Jimmy Carter
State of the Union Address 1981

January 16, 1981

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 dis