doesn't take into account individual needs and values. I could have told him that years ago. Here at home again we worked with a bipartisan coalition in Congress to save a faltering social security system from bankruptcy to enact a pay-as-you-go plan that helps free the elderly from financial consequences of catastrophic illness and to reform our welfare system. Our welfare system now includes strengthened requirements that fathers help support their children and for the first time work requirements for those able to work. At the same time, we prompted even bolder state experiments with welfare reform as well as state experiments with a bright ray of hope for America's poor enterprise zones. And we've begun to test selling public housing units to the tenants who live in them. Not everything we did can or should be measured in dollars and cents. Justice is the end of government, wrote Tocqueville. He said we would appoint judges who understood crime, criminals, and the Constitution, and we have. As our judicial appointees have begun to fill the bench, federal sentences have grown a third longer than in 1980. And now on the Supreme Court and our appeals courts, we have more and more justices and judges who appreciate the hardships of police work, who can see the distinction between the criminal and the victim of crime, and who know the difference between making the law and interpreting it. And talking about crime, I think it's a crime that one of the best men ever nominated was kept off the United States Supreme Court, but even so, who knows? Maybe in the next few years, the courts will even figure out what the American people know that the right to abortion is not in the Constitution and the right to pray, including for school children to play, is. In 1982, I announced to the nation that we were going to go after the mob like no other administration in history. Within a few years, organized crime convictions had quadrupled. Today we have the mob on the ropes. We're going to keep them there. Yes, we launched a war on organized crime and on drugs. Federal drug convictions have nearly tripled. Cocaine seizures are up 1,800 percent, and it seems as if almost every week of late brings news of another international roundup of gangsters. We've put the federal government on the side of children and families, going after child pornographers while working with Congress virtually to end the federal funding of abortions. We've also issued regulations to ensure that no friendly supported title to 10 family planning program provides abortion counseling or referral. And meanwhile, a certain lady I know has been teaching America's young people to just say no to drugs, and more of them are than ever before. I can't tell you how proud I am of Nancy, but in education we've helped spark a nationwide grassroots movement to return quality to our schools. State after state and school system after school system have introduced reforms from merit pay for teachers to getting back to basics, the four Rs. Reading, writing, arithmetic, and respect for the teacher. And return and appreciation of fundamental values to America's classrooms. Or as Teddy Roosevelt said, but too many seem for too long to forget. To educate a man in mind but not morals is to create a menace to society. And while our feet have been planted on the ground, our eyes have been turned toward the stars. We have overcome tragedy and pushed forward on such visionary projects as the space station and the space plane, even as we've cleared the way for development of a private launch industry and for the commercial development of space. I believe that the opening of space to the questing dynamism of our free enterprise system may turn out to be among the most significant developments in space exploration since the first landing on the moon. Combine that with the renaissance in private research that our economic policies have spawned and our commitment to fields of research ranging from AIDS-related studies of the immunological system to the superconducting supercollider and who can doubt that American technology will continue to set the pace for the world in the generation ahead. Yes, from the economy to science and in every other field, we've followed the lead of the American people these last eight years and chosen hope. Like the American people, we've chosen always to stand on the side of family and opportunity and freedom. We have looked back to the kind of America our fathers intended and their wisdom has given us the strength, the balance, and the vision to look forward. But as we look ahead, there's, of course, one area in particular where work is still left to do, the budget. In 52 of the last 56 years, the House of Representatives has been in the hands of the other party and both houses of Congress for 46 of those 56 years. And in all but eight of those years, the government has run a deficit. And under the Constitution, only Congress can spend money. The President can't appropriate a penny. Even so, with Congress dragged along, kicking and screaming, we've made remarkable progress. We have slowed the rate of growth in federal spending to a third of what it was the year before we took office. And we have transformed the debate on the budget. You don't hear people argue anymore that deficits are good or that they don't matter. Still, it's no secret that one of my great disappointments as I leave office is that the federal budget itself is not yet balanced. I've given our experience with the budget a great deal of thought. And I would like to speak for a moment about one of the principal lessons I have learned, a lesson I believe that has lasting importance. It sometimes seems to many Americans that what might be called a triangle of institutions, parts of Congress, the media, and special interest groups, is transforming and placing out of focus our constitutional balance, particularly in the areas of spending and foreign policy. Some have used the term iron triangle to describe something like what I'm talking about. And with apologies to them, I'll borrow that term. A measure of this iron triangle's power derives from its permanence. Administrations come and go, but the members of the iron triangle endure. Even the body that the framers of our Constitution intended to be the most vulnerable to shifts in public attitudes, the House of Representatives has, with a combination of gerrymandering, changes in campaign finance rules, and the powers of incumbency, become a virtually permanent chamber, no longer truly responsive to the people. With a 98% rate of re-election, there is less turnover in the House than in the Supreme Soviet. And a seat in Congress... A seat in... And a seat in Congress to secure jobs in America. But the iron triangle's power also comes from its ability to focus debate and overwhelming resources like campaign money and letter-writing campaigns on issues that don't command broad and intense national attention. Yes, as I said a moment ago, thanks to us, most liberals are now afraid to discuss new spending, but go one step into greater detail. The merits of this are that restraint on spending, and the iron triangle has virtually shut off public debate. Special interest groups focus all their resources and members on this line or that in the budget. And members of Congress, particularly liberal members, with their dependence on special interest campaign financing and their fear of bucking any group that is strongly committed to a spending program, take up the banner and join the charge. It helps the special interest that the government spends a great deal of money without Congress ever casting a vote. Now, I'm not talking here about Social Security, but of the many formula spending programs. When we came to town, bracket creep, let Congress raise taxes without voting a tax increase. With indexing and by beating down inflation, we stopped that. The same thing has not happened with formula spending. The result is that it's easier for most members of Congress to lay low and do nothing than to take the political heat of voting for a change. You'd think the media might act as a check on all this, but too often it doesn't. Now, let me say no one who sits in my seat can have anything but the greatest respect for the media and the role they play in our system, but it is also clear that too many members of the media approach issues like federal spending from a superficial perspective. Our positions are reported in caricature. Special interest charges are reported uncritically, and the public's understanding suffers. Shouldn't we expect better of those who act in the name of the public's right to know? What we are talking about here is the very thing our Constitution was designed to protect us against. A rise in the power of what Madison called factions, and I believe the budget crisis would not be nearly so serious today, had not the Constitution itself been in essence rewritten nearly 15 years ago, upsetting the calculus of consent within our system, and opening the way for the situation we now have. I'm speaking of the Budget Act of 1974. In a recent article in Commentary Magazine, commentator L. Gordon Krovitz wrote that the act, in his words, was crafted by Congress to rob the president of the ability to limit spending while making it possible for a fragmented collection of congressmen to spend and at the same time to evade responsibility for doing so. While it was originally drafted, the 1974 Act would have replaced the president's disciplining role in the budget process with institutional disciplines within Congress. But some complained that the proposed plan would, quoting a study paper of the time, lock the Congressional budget process into a conservative mold for generations to come. Well, Congress fixed that and changed the plan. And while, as I said, we've run deficits for most of the past five and a half decades, the really big deficits started coming immediately after the Act was passed and they've kept right on rolling ever since. Can you imagine a situation where any head of a company or head of a household is forced to spend every dime? But that's the situation the president is in now. If Congress appropriates it, the president has to spend it whether he needs all the money to do the job or not. And why do we have deficits? It's not because of a lack of revenues. Federal revenues have grown by $375 billion since 1981. But spending has grown by $450 billion. And for the record, less than $140 billion of the spending increase went to defense. Next year, we expect revenues to increase by another $80 billion without new taxes. So the challenge before us is setting spending priorities, deciding where to spend some of the additional revenue, but not spending at all so we can reduce the deficit. Now, that shouldn't be so hard, but history suggests that Congress will want to spend it all and then some. When I came to office, I found in the presidency a weakened institution. I found a Congress that was trying to transform our government into a quasi-parliamentary system. And I found a Washington colony that through the Iron Triangle was attempting to rule the nation according to its interests and desires more than the nations. I've used the president's ability to frame the broadest outlines of debate to compensate for some of the weakening of the office. This year we also put an end, I hope for good, to the use of monster-continuing resolutions to make the Congressional budget veto-proof. But we have not restored the constitutional balance, at least not fully, and I believe it must be restored. In the long run, the situation we have now isn't good for anyone, even the members of the Iron Triangle. Fundamentally, the American people know what's up and they don't like it. They may re-elect their congressmen, but they trust Congress itself less and less. They may watch or read the media, but they stop believing it, and they show more and more dislike for special interest influence. The only question is, when will they say once and for all that they've had enough? The strength of our nation has never been with the Washington colony, but with the American people. The budget deficit is the colony's last stand in the last eight years we've taken giant steps toward shutting down their game of tax and spend. We've succeeded as much as we have because even if the American people can't follow every issue that has its day in this city, in the end, they know how the chips are falling. I believe that soon they'll be saying with greater and greater force that it's time to restore our constitutional balance, and I believe that they'll join us in saying that the place to start is with enhanced rescission authority and a line item veto for the president with the balanced budget amendment to the Constitution. Do that, and the federal budget deficit will be ancient history in no time. As we face the battle ahead, we'll find strength in remembering that we have already fought great battles and great victories and one great victories. And we should never forget how much those victories mean not only to America, but to people throughout the world. Writer George Gilder has said that we have launched a global revival of capitalism. And yes, the days are gone when, for example, a British intellectual like historian A.G. P. Taylor could say that nobody in Europe believes in the American way of life, that is, in private enterprise. Well, now even in the Soviet Union and the People's Republic of China, our example of private enterprise has an almost irresistible appeal. But our achievement is more than simply economic. In his memoirs of imprisonment in the Soviet Union, Nathan Sharansky tells of how he was taken during a break in his trial to a special holding cell. Think of the hopelessness of one who, despite his courage and conviction, nevertheless knows that years in the Gulag are ahead of him, and his once normal life is behind. And then in that moment, his eyes lit on a scratching of graffiti left by another prisoner of conscience, also a refusenic. It said simply, be strong and courageous, and it was signed. And with that message from another man that his spirit was free, though his body was not, he found the strength to go on. We're free in body, as well as spirit. But our success these last eight years is also a message of hope to those who yearn for freedom all over the world. We've put the lie to the myth of determinism and despair and reaffirmed that no force in this world can match that of the robust spirit of free men and women. Political philosopher Michael Novak has written that the major division in American politics is not economic, but moral. And so it is. Freedom and hope versus determinism and despair. And thanks to men and women like you, the cause of hope and freedom is on the march. And now as I prepare to lay down the mantle of office, I will come and the transformations we've wrought and I know who will take my place. I cannot help believe that what Kipling said of another time and place is true today for America. We are at the opening verse of the opening page of the chapter of endless possibilities. Thank you and God bless you. Mr. President, as you just said, you are the change. And as we say to you, you are the change. Thank you very, very much. Thank you all for coming.