Annual Message to the Congress on the State of the Union

To the Congress of the United States:

We enter 1974 not at the beginning of an historical cycle, but in the middle of one. Beginnings have been made in many vital areas, beginnings which we now must build upon. New needs have arisen which we are in the process of addressing. Opportunities are coalescing which give us a chance to make historic progress toward a stable peace and expanding prosperity.

In looking at the agenda for 1974, we cannot consider the work of this or of any one year in isolation. What we select as our tasks in 1974 must build on the work of the years before, and anticipate needs of those ahead. Indeed, one of the continuing challenges facing us in the legislative process is that of the timing and pacing of our initiatives.

It would be as false to pretend that we could do--or afford to do everything at once, as it would be to maintain that we can do nothing. Therefore, we must strive to maintain steady progress, selecting each year among many worthy projects those that are ripe for action at that time, and that can be accommodated within the constraints of our budget--but pressing to ensure that the most that can be done is clone.

In discussing my legislative recommendations for this Congressional session, therefore, I shall do so in the context of the advances that have already been made, the problems that remain, and the special opportunities we have in 1974 to make further progress.

I have started with certain basic premises:

--The basic tax burden on the American taxpayer should not be increased.

--Our new initiatives, therefore, should be scaled to what can prudently be spent given the level of revenues that would be generated by the existing tax structure at full utilization of our resources.

--Increases in Federal spending should be kept to a minimum, but the budget should be flexible enough to be used, if necessary, to maintain jobs and prosperity.

--It is essential that we break the old habit of regarding any Federal program, once established, as permanent; we must learn to scrap old programs that are no longer effective or needed in favor of new ones that are. This is the only way we can afford to do what must be done.

Within these guidelines, there are a number of major new initiatives which are ripe for action in 1974--several of which can be milestones on our march to a life of greater freedom, greater opportunity and greater prosperity for all.

In particular, 1974 can be the year in which:

--First, we not only break the back of the energy crisis, but also, through Project Independence, lay the foundation for our future capacity to meet America's energy needs from America's own resources--at reasonable prices and with adequate environmental protection.

--Second, we take another giant stride toward lasting peace in the world--not only by continuing our policy of negotiation rather than confrontation where the great powers are concerned, but also by helping toward the achievement of a just and lasting settlement in the Middle East.

--Third, we will check the rise in prices, without administering the harsh medicine of recession, and move the economy into a period of steady growth at a sustainable level.

--Fourth, we establish a new system of comprehensive health insurance that makes high quality health care available to every American in a dignified manner and at a price he or she can afford.

--Fifth, we continue to build a new era of achievement and responsiveness in State and local government, by cutting the strings of too tight Federal control that have bound the hands of State and local officials in community and economic development programs.

--Sixth, we make a crucial breakthrough toward better transportation by strengthening the ability of local communities to deal with their transportation problems.

--Seventh, we reform our system of Federal aid to education to provide it when it is needed, where it is needed, and so that it will do the most for those who need it most.

--Eighth, we make an historic beginning on the task of defining and protecting the right of personal privacy.

--Ninth, we start on a new road toward reform of a welfare system that bleeds the taxpayer, corrodes the community and demeans those it is meant to assist.

--And tenth, together with the other nations of the world, we establish the economic framework within which Americans will share more fully in an expanding world trade and prosperity in the years ahead, with more open access to both markets and supplies.

MEETING OUR ENERGY NEEDS

At the start of this Congressional session, the number one legislative concern must be the energy crisis.

The cooperative efforts of the American people, together with measures already taken by the Administration, have significantly reduced the immediate impact of the energy crisis. There has been some economic dislocation and some individual hardships, but these have been minimized by our policy of encouraging broad conservation measures and allocating scarce energy resources so as to do the least possible harm to jobs and the economy. The object has been to keep our farms and factories producing, to keep our workers on the job, and to keep our goods and services flowing, even if this means that we must live and work in somewhat less comfortable surroundings and drive fewer miles at slower speeds.

Even with the full cooperation of most Americans, however, we will still face real challenges--and genuine shortages--in the months and years immediately ahead. To meet these challenges, we must change our patterns of energy consumption and production, we must press forward with the development of reliable new energy sources, and we must adjust to the fact that the age of unlimited supplies of cheap energy is ended.

The immediate energy crisis began with the oil embargo imposed in the Middle East last fall. But the embargo only hastened a shortage that was already anticipated. For a number of years our fuel consumption had been climbing while our production of domestic energy supplies declined. We became more and more heavily dependent on oil imports and, consequently, more vulnerable to any interruption or reduction in those imports, as well as to sudden increases in foreign prices. Today, we have an interruption in supplies and we face sharply increased prices for those supplies when they are restored.

Irrespective of the possibility of restoring the flow of Middle East oil, we must act now to ensure that we are never again dependent on foreign sources of supply for our energy needs. We must continue to slow the rise in our rate of consumption, and we must sharply increase our domestic production.

The effects of energy conservation can be felt at once. Already the responsiveness of the American people to the recent crisis has proved to be the major factor in helping to avoid the serious consequences that the winter might have brought. That conservation must continue.

The required increase in domestic supplies cannot be achieved so rapidly. It will involve the development of entirely new sources of energy as well as the expanded development of oil and coal resources; it will require a significant expansion of our research and development efforts; it will require a shift from the use of scarce fuels to those which are more plentiful but also more expensive than the cheap energy to which we have been accustomed; it will require that we encourage both exploration and production; it will mean that as we act to prevent the energy industry from making unconscionable windfall profits, we must also avoid crippling that industry with punitive legislation; and finally, it will require that we make some difficult decisions as we sort out our economic and environmental priorities.

As we seek to act domestically to increase fuel supplies, we will act internationally in an effort to obtain oil at reasonable prices. Unreasonable increases in the cost of so vital a commodity as oil poses a threat to the entire structure of international economic relations. Not only U.S. jobs, prices and incomes are at stake, but the general pattern of international cooperation is at stake as well. It is our hope that we can work out cooperative efforts with our friends abroad so that we eau all meet our energy needs without disrupting our economies and without disrupting our economic relationships.

Last week I sent to the Congress a comprehensive special message setting forth our energy situation, our energy prospects, our energy needs, and the legislative measures I consider necessary for meeting those needs. I shall not repeat that analysis nor the full list of those recommendations today.

I do want to urge, however, that the critical energy measures which I have proposed be made the first order of legislative business in this session of the Congress, and that work go forward expeditiously on the others. Those measures which I request be given the highest priority are the following:

--A special energy act which would permit additional restrictions on energy consumption and would postpone temporarily certain Clean Air Act requirements for power plants and automotive emissions;

--A windfall profits tax which would prevent private profiteering at the expense of public sacrifice;

--Unemployment insurance for people in areas impacted by serious economic dislocation; and

--Mandatory reporting by major energy companies on their inventories, their production and their reserves.

I am also asking that the Congress quickly establish the Federal Energy Administration and the Energy Research and Development Administration to provide the appropriate organizational structure for administering the national energy policy, as we work toward the establishment of a Department of Energy and Natural Resources.

The 13 other energy measures I requested last week deal with longer-term needs, extending beyond the present emergency. But these also require expeditious action if we are to achieve the goal of Project Independence--a capacity for energy self-sufficiency by 1980. The success of Project Independence is essential to the continued strength of our position in world trade, and also to our independence of action as a great power.

I hope that our joint efforts now to resolve the energy crisis and to move toward a capacity for self-sufficiency in energy will enable the President who addresses the 98th Congress a decade from now to look back and say we made it possible for America to enjoy continued peace and prosperity in the 1980s.

THE NATION'S ECONOMY

THE WORLD ECONOMY

During the past three years the United States has reached an unprecedented level of material prosperity. Industrial output has set new records. Trade has flourished. Consumption has risen to the highest levels in history. Even our inflation rate-the most serious economic problem we now face--has been one of the lowest in the industrialized free world.

The major policy decisions we took in 1971 contributed significantly to this prosperity--both here and in other countries. It was clear, for example, as we moved into the 1970s that the international monetary system adopted after World War II needed major adjustments. Unsustainable imbalances had developed, threatening a resurgence of protectionism and a disruption of world trade. This is why I decided to take some very strong measures in August of 1971, measures that have resulted in a major realignment of world currency values, progress toward new and more flexible international monetary management, and negotiations toward a more open and equitable trading system.

These adjustments, while essential, were not easy. But now we have finally entered into a more flexible and realistic international financial system. Much remains to be done to complete the transition, but its beneficial results are already clear.

The realignment of currency values helped produce an increase of 80 percent--or more than $50 billion in the rate of U.S. exports during the past two years, along with a major improvement in our trade balance. This improvement was good not only for us, but also for the rest of the world. In addition, the shocks to the world economy arising from reduced food supplies in 1972 and 1973, and in recent months from the oil embargo and the arbitrary increases in the price of oil, all were managed without panic under the new arrangements. Indeed, world trade has continued to expand, despite these temporary difficulties.

INTERNATIONAL TRADE BARRIERS

A vigorous international trade is vital to the American economy. Jobs for American workers depend on our ability to develop foreign markets. Moreover, American consumers deserve access to foreign-made products that might be less expensive, or more interesting, or unavailable in the United States. But if trade is to be advantageous over the long run, it must be conducted on a basis which is fair to all participants.

There are still many unnecessary barriers to trade which need to be lowered or removed. While improvements have been made in this situation during the last 10 years, we need now to build on this progress and to negotiate for more open access both to markets and supplies. This is why I call upon the Congress with special urgency to complete action on my proposed Trade Reform Act, in order to provide the authority we will need to negotiate effectively for reductions in barriers to trade, to improve the trading system, and to manage trade problems at home more effectively.

As the Senate considers this legislation, I would draw its attention particularly to provisions added in the House which would seriously impede our efforts to achieve more harmonious international relationships. These provisions would effectively prevent both the extension of nondiscriminatory tariff treatment and of credits to certain Communist countries unless they followed a policy which allowed unrestricted emigration. I am convinced that such a prohibition would only make more difficult the kind of cooperative effort between the United States and other governments which is necessary if we are to work together for peace in the Middle East and throughout the world. I am confident that by working with the Congress we can find a solution to this problem that will avoid a major setback in our peacemaking efforts.

At the same time, we must move forward with current negotiations to reform the international payments system under the auspices of the International Monetary Fund. These negotiations are designed to increase the opportunities for all nations to trade and invest profitably. The U.S. has already presented proposals for deterring the growth of significant imbalances in international monetary affairs while preserving for each nation a wide freedom in choosing how necessary adjustments can best be accomplished. In addition, the system will also have to accommodate the increased payments flow and prospective reserve accumulations occasioned by higher oil prices. If, however, other nations share with us the will to preserve a healthy and growing world economy, I am confident that a mutually acceptable solution to this problem will be achieved.

In practice, this means that our markets must increasingly be open to imports from developing countries--a condition that would be significantly facilitated by enactment of the Trade Reform Act. It also means that the Congress must continue to authorize and appropriate our fair share of both bilateral and multilateral economic assistance, including a substantial contribution to the International Development Association which helps the poorest countries. In 1973 we successfully negotiated a reduction of the United States share from 40 percent to one-third of IDA funds. We cannot let the action of the House in voting against IDA stand as our final answer. We will work hard with the Congress to ensure that this country continues to play a leadership role, consistent with our own economic situation, so that long-term economic development can continue to be planned in an orderly manner.

Along with trade and monetary problems, new international agreements on investment policies and new mechanisms for dispute settlement are high on our negotiating agenda for the coming year. We must continue to work for economic arrangements which permit the beneficial flow of international investment so that all may derive the maximum benefit from their own resources. To that end, I am glad to be able to note that this week the United States completed the phaseout of controls on flows of capital from this country.

The recent oil embargo and especially arbitrary increases in the price of oil have created major economic problems for many countries, including the United States. If continued, these policies would require enormous transfers of goods and assets from oil importing nations, transfers which would represent a serious burden for even the wealthiest countries and which would be virtually unbearable for the less developed countries.

Our objectives are clear--we must get world oil prices down from levels that are arbitrary and exploitative. We must also cooperate to ensure that the international and domestic economic policies of the advanced countries do not compound the economic disturbances created by the current emergency but rather that we do all that can be done to contain and limit those disturbances.

THE DOMESTIC ECONOMY

Despite our general prosperity, inflation remains a most serious economic problem, not only in the United States but also for the rest of the world. We see clear evidence of this problem at every hand. World oil prices have gone up recently at dramatic rates. World food, metals and other commodities prices are also up sharply. Because domestic prices cannot be isolated from international prices, worldwide inflationary pressures have helped to drive up prices here at home.

Inflation has been a continuous problem for nearly a decade, and it got worse in 1973. The result has been that people have come to expect continuing price increases--and to behave accordingly in their own economic life. Their behavior, in turn, adds further to inflationary pressures, contributing to a vicious inflationary spiral which is difficult to break.

Some people have said that the best way to wring these inflationary expectations out of our economy is by taking the economy into a recession. I disagree. It is true that a lower level of economic activity would reduce demand and thus lower the pressure for higher prices. However, the cost of such a policy in terms of increased unemployment would simply be unacceptable.

By the same token, I also reject the notion that we should totally ignore inflation and concentrate solely on stimulating higher levels of employment. This policy would also involve too high a cost since it would unleash a further acceleration of the inflation rate.

In developing my economic policy for 1974, I have chosen what I believe is a sound middle road: to cushion the economic slowdown we expect during 1974 without providing additional stimulus for inflation. We expect this policy to reduce the rate of inflation by the end of the year. Should there appear to be a serious threat of a severe slowdown, then we will act promptly and vigorously to support the economy.

As we cope with the challenge of inflation, we must recognize the clear lesson of recent years: While direct controls over prices and wages can help fight inflation in the short-run, they have a very limited useful life. Inevitably, their eventual effect is to create or aggravate significant distortions in production and distribution. Accordingly, I will continue to watch the wage-price situation closely and to pursue a policy of gradual, selective decontrol except in particularly troublesome areas.

At the same time, those Federal programs that will help reduce inflation by increasing the supply of scarce resources will be strengthened. One key area where we can look forward to expanded supplies is that of food. With a new national farm policy that encourages rather than discourages output, we achieved a record harvest in 1973 and another record harvest now appears likely in 1974. Increased agricultural output is the only sure way to bring food prices down--and increased output is what our new policies are producing.

Rapid inflation is not inevitable and it must not be tolerated. To regain control of inflation, however, will require patience and persistence over the long course. My Administration is dedicated to achieving this objective and we are confident that with the help of the American people we will succeed.

Another most pressing economic problem-and a major contributor to inflation-is the energy crisis. As the cost of using our own fuel resources came to exceed the cost of imports in the 1960's, it became increasingly attractive for us to import oil and petroleum products. Unfortunately, our growing dependence on imports made our entire economy more vulnerable to outside forces. That vulnerability has been tested in recent months--as has the even greater vulnerability of the developed countries of Western Europe and Japan and the less developed countries which have no oil. Every American has learned the consequences of this vulnerability: short fuel supplies and higher fuel prices.

To a large extent, our flexible, adaptable economy will solve the longer run energy problem through the normal workings of the marketplace. As energy prices reach somewhat higher levels than the bargain rates of the past, conservation will be encouraged while domestic energy production will be expanded. One example of normal market forces at work has been the recent shift to smaller cars with better gas mileage. Over the next few years we can also expect to see an expansion of coal production and new output of oil and natural gas.

Nevertheless, we will still have to import some of the oil we will need in the immediate future. It is essential, therefore, that we seek a more reasonable price for oil in the world market.

It is also imperative that we review our current and prospective supplies of other basic commodities. I have therefore directed that a comprehensive report and policy analysis be made concerning this crucial matter so that governmental actions can properly anticipate and help avoid other damaging shortages.

Even with the inflation and energy problems, 1973 was a year of many important economic gains for American people.

First, employment in 1973 increased by 2.7 million persons; this 3.3 percent rise in employment was the largest since 1955. New job opportunities greatly benefitted all categories of workers, including women, non-whites, teenagers, and Vietnam veterans. Unemployment reached low levels, especially for skilled workers.

Second, the purchasing power of the American people reached new highs last year. Even after allowing for price increases, people are now consuming more goods and services than they did a year ago, or in any other year in the entire history of the United States.

Not everyone's purchasing power went up, of course. Inflation took its toll on many families whose income did not rise as fast as that of the average American. It is for this reason that we continue to regard inflation as a very serious enemy. At the same time, however, we should not ignore the substantial economic gains that have been made.

PERSPECTIVE ON 1974

We have known for some time that a slowdown in economic growth is inevitable in 1974. It has been clear that our economy has simply been growing at an unsustainable rate. Shortages of skilled workers, full utilization of plant and equipment in key industries, and short supplies of a number of essential raw materials have all provided clear indications that our rate of growth would have to taper off. Unfortunately, the very mild slowdown which we anticipated for 1974 now threatens to be somewhat more pronounced because of the oil embargo, the resulting shortages, and the oil price increase.

We expect, therefore, that during the early part of this year output will rise little if at all, unemployment will rise somewhat and inflation will be high. Our objective, however, is to turn this situation around so that later in the year output will be rising more rapidly, while unemployment will stop rising and will then decline, and the rate of inflation will slow.

ROLE OF THE FEDERAL BUDGET

The budget that I will recommend to the Congress next week will help us achieve our goals for this period. It will support the economy, resisting a major slowdown, but it will not provide a degree of stimulation that could accelerate inflation. If future events suggest that a change in fiscal policy is desirable, I will promptly recommend the appropriate changes. In particular, I will not hesitate to use the stimulus of fiscal policy if it becomes necessary to preserve jobs in the face of an unexpected slackening in economic activity.

For fiscal year 1975, my budget recommends total spending of $304.4 billion, an increase of $29.7 billion over the current year. The increase is being held to the minimum level necessary--nearly 90 percent of the increase is unavoidable under existing law. The budgeted increase in relatively controllable outlays is only 4.2 percent.

Federal receipts should reach $295 billion during fiscal year 1975, an increase of $25 billion. The projected budget deficit is $9.4 billion. Under conditions of full employment, however, Federal receipts would be substantially higher and there would instead be a moderate budget surplus.

The Federal budget remains an essential tool in the fight against inflation. With the energy supply limitations we are experiencing and the price pressures they create, budget discipline is still required.

I have noted with satisfaction that most Members of the Congress have also recognized the need for budgetary discipline, and that work is going forward to establish a more systematic budgeting procedure. The Congress devoted considerable effort in 1973 to developing a mechanism for coordinating its individual spending decisions with the budget as a whole. I continue to support this effort, although I have been troubled by some of the extraneous amendments which have been added to some of the measures for achieving this goal. I urge the Congress to enact workable budget reform in this legislative session.

TAX REFORM

Our entire economy is affected by the incentives for job-creating investments that are embodied in our tax laws. Major steps have been taken to reform our tax laws in the past five years, but much remains to be done.

Since 1969--primarily through the Tax Reform Act of 1969 and the Revenue Act of 1971--major changes have been introduced to make the personal income tax system conform more nearly to contemporary standards of fairness. Both the higher level of personal exemptions and the low income allowance have worked to free more than eight million low income families from their entire Federal income tax burden. The difference in the tax liability for single and married taxpayers has also been reduced. As a result of these and other tax changes, individual income taxes will be about $25 billion less in 1974 than they would have been under the old tax laws. The saving in the tax burden for a typical family will be more than $270, or the equivalent of two weekly take-home paychecks for the average worker.

I look forward to working with the Congress during the next few months not only to simplify our tax laws themselves, but also to simplify the tax forms that individuals fill out and to distribute the income tax burden more equitably.

Last April, the Secretary of the Treasury presented to the Congress a set of Administration proposals for major and fundamental tax reform. Included in these proposals were the establishment of a minimum taxable income so that no one could avoid paying a fair share of the tax burden, the establishment of new rules for taxing income from foreign sources, and also a limitation on artificial accounting losses to eliminate so-called "tax shelters." I urge the Congress to consider the Administration's tax reform proposals early in the year.

I have also been concerned about the excessive burdens imposed on our low income elderly families by State and local property taxes. To deal with this problem, I have proposed a refundable tax credit for those low income elderly persons whose property taxes exceed five percent of their income. The proposal would also provide equivalent relief for the low income elderly individual who pays rent. I again urge the Congress to enact this very important proposal.

FINANCIAL REFORM

The health of our economy depends upon an efficient and flexible private financial system--commercial banks, thrift institutions, credit unions, and a host of other institutions and individuals that comprise the financial sector of our economy. The average family depends on these institutions, both to provide a fair and reliable return on its savings and to provide credit on reasonable terms when needed to buy homes, automobiles and other purchases. There have been occasions recently when this financial system has not worked as well as it should--occasions, for example, when mortgage lending has been very difficult to obtain. In large part these problems have been the result of legislation, regulations and institutional arrangements which were suited to an earlier time but which are now obsolete.

To remedy this problem I submitted draft legislation last year which reflected the results of careful study by a Presidential commission and Government experts. I again urge the Congress to act promptly on this matter so that American families, businessmen, and local governments can be served by a financial system suited to the economic conditions of the 1970s.

The Administration is also studying the competitive position of foreign banks within this country and of American banks abroad to make sure that discriminatory regulations do not prevent American banks and other financial institutions from doing business they are entitled to do. I will be following the results of this study with considerable interest and will submit to the Congress any proposals resulting from the study which seem desirable.

A HEALTHY AGRICULTURAL ECONOMY

Abundance is the primary goal of our farm policy--abundance that can guarantee lower food prices for every American and higher incomes for all American farmers.

Five years ago, agriculture was a troubled industry:

--Government controls were reducing incentives for production and costing the taxpayers over $3 billion a year in farm subsidies designed to hold down production.

--Farm income was low ($14.7 billion) and the long hours worked by farmers earned them an average income that was 26 percent below the nonfarm average. Farm families had been leaving the farm at an average rate of over 100,000 a year.

Today, that picture has been dramatically altered:

--Farm markets have expanded dramatically. Farm exports have set new records in each of the last four years, becoming the largest single factor in the Nation's balance of payments and strengthening the dollar in international money markets.

--Farm production has reached new record levels in each of the last three years, and a new record harvest should be forthcoming in 1974.

--The billions of tax dollars which used to go for farm price support payments for basic commodities every year will be reduced to nearly zero.

--Farm income has reached record levels. By 1973, the gap between farm income and nonfarm income had closed from 26 to 7 percent. Net farm income was up from $14.7 billion to $26.1 billion.

We are making this progress not through more Government regulation but less. One of the proudest achievements of this Administration was the enactment of the Agriculture and Consumer Protection Act of 1973, which places production decisions where they belong--with farmers, not with the Government.

A primary challenge for Federal agricultural policies now is to encourage greater production of agricultural goods-which will mean more income for the farmer, greater international trading benefits for the Nation, and reasonable food prices for the consumer. I am therefore asking the Congress to revamp the programs which still require restrictive Federal control over the production of some remaining farm commodities--especially rice, peanuts, tobacco, sugar, and extra long staple cotton.

To further enhance agricultural activity, the Administration will also:

--Promote longer-run soil and water conservation practices.

--Consolidate the locations of local offices of Federal agricultural agencies-specifically, the Agricultural Stabilization and Conservation Service, the Soil Conservation Service, the Farmers Home Administration, and the Federal Crop Insurance Corporation--creating one-stop agricultural service centers on the local level to make things easier for the farmer and less costly for the Government.

--Place high priority on directing agricultural research into those areas which will assure plentiful agricultural goods at reasonable prices, maintain our competitive advantage in world agricultural production, and protect the land.

At my direction, Secretary Kissinger recently proposed to the United Nations that it convene a World Food Conference, a concern made urgent by acute food shortages in many parts of the world. This conference, to be held in November of 1974, should prove of particular importance to the American farmer, whose extraordinary productivity has made this Nation the world's leading food exporter and whose own prosperity will continue to increase as we help to meet the needs of a hungry world.

Our farm policy must of course address not only the needs of the farmer but also those of the consumer. During 1973, we experienced a period of rapidly increasing food prices. Those prices leveled off in late 1973, but now we appear to be heading into a period of increasing food prices for at least the next few months. It is our intention to hold these increases to the smallest possible rate through executive actions such as lifting the quota on wheat imports, an action that I took last week. But the most significant force in the battle against higher food prices is higher production. This summer and fall, the large 1974 harvest should be coming on the market, serving as the best possible damper on higher prices.

ECONOMIC SECURITY

One of the most significant legislative achievements of 1973 was the enactment of the Comprehensive Employment and Training Act (CETA). A form of manpower revenue sharing, this bill transfers from the Federal Government to States and localities significant control over the design and operation of programs to improve the employability of the unemployed and the underemployed. CETA is a landmark of the New Federalism. It is also a landmark on the way to better manpower programs.

Under this legislation, State and local governments will be able to use Federal funds to meet locally-determined needs and to devote special attention to employment problems with particular local impact-as, for example, those that might arise in certain areas as a result of the present energy shortage. In my new budget, I am including an additional $250 million for CETA in the current fiscal year, and $350 million in the year beginning July I, for distribution to areas with high unemployment. Overall, I am requesting more than $2 billion to fund our training and employment programs in the coming year.

Other proposals related to economic security that I made to the Congress last year, and on which I again urge action, include:

--The establishment of minimum vesting, funding and fiduciary standards for private pension programs, so that workers could have greater assurance of receiving the pensions they expect and deserve when they retire. I urge that we work together to resolve speedily the remaining disagreements and to enact responsible legislation which increases employee protection without burdening employers to such an extent that existing plans are jeopardized or new ones discouraged.

--Extension to State and local governments of the law forbidding employment discrimination against older workers.

--Improvement of the Federal-State unemployment insurance program in several ways: by increasing the State limits that keep some unemployed workers from receiving a reasonable proportion of their normal wage, by extending coverage to farmworkers, and by prohibiting payment of benefits to strikers while assuring benefits to non-participants unemployed as a result of a strike.

These general improvements in unemployment insurance should be augmented by a special extension of present benefits for those specific areas of the country which experience particularly high levels of unemployment over the next 12 months. In addition, basic coverage should be provided for those in these areas who do not at present have any unemployment insurance. I will submit special legislation to achieve this purpose.

I also continue to support legislation to raise the minimum wage. Higher prices have eroded the purchasing power of workers receiving the current minimum wage. But we must be careful to guard against enacting a bill which includes sharp increases or coverage extensions that would keep low income workers from being employed or a bill with a minimum wage for youths so high that we unwittingly deny them jobs.

Finally, we must attack one of the most troublesome problems faced by both rural and urban areas; the existence of persistent and often severe unemployment or low incomes in areas whose character has been altered by changes in our economy and technology. Within the next several weeks, I will propose an Economic Adjustment Assistance program to help States and communities in overcoming problems caused by structural changes in their economies. This program would replace the present Economic Development Administration and the Regional Action Planning Commissions after a period of orderly transition.

INCOME SECURITY

One measure of a nation's character is the respect it accords to its elderly. Another is the way it helps those in need. We can be proud of the efforts we have made, but it is time to reassess where we are and what direction we should take in the future.

We can take pride in the fact that:

--Cash benefits under social security have risen from $26 billion in fiscal year 1969 to $63 billion in fiscal year 1975, primarily as the result of five benefit increases totaling almost 70 percent and reaching 19 million persons.

--A program of Supplemental Security Income has been initiated and will soon be providing benefits to more than 5 million of the low-income aged, blind, and disabled, on a uniform, nationwide basis in a way that respects their dignity.

But our income security programs need more than improved benefits.

Over the past thirty-five years, a multitude of federally funded programs has grown up whose primary purpose is income security for those in need. Each of these efforts reflects a humane attempt to respond to a worthy goal. However, as cash, in-kind and service programs have rapidly expanded in the past few years, two things have become painfully clear:

--First, the result is an extremely costly set of generally unrelated, uncoordinated programs with many unintended and undesirable consequences; and

--Second, these efforts neither efficiently nor equitably accomplish the overall objective of assisting lower income families and individuals to achieve greater economic independence.

The fact that a third of the new Federal budget--$100 billion--will be spent on income security programs in fiscal year 1975, compared to the $38 billion, or one-fifth of the budget, which they received just five years ago, highlights the need to rationalize and integrate our income assistance programs.

As long ago as 1969, I called for a complete overhaul of our discredited welfare programs. I said then that "whether measured by the anguish of the poor themselves, or by the drastically mounting burden on the taxpayer, the present welfare system has to be judged a colossal failure."

At that time, I proposed the Family Assistance Plan. Neither the Congress nor the country, accepted that proposal. I do not intend to resubmit a new version of the Family Assistance Plan.

Since then, we have made a concerted effort to improve the administration of the existing programs. In 1973, for the first time in recent years, because of vigorous new Federal and State initiatives to enforce the rules more strictly, growth in the Aid to Families With Dependent Children case load was halted. But, in their overall impact, the welfare programs remain a failure and an outrage. As an example of the failure, recent studies have shown that fully 40 percent of the AFDC benefits being paid are either going to ineligible persons or are incorrect in amount. This performance is not just the result of fraud, although there is some of that. It is primarily and overwhelmingly the result of a system which is so complex and so riddled with obscure, obsolete and incomprehensible regulations that it defies fair and efficient administration.

I plan to make a major new effort to replace the current maze of welfare programs with a system that works. This task will be difficult, but we have no other alternative, save further waste--both of lives and dollars. I welcome the evidence that thoughtful Members of the Congress, after careful study, have reached the same conclusion.

While this effort goes forward, I will make every possible effort to improve the operation of the existing programs through administrative reforms, recognizing that a replacement system cannot be developed, enacted, and put into operation overnight. But, unless we move urgently to the development of a new system, efforts to improve the administration of the present programs wilt eventually be undermined by their basic structural flaws.

In the development of my proposal, I will be guided by five principles:

(1) All Americans who are able to work should find it more rewarding to work than to go on welfare. Americans would strongly prefer to have good jobs rather than a Federal handout. While we should provide cash assistance to those in need, we must always encourage complete self-support for those who are capable of it.

(2) Cash assistance is what low-income people need most from the Federal Government. The people themselves, not the Federal Government, know their own needs best.

(3) We need to focus Federal help on those who need it most. People in need should receive equal treatment from the Federal Government regardless of their place of residence.

(4) The new system should be as simple as possible to administer with rules that are clear and understandable. It should be based on objective criteria rather than the personal judgment of administering officials. And it should be efficient.

(5) This new approach should not require an increased tax burden for any of us. Too much of the income of all of us now goes to support Government. We help no one--certainly not those in poverty-by weakening our free enterprise system by even higher taxation.

Starting from these basic principles, I believe we can develop a new system which would ensure that those who can help themselves do help themselves, and which would allow those who cannot help themselves to live with dignity and self-respect.

IMPROVING OUR PEOPLE'S HEALTH

In February of 1971, I outlined to the Congress a new national health strategy to assure that no American would be denied access to high quality medical care because of an inability to pay. Much has already been accomplished toward meeting that objective.

A little over two years ago, I took special satisfaction in signing into law the National Cancer Act, which enabled us to launch an accelerated effort to conquer this dread disease. Considerable progress has been made in our attack on cancer and there is much hope that additional knowledge can be developed in the future. In the budget that I will submit to the Congress next Monday I plan to ask for an additional $100 million above last year's request of $500 million for the expanded attack on cancer. In addition, biomedical research in other areas, including heart disease, has been intensified--and the total 1975 budget for biomedical research will exceed $2 billion, more than double the total in fiscal year 1969.

We are also making headway toward increasing the Nation's supply of health manpower. During the last ten years, first year medical school enrollments have grown by more than 55 percent. The number of other health professionals also can be expected to grow dramatically. Just last month, I approved legislation along the lines I requested in 1971 to permit the Federal Government to support the demonstration of health maintenance organizations across the Nation. During both 1974 and 1975, $125 million will be provided through health maintenance organizations to demonstrate the benefits of prepaid health care to our citizens.

Federal programs to finance health services for the aged, for the disabled, and for low income persons have been greatly expanded. Since 1969, Medicare and Medicaid coverage has been extended to an additional 21 million aged, disabled, and low-income Americans. The range of services covered under Medicare and Medicaid has also increased.

Consumer safety programs--to assure safe foods, drugs, cosmetics, and other consumer products--have received almost a fourfold increase in Federal funding since 1969.

Despite all these advances, however, too many Americans still fail to receive needed health care because of its costs. And too often the costs of health care threaten our citizens with bankruptcy while the services that can prevent or cure disease are not fully utilized.

As one of my major new initiatives for 1974, I shall soon submit to the Congress a comprehensive health insurance proposal which would:

--Make available health insurance protection to millions of Americans who currently cannot obtain or afford the private health insurance coverage they need.

--Provide all Americans with vastly improved protection against catastrophic illness.

--Place a new emphasis on preventive health care.

--Provide State and Federal subsidies for low-income families, and for those whose special health risks would otherwise make them uninsurable or insurable only at exorbitant expense.

My comprehensive health insurance proposal will build upon the strengths of the existing health system, rather than destroying it. It will maintain the high quality of medical care without requiring higher taxes. It will be based on partnership, not on paternalism. And most importantly, it will. require doctors to work for their patients, not for the Federal Government.

This plan would require that employers offer a comprehensive health insurance plan to all their full-time employees, with the employer paying a share of its costs. The role of private health insurance in financing health care would be expanded and the consumer's opportunity to choose between competing health insurance plans would be enhanced.

In addition to this plan, there are a number of other health-related measures that I urge the Congress to enact this year. These include:

--A Health Resources Planning Act, to help States and localities improve their planning and use of health resources;

--New and expanded national health service scholarship legislation, to increase the number of Federal scholarships available to students in health professions, and also to help ensure that the Federal Government can meet its needs for physicians; and,

--A general expansion of the guaranteed student loan program, to provide adequate financial assistance to all professional and graduate students, including health professionals.

IMPROVING EDUCATION

The Federal Government should provide strong leadership in assuring equal access to a high quality education for all Americans and in bringing about renewal and reform of all of our education programs.

Since 1969, we have raised Federal spending for education from $4.3 billion to $7.6 billion--an increase of 76 percent.

In special messages to the Congress on education in the past, I set forth five major proposals to improve American education. They were:

--A new program of student assistance to help to ensure--for the first time in the Nation's history--that no qualified person is barred from attending college by lack of money.

--A National Institute of Education, to be the focal point for educational research and development aimed at increasing our knowledge of how to help students learn.

--A National Foundation for Higher Education, to encourage innovation in learning beyond high school.

--An Emergency School Aid program to assist desegregating school districts.

--A thorough reform of the programs for Federal support of elementary and secondary education, consolidating the myriad separate categorical grant programs in order to transfer educational decisions back to the State and local levels where they belong.

The first four of these basic proposals have been enacted, in whole or in part, and a great deal has already been accomplished through them. As for the fifth, reform of Federal funding for elementary and secondary education, I believe that 1974 should be the year of its enactment.

COLLEGE STUDENT ASSISTANCE

The Basic Educational Opportunity Grant Program is the primary vehicle in my effort to ensure that no qualified student be denied a college education because of lack of funds. In my new budget, I am asking Congressional approval to strengthen this program by providing grants of up to $1,400 a year for needy students. Altogether, when combined with other student funding efforts, the Federal Government in the coming fiscal year would provide an estimated $2.2 billion of financial aid to post-secondary students, an increase of over $900 million from the level of five years ago.

Since the present student assistance programs are targeted to help the neediest, and because the costs of higher education have risen dramatically, many middle income students are now finding it increasingly difficult to make ends meet. I therefore also recommend that the limit on total borrowing be increased so that professional and other graduate students will be able to find adequate student loans.

EDUCATIONAL RESEARCH AND DEVELOPMENT

When I originally proposed the creation of a National Institute of Education, I suggested that providing equal opportunity for quality education means, in part, increasing our knowledge about the ways that students learn and then changing the way we teach them. For too long we have followed the belief that bigger educational programs are necessarily better educational programs and that money alone can solve our educational problems. But now we are beginning to see that the quality of our thinking about education can be as important as the size of our educational budget.

The National Institute of Education can help us to marshal our educational resources in ways which will produce the best results. It has already begun to provide the kind of leadership in educational research and development which I have long believed was needed.

EDUCATIONAL INNOVATION BEYOND HIGH

SCHOOL

While the National Foundation for Higher Education which I proposed in 1970 has not been established, the Fund for the Improvement of Post-secondary education was set up by the Congress. The fund is now providing support for the development and demonstration of more effective approaches to college level education. Our initial assessment leads me to believe that the fund will, in the years to come, become the primary focal point for innovation in higher education.

ASSISTING SCHOOL DESEGREGATION

Under the Emergency School Aid Act of 1972, an estimated $467 million in Federal funds will have been provided to local school districts by the end of 1975 to assist in the process of elementary and secondary school desegregation, to encourage voluntary programs to overcome minority group isolation, and to assist in meeting the educational needs of children who, because of racial isolation, have not had an equal educational opportunity.

By the 1975-1976 school year, the bulk of the problems incident to "de jure" segregation should have passed. However, to provide assistance to those other school districts which may still be required to take special desegregation measures as the result of court rulings, I have budgeted an additional $75 million for fiscal year 1975. In addition, the Federal Government will continue to provide civil rights education advisory activities to local districts to assist them in meeting any remaining problems.

BUSING

I have often .expressed my opposition to the use of forced busing for purposes of achieving racial balance. I have also proposed legislation which would dictate reasonable limits on the use of forced busing, and I have opposed the consolidation of school districts in an effort to achieve racial balance in the larger district. Such consolidation plans have only led to more busing and the eventual disappearance of the neighborhood school. The end result of an excessive reliance on forced busing and the imposition of arbitrary ratios has frequently been an increasing concentration of the poor and minorities in our central cities and the serious weakening of the very school systems which must serve them. In some cases, the education of minority children has actually suffered, not benefitted, from such plans.

I shall continue to support the passage of legislation which makes busing only a last resort tightly circumscribed even then. I will also continue to work with the Congress to revise my proposals in light of unfolding events in this area.

FUNDING ELEMENTARY AND SECONDARY

EDUCATION

I am encouraged by the interest the Congress has continued to show in legislation which follows the concepts put forward in my proposed Better Schools Act. I believe that meaningful compromise is now possible, and that we can at last reform and consolidate Federal grants for elementary and secondary education, vocational programs and adult education.

I hope that the Congress will include four basic elements in this reform:

--Consolidation of existing categorical grant programs.

--Granting greater decision-making authority to State and local educational agencies.

--Greater equity in the distribution of Federal funds to the States for the education of disadvantaged children.

--Reform of the impact aid program to concentrate support in those districts where the Federal presence has substantially decreased the tax base, rather than those in which it has increased the tax base.

Upon enactment of legislative authorities that accomplish these goals for elementary and secondary education, vocational programs and adult education, I will propose special supplemental appropriations to provide funding for the 1974-1975 school year. This funding would place most elementary and secondary education grant programs on a "forward funded" basis, letting State and local agencies know how much they will receive while plans for the next school year are being made. "Forward funding" is an important concept in the financing of education, and it merits the full support of the Federal Government.

As I noted in my message sent to the Congress on education policy last week, I also recommend additional support for several other educational programs-some old and some new. These include:

--An additional increase in aid to black colleges and other developing institutions during fiscal year 1975, thus quadrupling Federal funds for these important educational institutions since I took office.

--Continuation and extension of the Head Start program, our single largest child development program. In 1975, Head Start will reach 282,000 disadvantaged youths year-round, as well as some 78,000 pre-schoolers during the summer-and it will extend its activities to include handicapped youth.

--The consolidation of eight separate authorities for education of the handicapped into four broader and more flexible programs.

NON-PUBLIC SCHOOLS

I remain firmly committed to the principle of educational diversity. The continued health of the Nation's non-public schools is essential to this concept. Although governmental efforts aimed at supporting these schools have encountered difficulty in the courts, I believe we must continue our efforts to find ways to keep these schools open.

For that reason, I continue to support legislation which permits tax credits for parents who pay to send their children to non-public schools.

HELPING OUR VETERANS

Twenty-nine million Americans living today have given military service to their country. As a group, veterans are among our most productive citizens. Studies show that they generally have higher incomes, more education, and better health than non-veterans of the same age.

We can be proud of the veterans' contributions, but we must also be concerned for those veterans and veterans' families who remain in need.

The assistance provided to veterans and their families in recent years has been substantial:

--Total compensation payments for veterans disabled or killed in military service have been increased from $2.7 billion in 1969 to $3.9 billion in the coming fiscal year.

--Medical care in VA hospitals and clinics has been greatly improved and expanded, with ten new or replacement hospitals now in service and five more in preparation.

--Educational benefits per trainee have more than doubled since 1969.

--Last year two key measures--one expanding health care and the other improving the national cemetery system for veterans--were passed and signed into law.

--Of vital importance, the unemployment rate for Vietnam era veterans has been sliced from 11 percent in early 1871 to 4 percent by late 1973. As a result, Vietnam era veterans have a higher employment rate than others of their same age, a significant achievement that is well deserved.

Earlier this week, in a special message to the Congress, I proposed additional legislation to help veterans in two crucial areas in 1974--pensions and education.

My pension proposals would benefit some I million veterans and 1.3 million veterans' survivors who are in economic need because of disability, age, or the loss of a breadwinner. VA pensions already go a long way toward meeting such needs, but the pension structure itself is fraught with inequities and anomalies that are technical in nature but tragic in consequence. My proposals would correct these deficiencies.

Veterans now in training require additional help if their GI bill allowances are to keep pace with rising costs. I shall therefore propose that GI bill benefits be raised by an average of 8 percent.

I have also set a 1974 goal for the Government of placing an additional 1.2 million veterans in jobs or job training. There remain sizable numbers of educationally disadvantaged veterans and service-disabled veterans who have never taken advantage of Federal training opportunities and are now unemployed. I have directed that, as a matter of high priority, the Federal Government's efforts to reach these veterans be intensified and that they be counselled and encouraged to use the available services.

EQUAL OPPORTUNITY FOR ALL

AMERICANS

This Administration has made a determined effort to secure equal opportunity for those who have been previously denied such opportunity. I am personally very proud of the success those efforts have already achieved, and I am committed to building on that success in the future.

PROGRESS FOR MINORITY GROUPS

Members of racial minority groups have made considerable strides toward equal opportunity in recent years. The following are among the more notable benchmarks of this progress:

--Setting an example as an Equal Opportunity Employer in the past five years, the Federal Government has added more than 35,000 minority group members to its civilian employee roles.

--In the Armed Forces, more than 850 minority-group cadets are now enrolled in the military academies; and whereas prior to 1971 only four minority group members had ever achieved general or flag rank in the armed forces, now sixteen serve on active duty as generals and admirals.

--Federal aid to minority business enterprises-- one of the cornerstones of the Administration's effort to open new economic horizons for minority group members-has nearly tripled since 1970.

--Civil rights enforcement activities have continued at a vigorous level, with their funding substantially increased.

--Since 1969, combined Federal expenditures on civil rights activities and minority economic development programs have grown from less than $1 billion to $3.5 billion.

--Five years ago 68 percent of all black children in the South were still attending all-black schools. Now that figure has been reduced to 8 percent, and the dual school system has been virtually eliminated.

--The Government has also sought to expand job opportunities through legal actions of its own against those who may be engaged in discriminatory practices. During 1972 and 1973 the Department of Justice initiated 34 pattern and practice lawsuits against approximately 207 defendants. These suits directly covered more than 248,803 employees. During the same period of time, approximately 37 cases were fully resolved by entry of decrees and an additional six were partially resolved by the entry of decrees. The decrees entered in those two years alone covered more than 217,000 employees and provide specific goals for the hiring of more than 21,800 minorities and women in traditionally white and male jobs. In addition, those decrees provide new transfer of seniority rights for approximately 12,700 minorities and women and provide for back pay awards which are estimated to amount to well over $6,000,000.

The real story lies not in these figures themselves, but in the facts and the attitudes they represent. They do not represent a flamboyant promise, but rather a quiet determination to work not only toward the symbols but also toward the substance of equal opportunity. They represent an effort to build foundations that will last--in particular, the foundation of economic independence, and of a basic faith in the equal dignity of mankind.

JUSTICE FOR AMERICAN INDIANS

For too many years the American Indians-the first Americans--have been the last Americans to receive the rights and opportunities to which they are entitled. This Administration has taken the initiative to change this picture.

For its part, the Federal Government must put behind it the role of autocratic manager of Indian reservations. We shall continue to encourage Indians and their tribal governments to play an increasing role in determining their own future. We are also particularly determined to defend the natural resources rights of Indian people.

The last five years have been historic steps in Federal Indian policy. In 1971, we worked closely with Indian leaders to achieve a settlement of Alaska Native claims, a settlement consistent with America's sense of fairness and also indispensable to the growth and development of all of Alaska.

We also returned lands taken away long ago from the Taos Pueblo at Blue Lake. We returned lands wrongfully taken from the Yakima people. Because the Menominee people have seen their tribal states involuntarily terminated but had nevertheless kept their land and their tribal structure together, the Congress enacted and I signed the bill which restored the Menominee tribe to trust status. In the courts, we are forcefully asserting Indian natural resources rights, as we have done in protecting Indian rights in Pyramid Lake.

One measure of our attempt to foster a better, more humane policy is the level of Federal funding benefitting American Indians--over twice what it was five years ago or about $ 1.6 billion.

I am especially encouraged by the fact that the rate of infant deaths, pneumonia, influenza, and tuberculosis is significantly lower among Indians than ever before. Although we have not yet achieved our full goals of health and educational services for the Indian people that are fully compatible with those of the general population, this progress demonstrates our continuing commitment.

The Congress has shared in these accomplishments in a spirit of bipartisan cooperation. I hope that I will soon have on my desk two more enactments on which Congressional action is progressing: measures to speed Indian economic development and to upgrade the position of the Commissioner of Indian Affairs to the Assistant Secretary level. Also still awaiting Congressional action are four other proposals I have submitted previously: to permit turning over to Indian tribal governments the management and control of Indian programs; to create an Indian Trust Counsel with authority to safeguard Indian natural resources rights; to help ensure that funds for Indian education actually reach Indian children; and to provide greater local control over federally assisted reservation programs through a program of tribal grants.

Looking forward, I shall ask that the Bureau of Indian Affairs make specific plans to accelerate the transfer of significant portions of its programs to Indian tribal management, although I repeat my assurance that, while accelerated, these transfers will not be forced on Indian tribes not willing to accept them.

THE SPANISH-SPEAKING

The Spanish-speaking citizens of our Nation face special problems in obtaining equal opportunities because of language and cultural barriers. For that reason, my Administration has made a special effort to expand those opportunities.

Our progress on this front is reflected in many ways. Nearly 3,800 Spanish surnamed Americans have been employed by the Federal Government, despite an overall reduction in Federal jobs. The Small Business Administration has also increased its loans to Hispanic businessmen, reaching a total of $109 million in fiscal year 1973.

In 1969, the Cabinet Committee on Opportunities for the Spanish-speaking people was created. The Cabinet Committee has both made the Government more aware of the needs and the talents of Spanish-speaking citizens and helped to expand Federal employment of the Spanish-speaking. Since the authorization for this organization expires this year, I am asking the Congress to extend its life through June 30, 1975. The Cabinet Committee on Opportunities for the Spanish-speaking serves to focus the Administration's continuing efforts in this important area of concern.

THE RIGHTS OF WOMEN

Both men and women have become increasingly aware of the pattern of sometimes blatant but often subtle discrimination to which women are subjected. Some of this discrimination can be erased by existing law; some requires new law; some would be rectified by the Equal Rights Amendment, now nearing ratification by the required three-fourths of the States. It is my hope that the Equal Rights Amendment will be ratified speedily so that equal justice under our laws will become a reality for every American.

One of the primary goals of this Administration is to ensure full equal employment opportunity for women by striving to open to women jobs that previously were reserved for men, often simply by habit or custom. Specifically, we have moved vigorously both to enforce the law and to lead by example---by insisting on equal employment and promotion opportunities within the Federal service, by promoting more women into the professionally critical areas of middle management and by continuing our special recruiting drive to bring more women into the highest levels of Government.

To help advance these goals I have appointed the first woman Counsellor to the President, and she, in turn, has set up a new Office of Women's Programs within my executive office. We are particularly proud that this Administration is the first to have women as heads of three independent Federal agencies--the Atomic Energy Commission, the Federal Maritime Commission, and the United States Tariff Commission.

The effort to improve the economic status of women outside the Government is also continuing. The Equal Employment Opportunity Commission, which has been given enforcement power in the Federal Courts, has reported a marked increase in its activities to end sex discrimination in employment.

We will continue to pursue all these efforts with vigor. This emphasis is especially appropriate as we approach 1975, which has been declared International Women's Year by the United Nations.

One especially invidious form of sex discrimination in particular is ripe for correction now through new legislation: the discrimination that often denies women equal access to credit. In an economy that increasingly operates on credit, this is a particularly grievous practice.

The Congress already has before it a proposal to ensure that credit is extended to all persons on an equitable basis, without regard to their sex or marital status. This Administration strongly supports this proposal and is sending to the Congress amendments which we believe will strengthen it even further. I urge prompt consideration and passage of this vital legislation.

PROTECTION AGAINST CRIME AND INVASIONS OF PRIVACY

Over the past five years I have had no higher domestic priority than rolling back the tide of crime and violence which rose in the 1960s. I am therefore especially pleased with the progress we are making on this front:

--After 17 years of continuous and often dramatic increases, crime in 1972 registered its first overall decline. Although in 1973 it again registered a slight increase, it still held below the level of

1971. Now that the momentum of increase has been broken, I am confident that we can look forward to further reductions in crime rates in the years ahead.

--Serious crime in our largest cities was actually reduced by 13 percent between 1971 and 1973.

--In Washington, D.C., where the Federal Government has special law enforcement responsibilities, crime has been cut in half since 1969.

Indictments and convictions of organized crime racketeers have more than tripled since 1969, thanks in large measure to the 1970 Organized Crime Control Act and to expanded Federal interagency strike forces. In addition, of course, the riots, urban terrorism and burnings of the 1960s have now become a thing of the past.

These indications of success do not mean that we should slacken our anti-crime effort, but that we should intensify it. Key elements of our strategy to do so--most of which will require the assistance of the Congress--include:

--Comprehensive reform of the Federal Criminal Code. Last year I submitted a proposal which was based upon the work of the Justice Department and a five-year study completed by the National Commission on Reform of Federal Criminal Laws. The Federal criminal code has not been completely revised in a quarter century and the need for reform is urgent. I call upon the Congress to act expeditiously in reforming our criminal code, to make it both more workable and more responsive to the demands of our complex society.

--Restoration of the death penalty under the Federal Criminal Code for several especially heinous specific crimes which result in the death of innocent victims. Examples of such crimes are hijacking, kidnapping, or bombing.

--Increased Federal assistance to State and local law enforcement agencies. For the next fiscal year, I propose funding through the Law Enforcement Assistance Administration of $886 million--up from only $60 million in 1969.

--Increasing the resources available to the U.S. Attorneys' offices throughout the Nation----offices which have, in the last three years, increased the number of criminal convictions by 28 percent.

--Creation of additional Federal judgeships to assure speedier disposition of criminal cases. Legislation to accomplish this goal is now before the Congress.

--Comprehensive improvement of Federal correctional programs. Already 15 additional correctional institutions have been built, acquired or begun. My 1975 budget request would represent a tripling of 1969's budget levels.

--A new effort to deal more effectively with employment problems caused by the increase in the number of illegal aliens entering this country. Legislation to achieve this objective is also before the Congress.

PROTECTING THE RIGHT OF PRIVACY

One of the basic rights we cherish most in America is the right of privacy. With the advance of technology, that right has been increasingly threatened. The problem is not simply one of setting effective curbs on invasions of privacy, but even more fundamentally one of limiting the uses to which essentially private information is put, and of recognizing the basic proprietary rights each individual has in information concerning himself.

Privacy, of course, is not absolute; it may conflict, for example, with the need to pursue justice. But where conflicts occur, an intelligent balance must be struck.

One part of the current problem is that as technology has increased the ability of government and private organizations to gather and disseminate information about individuals, the safeguards needed to protect the privacy of individuals and communications have not kept pace. Another part of the problem is that clear definitions and standards concerning the right of privacy have not been developed and agreed upon.

I have therefore ordered an extensive Cabinet-level review--which will be undertaken this year--of both government and industry practices as they relate to the right of privacy, of the conflicts that arise and the balances that must be struck between legitimate needs for information and the right of privacy, and of those measures--including appropriate legislation-that can be taken to ensure that these balances are properly struck.

ENDING DRUG ABUSE

During the decade of the '60s, increasing numbers of Americans--including a high percentage of young people--each year turned to heroin and other drugs in search of "new highs" and "synthetic solutions" to the problems of life. In this retreat from reality, the Nation's drug problem grew dramatically. Residents of our proudest cities were gripped by fear as addicts turned to crime to support their habits, and thousands of families suffered devastating personal tragedies.

I am pleased to be able to report that since then, Federal spending on drug treatment and enforcement have increased tenfold, and progress has been made. We have indeed turned the corner on hard drugs:

--Better drug law enforcement, at home and abroad, has caused an acute heroin shortage throughout much of the country.

--Enough treatment capacity has now been created so that virtually all addicts who want medical help and counselling can get it.

--Our drug abuse indicators all suggest that we have at last succeeded in reducing both the total number of heroin addicts and the number of new addicts.

Nevertheless, the drug battle is far from over.

For the sake of the next generation, I am determined to keep the pressure on-to ensure that the heartening progress made to date is translated into a lasting victory over heroin and other drugs.

As enforcement efforts meet with success in one area of the world, pressure increases on other trafficking routes. To meet these new threats, we will step up our support of joint drug enforcement programs. I have also directed that plans for increased vigilance at our own borders be put into effect.

In the treatment area, we are intensifying our efforts to encourage hard-core addicts to undergo treatment.

To provide added incentive for those not motivated to seek help on their own, I have directed Federal agencies to expand their support for local programs which direct addicts charged with crimes into treatment pending trial and sentencing.

Continued progress will also require help from the Congress:

--I will shortly recommend severe new penalties for both heroin traffickers and those engaged in illegal distribution of other illicit drugs. This legislation will supplement my proposals currently pending before the Congress.

--The Psychotropic Convention, a key international treaty regulating manufactured drugs worldwide, has--after 2 1/2 years--still to be ratified. Affirmative action in this session is of the utmost importance.

I will continue to pursue a balanced approach to the drug problem in the next year by emphasizing both vigorous law enforcement, and treatment and rehabilitation programs to help speed the return of ex-addicts to productive lives in society.

ENHANCING THE ENVIRONMENT

Both our Nation and the world have made imposing strides during recent years in coping with the problems of our natural environment. Building upon well-justified concerns, we have created institutions, developed policies and strategies, and deepened public understanding of the problems that face us.

Now we are entering the second phase of environmental action. It may prove to be a more difficult period.

In this second phase, we will be looking at our environmental problems in new ways which are more complex and far-reaching than those to which we have been accustomed. We must be concerned not only with clean air, clean water and wise land use but also with the interaction of these environmental efforts with our need to expand our energy supplies and to maintain general prosperity.

In facing up to these tough, new problems, we can draw strength from the progress we have already made and from the knowledge that there can be no turning back from our general commitment to preserve and enhance the environment in which we live.

Our record over these past five years includes the vigorous enforcement of air quality legislation and of strengthened water quality and pesticide control legislation, the enactment of new authorities to control noise and ocean dumping, regulations to prevent oil and other spills in our ports and waterways, and legislation establishing major new parks, recreation and wilderness areas.

We have also tried to reorganize the Federal structure in ways that are more responsive to environmental needs. The National Environmental Policy Act, passed in 1969, has provided a basis for reform in our Federal agencies and has given citizens a greater opportunity to contribute to environmental decisions. In 1970, I established the Environmental Protection Agency and National Oceanic and Atmospheric Administration to provide more coordinated and vigorous environmental management. Also in that year, I appointed the first Council on Environmental Quality.

PRODUCING RESULTS

The results of our vigorous anti-pollution efforts are now being seen and felt. In our major cities, levels of dangerous sulfur oxides and particulates have declined, and pollutants from automobiles have been reduced. Water pollution is being conquered, assisted by a massive Federal commitment of over $14 billion in municipal treatment plants during this Administration. Major misuses of pesticides are now under control, and major sources of noise are being regulated for the first time.

During these five years, Federal agencies have acquired over 800,000 additional acres for preservation for future generations, many of them near our heavily populated urban centers such as New York and San Francisco. In addition, the Legacy of Parks program, which I initiated in 1971, has made massive strides in bringing parks to the people. To date, 400 separate parcels covering almost 60,000 acres of under-utilized Federal lands in all 50 States have been turned over to State and local governments for park and recreational use. Many of them are near congested urban areas. We will continue to expedite transfer of additional surplus properties to State and local governments for park and recreation use.

IMPROVING THE WORLD ENVIRONMENT

On our small planet, pollution knows no boundaries. World concern for the environment is as necessary as it is encouraging. Many significant international actions have been taken in recent years, and the United States can be proud of its leadership.

These actions have included the signing of international conventions to protect endangered Species of wildlife, to regulate ocean dumping, to extend the national park concept to the world, and to control marine pollution.

A United Nations Environment Program was established last year. With it, the UN Environment Program Fund came into being, fulfilling a proposal I had made in 1972.

Under the US-USSR Environment Agreement, which I signed in Moscow in May, 1972, Soviet and American scientists and environmentalists have been actively working together on serious environmental problems.

THE CHALLENGE AHEAD

As part of this Administration's continuing effort to conserve outdoor recreation areas, my new, budget will propose full funding of the Land and Water Conservation Fund for 1975. Nearly two-thirds will aid State and local governments in acquiring their own recreation lands and facilities. Coupled with the change I have proposed in the formula for allocating funds to the States, this measure would encourage the development of more recreational sites closer to the places where people live and work.

This year we have the unique opportunity and responsibility to determine the future use of enormous land areas in America's last great frontier--Alaska. Last month, in accordance with the Alaska Native Claims Settlement Act, I transmitted to the Congress recommendations that would add 83.47 million acres in Alaska to the National Park, National Forest, Wildlife Refuge and Wild and Scenic Rivers Systems. If the Alaska frontier is thoughtlessly developed, it will be gone forever. But we now have the opportunity to make considered judgments as to the appropriate uses of these outstanding Alaskan lands for the American people of all future generations.

This session of the Congress has before it 17 major natural resources and environment proposals that I have previously submitted, and on which I again recommend action. These include:

--Department of Energy and Natural Resources: While I discuss this new department elsewhere in this message, I want to reemphasize that I consider it of cardinal importance in ensuring that complex, interrelated environmental and natural resource issues receive an appropriately wide policy overview and administrative coordination.

---National Land Use Policy: Adoption of the National Land Use Policy Act, first proposed in 1971, remains a high priority of my Administration. This legislation would reaffirm that the basic responsibility for land use decisions rests with States and localities--and would provide funds to encourage them to meet their responsibility. I am pleased that the Senate has passed legislation incorporating some of the policies that I proposed. I urge the Congress to pass legislation which would assist States and localities, but which does not inject the Federal Government into their specific land use decisions.

--Coastal Wetlands: These environmentally vital wetlands are increasingly threatened by development. My proposed Environmental Protection Tax Act would amend Federal tax laws to discourage the unwise use of these areas, and to enhance our opportunities for sound land use planning within the coastal zone.

--Wilderness: Traditionally, we have looked westward for our wilderness areas. Last year, however, I proposed that 16 Eastern areas be designated as "wilderness" and that 37 others be studied for possible wilderness designation.

--Historic Preservation: Because we have an irreplaceable historic and architectural heritage, I have proposed an Environmental Protection Tax Act to discourage the demolition of historic structures and to encourage their rehabilitation.

--Big Thicket National Biological Reserve: The Big Thicket area of east Texas is a biological crossroads unique in the United States. I am gratified that the House has acted and I urge the Senate promptly to consider my proposal to preserve key segments of the Thicket in a Big Thicket National Biological Reserve.

--Big Cypress National Fresh Water Reserve: Protection of the Big Cypress Swamp in Florida is essential to the preservation of the water supply in the Everglades National Park. I have recommended legislation which would authorize the acquisition of over 500,000 acres, enabling us to protect this vital water supply.

--Public Land Management: The Secretary of the Interior needs additional authority to protect the environmental values of our public domain lands. I again urge that he be given that authority.

--Controlling Pollution: Three of my legislative proposals aimed at controlling pollution have not yet received final Congressional action:

--Toxic Substances: New chemicals with unknown environmental effects come into use each year. Authority to test these substances and to restrict their use in the event of danger, while still permitting the orderly marketing of needed chemicals in a timely fashion, is highly desirable.

--Hazardous Wastes: Disposal of wastes on land is increasing due to advances in industry and technology and because of our stringent controls on air and water pollution. These wastes can be hazardous to human health and other forms of life. My proposal provides for national standards for treatment and disposal of hazardous waste with primary regulatory responsibility resting with State governments.

--Safe Drinking Water: The water we use in our homes should not endanger our health. Under my proposal on safe drinking water, Federal standards would provide health protection by requiring strict limitation of any contaminants in drinking water, but primary enforcement responsibilities would be left to the States. Alternative legislation is now being seriously considered by the Congress which would require unnecessary Federal standards on operating treatment plants, generate a domineering Federal enforcement role, and create several new categorical subsidy programs.

COMMUNITY DEVELOPMENT

Although American communities share many of the challenges of our age, the relative intensity and the particular nature of these challenges vary sharply from one community to another.

The current way of providing most Federal aid to our communities--with each dollar tied to a string pulled and manipulated by a Federal planner--is wrong. Much of the money that pays the Federal planners could better be spent in the local community; the decisions made by the planners could better be made by the people who live on the scene.

In these past few years, we have sought to change the old system. We have recognized that the Federal policy that will work best is one that helps the people of a particular community define their own needs and meet those needs in the way which they consider best. While in this Administration we have tried to be generous, we have also tried to grant communities greater freedom to set their own priorities. Since 1969, we have:

--Spent twice as much money on community development programs as the Federal Government had spent for this purpose in the entire previous history of the Nation.

--Reduced the red tape and arbitrary restrictions on local action that were so much a part of these programs in the past.

--Moved authority for administering community development programs from Washington to the field, where administrators are more accessible to local officials, and where they can become more familiar with local problems.

--Stepped up Federal support for State and local planning and management, again spending more for this purpose than had been spent in all previous years combined.

As a result, not only have cities received more Federal dollars, but they have been able to accomplish more with each dollar than before.

Despite this progress, we need a much more sweeping reform than has been possible under existing laws. Therefore, I once again urge passage of The Better Communities Act, a $2.3 billion bill which would give local officials new flexibility and provide greater effectiveness in the expenditure of Federal community development funds. This legislation would consolidate seven categorical grant programs into a single program. Funds would be distributed on the basis of need, and then local communities could decide for themselves what projects should come first. Thus we could eliminate a mountainous volume of red tape and allow local government to play a larger role in determining their own destinies.

Two Congresses have now addressed community development legislation. Both of them have agreed, for the most part, with the basic principles and approaches that the Better Communities Act represents. But we have still had no action. Cities and towns that have counted on having this legislation in effect in the next fiscal year now face an uncertain future. I urge the Congress to move ahead as quickly as possible with the Better Communities Act--and I pledge every effort to work out our remaining differences so that our cities and towns can benefit from this program as soon as possible.

I also urged the 93rd Congress to pass the Responsive Government Act that I submitted last year. This measure would enable State and local officials to improve their planning, decision-making and managerial capabilities through broadbased, flexible grants.

RURAL DEVELOPMENT

Over $12 billion has been invested in rural development through Agriculture Department programs alone during the five years of this Administration. Annual Federal funding for these rural development programs has been tripled during that time. These funds have been spent for:

--Rural housing, where more than $6.4 billion has been provided through 487,000 housing loans.

--Electrification and telephone systems, where over $3 billion has been spent to bring service to 177,000 new rural consumers.

--Water and waste disposal, where some 8,500 loans and grants totaling $1.4 billion have been provided to rural communities for water and waste disposal systems.

--Loans to farmers, who received more than 489,000 loans totaling over $4.2 billion.

In addition to these efforts under Department of Agriculture programs, almost 200 other Federal programs have had a significant impact on rural areas. As a result, rural residents receive as much Federal support per capita as residents of urban areas.

During the past year we have markedly increased our activity on behalf of the Nation's rural residents:

--During 1973, the Rural Development Act was funded for the first time to provide over $750 million in loans and grants to States under procedures which give them a new flexibility in promoting rural industrialization and in improving the quality of rural life.

--An interim rural housing policy was developed, placing greater emphasis on more effectively utilizing existing housing and making Farmers Home Administration programs more responsive to those with the greatest housing needs.

--To ensure continuing Government attention to rural development needs, this Administration has also created both a special Cabinet-level Rural Development Committee and the new post of Assistant Secretary of Agriculture for Rural Development.

As we look to the future patterns of national growth, we must never forget that the prosperity, the vitality and the character of rural America are essential cornerstones of our Nation's balanced growth. It is essential that rural America receive its proper share of our attention--and I am determined that this shall be the case.

HELPING DISASTER VICTIMS

Seldom is swift and effective Government action needed so urgently as when a natural disaster strikes.

Since taking office, I have had to declare over 160 major disasters in 42 States and in 3 territories. In recent years, the amount of Federal assistance given to disaster victims has been greatly expanded, and we have also pressed an intensive effort to provide this aid more equitably and expeditiously.

Since more than 90 percent of all property damage resulting from natural disasters is caused by floods, I was especially pleased by the Congress approval last year of our proposed Flood Disaster Protection Act, which significantly expands and improves the national flood insurance program.

More remains to be done, however, if we are to meet our basic humanitarian responsibility to those who fall helpless and innocent victims to nature on the rampage. Therefore, I have also proposed a Disaster Preparedness and Assistance Act, which places new emphasis on the essential element of preparedness, while also increasing the role of State and local officials in allocating Federal disaster funds and cutting the tangle of red tape. It also provides for the automatic use of Federal resources when major disasters strike, and it includes generous grant features for those individual disaster victims unable to repay Government loans, as well as for communities faced with the task of restoring damaged public facilities.

That natural disasters will continue to strike is certain; the only uncertainty is how well prepared we will be. As a generous and compassionate Nation, we should be prepared to give the victims of these disasters the prompt and effective help they so desperately need.

BETTER HOUSING FOR ALL

As I have stated many times, this Administration will not waver from the Federal commitment first outlined in the Housing Act of 1949: "a decent home and a suitable living environment for every American family."

The state of America's housing will continue to depend on the state of America's economy more than on any other factor. The forces of the marketplace are the forces that count the most-families with sufficient real income and sufficient confidence to create an effective demand for better housing on the one hand, and builders and credit institutions able to respond to that demand on the other.

The Federal Government must play a major supporting role through its actions in the mortgage credit market and its help for low income families who need assistance in obtaining adequate housing.

Last September, as credit for housing was becoming increasingly scarce, the Administration acted to make more credit available to home buyers. Recently, mortgage market conditions have begun to improve. However, to assure continuing improvement, I recently authorized a reduction in the maximum allowable interest rate for mortgages insured by the FHA, the Farmer's Home Administration and VA--a more than $6 billion mortgage insurance program that will assist in financing the construction of up to 200,000 housing units.

These actions should have a favorable impact on housing production. If the anticipated results are not fully achieved I will recommend further action to ensure a reasonable level of production.

In the last five years a substantial effort has been made to address the country's housing problems:

--Largely because of a general upswing in the economy, housing production has occurred at record levels.

--FHA mortgage insurance has enabled nearly 3 1/2 million families to purchase homes.

--Over two million units of subsidized housing for low and moderate income families have been approved, more than during the previous 33 years of federally subsidized housing programs.

--Over $1.4 billion has been committed to improving and modernizing existing public housing.

--Subsidies to local housing authorities have grown from $33 million in 1969 to $350 million in 1974.

Even as good housing has become a reality for most Americans, it is clear that important problems still exist. Two are especially significant. First, our credit institutions often encounter problems in providing adequate housing credit. Second, too many low income families are unable to obtain adequate housing--even as good housing sits vacant in their community. We must help them to meet their needs.

In order to increase the availability of housing for all families, I urge passage during this session of two key measures I have already proposed:

--The Financial Institutions Act to enable savings and loan associations to compete more effectively for funds during periods of tight money, as well as to encourage increased investment in housing through a tax credit on income earned from residential mortgages.

--The Administration's proposed Housing Act which would ease the present tight mortgage credit situation and make home ownership easier in the long term by:

--Authorizing increases in the permissible mortgage amounts eligible for FHA insurance.

Permitting home buyers to pay market interest rates on FHA and VA insured mortgages, and reducing the cost of buying a home by doing away with the present system of charging points on mortgage loans.

--Authorizing on an experimental basis more flexible repayment plans on FHA insured mortgages.

--Authorizing more flexible interest rates, longer repayment terms and higher amounts for mobile homes and home improvement loans.

This legislation would extend authority for extensive experiments with a new approach--direct cash assistance--for addressing the housing problem of low income American families. Despite the commitment of over $66 billion, evidence has clearly shown that the subsidized housing programs for low income families have not worked well. Instead of programs to treat symptoms, I will continue to press for a longer term solution-which goes to the root of the problem-lack of sufficient income--and which permits the private housing market to work in as efficient a way as possible. Additionally, this legislation would improve the operation of our existing public housing projects, by helping them move to a more effective, efficient and self-sufficient basis of operation.

IMPROVING TRANSPORTATION

The energy crisis has made urgent what once seemed only necessary: the building of a transportation system that permits all Americans to travel efficiently and at reasonable cost.

While some elements of our transportation system--such as the Federal highway network--have been dramatically improved or expanded in the past decade, others--notably the railroads--have fallen into serious difficulties. It is also apparent that our public transit system must be greatly improved within our urban centers. The measures already taken and others which I shall propose this session are particularly important in helping to deal with the energy crisis by encouraging a more sensible utilization of our transportation resources.

During the past four years, several key measures have helped lay the basis for a greatly improved transportation system.

Under the Urban Mass Transportation Act of 1970, we increased annual Federal aid to urban public transportation to $I billion by 1973--8 times the level of 1968--and in 1973 another $3 billion was made available for the years immediately ahead. For the first time since World War II the downward trend in transit ridership has been reversed, and is now moving upwards. And for the first time, under the provisions of the Federal-Aid Highway Act of 1973, States and localities can now use a portion of their Federal highway funds for public transit purposes.

There has also been improvement of rail passenger service under AMTRAK, a public corporation created by the Rail Passenger Service Act of 1970. After years of steady decline in rail passenger service, the past year saw a 14 percent increase in the number of passengers carried on AMTRAK.

Just this past year, we also went to work to avoid a major rail crisis through passage of the Regional Rail Reorganization Act of 1973, which provides for the restructuring of the bankrupt railroads of the Northeast and Midwest region into a streamlined system. By 1976, we hope that the affected railroads will be able to operate profitably and can survive as producers, not consumers, of tax revenues.

Significant new initiatives have also been taken in airport and airway development, making vitally needed improvements in the merchant marine, and in promoting transportation safety, especially on our Nation's highways.

Clearly, however, there is still much to be done. It is my hope that 1974 will be the year when we make major advances by enacting two critical transportation bills.

One of these proposals, which I will send to the Congress in the near future, would give our communities not only more money but also more freedom to balance their own transportation needs--and it will mark the largest Federal commitment ever to the improvement of public transportation. This bill would increase Federal assistance for metropolitan areas by nearly 50 percent over the level of fiscal year 1974. More than two-thirds of those funds would be allocated by formula to State and local governments and those governments could better determine their own transportation priorities, choosing between construction of highways or public transit systems, or the purchase of buses or rail cars. Additional transit aid would also be made available to rural communities for the first time.

Under this bill resources would also be available for the first time to augment the operating funds for public transportation systems in both urban and rural areas. By permitting Federal resources to be used for operating purposes, this proposal should make it unnecessary to establish a new categorical grant program for transit operating subsidies, as is now contemplated in bills before the Congress.

As a second major transportation initiative this year, I shall propose that we modernize the regulatory system governing railroad operations. This legislation would make it easier for railroads to consolidate service on a sustainable basis. It would make changes in the system of rate regulation to allow rail carriers to compete more effectively with one another and with alternative modes of freight transportation. Discriminatory State and local taxation of interstate carriers would be barred. It would also provide $2 billion in Federal loan guarantee authority to finance improvements in rights-of-way, terminal and rail plant facilities, and rolling stock, where necessary, which would be a major step in our effort to improve the Nation's railroad system.

Additional transportation measures I shall soon propose will include:

--Improvements in highway safety through the earmarking of approximately $250 million of the 1975 Federal highway program for the elimination of death traps from the highways--by, for example, improving high-hazard intersections and replacing dangerous bridges. New bonus grants to the States will also be initiated to encourage the adoption of improved safety legislation and to reward States for outstanding safety accomplishments.

--A restructuring of the airport and airway financing system to allocate costs more equitably among the users of our airways and to provide more flexibility in the use of funds.

DISTRICT OF COLUMBIA

Last Christmas Eve, when I signed the new home rule bill into law, the Nation's Capital reached a significant milestone. If the voters of the District accept the proposal in the forthcoming referendum, the city will soon have its first elected mayor and city council in 100 years. In addition to giving the citizens of our Nation's Capital the right to elect their own officials and a greater role in decisions affecting local affairs, the act also transfers to the District functions now carried out in Federal agencies which should rightfully be under local control.

In order to accomplish this transfer of responsibilities to the local government, much work will have to be done. This Administration will make every effort to assist in that transfer and to ensure that it is both timely and effective.

While our attention to the affairs of the District of Columbia has been captured by the transition to home rule, we must not ignore another important task before us. As the city moves into a new era of self-government, it must also prepare for the Nation's celebration of the Bicentennial.

A Federal Bicentennial Task Force has been working to ensure that the Federal Government meets its financial and program commitments in the Nation's Capital. Under the leadership of the Bicentennial Coordination Center, which I established over two years ago, a number of projects are moving forward. The National Visitors' Center, Constitution Gardens, the Eisenhower Civic Center, the Fort Circle Parks, the National Air and Space Museum and other projects will contribute enormously to the celebration which takes place here in 1976. In addition, the Pennsylvania Avenue Development Corporation will soon present its plan to restore and improve this central, historically important thoroughfare.

During the coming year, I also urge the Congress to take action on pending legislation to create a District of Columbia Development Bank, which would do much to broaden the economic base of the District.

THE BICENTENNIAL

As we near the celebration of America's Bicentennial, which officially begins in March of 1975, the tempo of preparations has picked up. A sound organizational framework has now been established, with the approval by the Congress last year of a new American Revolution Bicentennial Administration. Each of the 50 States, the District of Columbia and the four territories has also established its own Bicentennial Commission to plan and coordinate local Bicentennial projects. Some 370 counties, cities, towns, villages and tribal units have been recognized as Bicentennial Communities, and some 600 applications for this designation are currently being reviewed.

On the Federal level, I have created the Domestic Council Committee on the Bicentennial. This Cabinet-level Committee has approved the goals for Federal participation in the Bicentennial, established an Interagency Bicentennial Task Force, and approved over 200 Bicentennial projects of the Departments and agencies.

The Department of the Interior will complete the development of historically significant National Park sites; the National Foundation on the Arts and the Humanities will support cultural activities relating to the Bicentennial; and many of our other national institutions, such as the Smithsonian Institution, will present special exhibitions across the Nation.

Other nations are actively responding to the "Invitation to the World" that I issued on July 4, 1972 to participate with us in this celebration which is not ours alone, but one which draws on the heritage of every nation from which people have come to our shores.

In celebrating America's Bicentennial, we shall, of course, commemorate our national achievements. We shall honor our celebrated leaders even as we remember those whose contributions were less well known. We shall take stock of our shortcomings and resolve to overcome them.

What we will celebrate most of all in 1976 will be the vitality of the American people. We have tried to ensure that Federal Bicentennial activities reflect the diversity which is ours alone, and which is appearing in community Bicentennial planning across the country.

CULTURE AND COMMUNICATIONS

When I took office in 1969, I was determined to give support to the goal of substantially strengthening the arts and humanities in the United States. The result has been the rapid growth of the National Endowment for the Arts and the National Endowment for the Humanities-which had existed before but at a very low level of activity.

In the current year, the National Endowment for the Arts will spend $60.8 million on a large scale of programs intended to enrich America's cultural present and future. A broad range of individuals as well as institutions, both public and private, are being assisted. And special support is being given to projects which will add to the celebration of our Bicentennial.

The Congress has in the past given strong bipartisan support to the Arts Endowment. That same support will be needed in the future. Increased Federal funds, eliciting greater financial support from the private sector and State and local governments, will ensure the flourishing of American arts in the years ahead.

The National Endowment for the Humanities has likewise made outstanding contributions to the stimulation of our intellectual and cultural life. One measure of the growing importance of its activities is the fact that the Humanities Endowment has a program today which is ten times as large as it was five years ago.

The Humanities Endowment will also play a major role in promoting the Bicentennial and will emphasize activities which reach large numbers of people, such as film and television productions and traveling exhibitions.

In America, television is by far the best means of communicating with the widest audience. To assure the American audience a greater range of television programming of a type not financially feasible for commercial television, we have dramatically increased our support for public television in the last five years.

Public Broadcasting matured during the past year. Both the television and radio licensees reorganized themselves in a way which encouraged a more rational relationship between them and the Corporation for Public Broadcasting, and increased the ability of each local station to provide programs uniquely tailored to their local communities.

Another aspect of electronic media that has recently become a public policy issue is cable television, a development that could lead to a vast expansion of the Nation's communications capabilities. In June of 1971, I established a Cabinet Committee to develop proposals for a comprehensive national policy on cable communications. I have recently received and am now reviewing the report which is the product of that committee. I have also asked the Director of Telecommunications Policy to prepare legislation to move toward the adoption and implementation of a national cable television policy and I expect to submit such legislation to the Congress in the near future. I encourage the Congress to review carefully the issues presented by cable television and I especially encourage a widespread national debate on this subject which could play such a major role in all of our lives during the future.

SCIENCE AND TECHNOLOGY

One of the great strengths of this Nation has been its preeminence in science and technology. In times of national peril we have turned to the men and women in the laboratories in universities, Government, and private industry to apply their knowledge to new challenges.

Once again, in the current energy crisis, we are calling upon them to respond. I have outlined, in my recent energy message to the Congress, the first step in a five-year, $10 billion research and development effort in energy: $1.8 billion for direct energy R&D for the coming fiscal year and an additional $216 million for supporting research--a total increase of 80 percent over this year.

A look at the broad scope of this energy effort tells a great deal about our confidence in the capabilities of the Nation's scientists and engineers. We are calling on them to accelerate the development of nuclear power systems, to determine how we can use our abundant supplies of coal in ways that are environmentally acceptable and to improve technology for harnessing natural energy sources such as the sun and the heat of the earth. At the same time, we are asking them to explore new ways of conserving the energy that we already use for everyday conveniences such as our automobiles.

This Administration recognizes that the need for progress in every major area of American life requires technological input. We are therefore committed to giving all our major programs a broad scientific underpinning. The new budget will call for an increase of over 20 percent in civilian research and development expenditures.

In addition to a major increase for energy, research and development funds will be spread across a large number of programs for enhancing the prosperity, well-being, and health of Americans. Science will continue to be vital to our efforts to fight drug abuse, to prevent infant mortality, to combat venereal disease, and to aid in treating mental illness.

We will call upon the services of our scientists and engineers to design better forms of transportation, and to make safer the transportation we already have. We will examine ways of making our vast agricultural establishment yield more food at lower prices, and try to lessen agriculturally-related pollution. We will attempt to develop methods of mining that will not only yield greater mineral wealth but also give the miner greater safety and the landscape greater protection. We will study ways to protect our wildlife from natural and man-made attack, and we will attempt to learn how to protect ourselves from the violence of nature in the form of floods, landslides, earthquakes, tornadoes, and other natural calamities.

This Administration recognizes the vital role which the social sciences must play in America's growth. Money will be made available for studying the social effects of various Government income distribution and redistribution plans, such as social security, welfare benefits, health insurance, and varied and experimental educational forms.

In every great area of national endeavor, the Administration will see that adequate funds for making scientific progress are spent.

That also means we will continue our important efforts in space. The exploration of space is today making a key contribution to man's understanding of his universe and to our abilities to manage our resources on earth wisely. As our Skylab astronauts have proven, space is now an acceptable working environment for man.

While we explore our planetary system, the stars, and the galaxies, we are also using space technology to monitor the earth's environment. The Earth Resources Technology Satellite is allowing us to search for scarce resources from high above the earth. Already, many of our intercontinental communications are by satellite. This year new commercial satellites will also be used for domestic telephone, telegraph, and television services. Satellite weather forecasting is now commonplace as a result of our space efforts.

Space exploration in the future should become more economical as we develop the Space Shuttle, a reusable vehicle for space transportation. A cooperative international aspect of the space program will come with the European developed Space-lab as an integral part of the Shuttle program. In addition, we are now moving full speed ahead with our plans for a joint space venture with the Soviets in 1975.

THE NEW FEDERALISM

Just as the rapidly changing and increasing demands placed upon Government have made it necessary to reorganize the Federal structure, they have made it even more imperative to make State and local government stronger and more effective.

During the last four decades, almost every major attempt by the Government to meet a major social need has resulted in a new national program administered in Washington by a new bureaucracy. Forty years ago there were more than 600,000 Federal employees; today there are more than 2.7 million. In the last decade, this problem has grown acute. In 1960 there were some 200 Federal grant-in-aid programs with outlays of $8 billion, but by 1970 there were nearly 1,000 and the total outlays had risen to $22 billion. And in the next fiscal year we expect outlays for grant-in-aid programs to reach $52 billion, even after our substantial efforts to cut their number. This growth in size, power and complexity has made the Federal Government increasingly inaccessible to the individual citizen it seeks to help.

Many of our new national social programs have actually impeded the development of effective local government. By creating a Federal categorical grant system of staggering complexity and diversity we have fostered at the State and local level:

--Overlapping and wasteful programs;

--Distorted budgets and priorities;

--Additional administrative expense;

--Delay and uncertainty; and

--A diminution in the authority and responsibilities of State and local elected officials, as Federal grants have become the special province of competing bureaucracies.

In one of the basic new directions of my Administration, I proposed in 1969 that we create a new and fundamentally different relationship between State and local government, on the one hand, and the Federal Government on the other. This new relationship has come to be known as the New Federalism. As I said in 1969, its purposes are:

--To restore to the States proper rights and roles in the Federal system with a new emphasis on local responsiveness;

--To provide both the encouragement and necessary resources for local and State officials to exercise leadership in solving their own problems;

--To narrow the distance between people and the Government agencies dealing with their problems;

--To restore strength and vigor to State and local governments where elected officials know best the needs and priorities of their own constituents; and

--To shift the balance of political power away from Washington and back to the country and the people.

With the help of both the Congress and the Administration, this new relationship among local, State and Federal governments has begun to take shape:

--In 1972, the Congress enacted our General Revenue Sharing program, and already more than $11 billion of new money has been put to work in over 38,000 units of State and local government.

--Funding through the Law Enforcement Assistance program has demonstrated the flexibility of the New Federalism in leaving to State and local authorities the decisions on how best to combat crime in their jurisdictions. This program has helped to make America's streets safer for our citizens.

--The Comprehensive Employment and Training Act which I signed into law in 1973 is a landmark example of the New Federalism's broad and more flexible forms of assistance--and it represents a leading example of what can be achieved when the Executive and the Congress team up to enact solid legislation.

--New authorities under the Rural Development Act are being exercised this year in a way which is supportive of State and local development plans and priorities.

--In addition, within the limits of law, we have moved administratively to strengthen the role of State and local governments by simplifying and streamlining Federal grant systems--including procedures for State and local review of project proposals affecting their jurisdictions, opportunities for grant integration and joint funding, and the decentralization of many Federal activities to ten Federal Regional Councils.

In the remaining three years of this term I shall continue to take every sound administrative action within the authorities available to me to support and strengthen State and local government, but we must have the support of the Congress to maintain the progress which has begun. Proposals for furthering the New Federalism now before this body and for which I urge your support include:

--Federal education reforms to consolidate support for elementary and secondary schools as well as vocational and adult programs, and to promote better planning on the local level through advance funding.

--The Better Communities Act, to replace several ineffective and restrictive urban programs with a flexible approach that would allow local officials to make essential decisions on the way community development funds would be spent.

--The Responsive Governments Act, to provide needed Federal assistance for improving State and local planning, decision-making and management capabilities. This would help to strengthen the capacity of State and local governments to assume greater responsibility for the administration of their own programs, whether federally assisted or not.

--The Disaster Preparedness Act, to increase the role of State and local officials in allocating Federal disaster funds and to cut the tangle of Federal red tape.

In addition to these proposals now pending, a number of the new initiatives that I describe elsewhere in this message also reflect the principles of New Federalism. These include:

--A new public transportation initiative that would permit States and localities-both urban and rural--to allocate highway and mass transit funds in accordance with local conditions and priorities.

--An economic adjustment assistance program, that would help States and communities to create employment opportunities where they have been affected by structural changes in their economies which has brought about persistent unemployment or depressed incomes.

--In the field of health, a comprehensive health insurance plan which would bring protection against medical expenses within the reach of all our citizens.

MAKING GOVERNMENT WORK BETTER

On taking office five years ago, one of the first needs I sought to address was the organization of the executive branch of Government--for the plain fact is that the only way Government gets anything done is through its organizational structure, and how well it can perform depends in large measure on how well it is organized.

Because the needs of the Nation continue to change, and because the activities of Government must respond to those changes, the patterns of Government organization that might have been fine in the 1930s or even in the 1960s, may be hopelessly out of date in the 1970s. Therefore, early in my first term I established an expert commission to survey the organization of the executive branch and to recommend improvements to meet present-day needs. The reports of this commission contributed significantly to the reorganizations that I ordered and that I recommended, including the proposal I put forward three years ago for a sweeping reorganization of the executive branch, consolidating seven of the present Cabinet departments into four new units.

Although this basic restructuring has not been enacted by the Congress, other progress of a substantial nature has been made in modernizing the Government. For example, we have established:

--The United States Postal Service, taking the post office out of politics;

--The Office of Management and Budget, providing a strong management arm to assist in coordinating the functions of the executive branch;

--A restructured National Security Council;

--The Domestic Council to coordinate domestic policy formulation;

--The Council on Environmental Quality, the Environmental Protection Agency, and the National Oceanic and Atmospheric Administration, all to provide leadership in meeting our vital environmental needs;

--The Special Action Office for Drug Abuse Prevention and the Drug Enforcement Administration;

--The Council on Economic Policy, to facilitate the formation and execution of overall economic policy;

--The Council on International Economic Policy, to focus on an area increasingly important both to our foreign relations and to our domestic economy;

--ACTION, to provide stronger coordination and incentives for volunteer activities;

--The Cost of Living Council, to help stabilize prices; and,

--The Federal Disaster Assistance Administration, to help individuals and communities struck by natural disasters.

Each of these reorganization steps was designed to meet a specific need more effectively, or to respond to newly urgent needs. Several were accomplished under the reorganization plan authority which has been available to every President in the last 25 years, but which expired last March. This authority--which is utilized only with the concurrence of the Congress-continues to be necessary in order to keep abreast of changing needs, and I urge that it be reinstituted.

Of special concern today is the reorganization of the Government to meet the energy crisis. I have by Executive Order already established the Federal Energy Office to serve as a focal point for energy actions taken by the Government.

But that office lacks a statutory base and does not have sufficient authority to do the full job. That is why I have asked the Congress to establish the Federal Energy Administration and I once again urge it to act on this matter. Recognizing that this country should no longer remain dependent upon foreign energy sources, I have also urged the creation of an Energy Research and Development Administration to develop the necessary technology to tap new domestic sources of energy and a separate Nuclear Energy Commission to carry on the regulatory activities presently assigned to the Atomic Energy Commission.

While these organizational initiatives are needed now, the best organization to knit together the future energy and natural resource programs of the Federal Government would be a comprehensive Department of Energy and Natural Resources. This concept is consistent with the major Federal departmental reform I submitted to the Congress in 1871. Today, I again urge swift, favorable action by the Congress on this proposal so that we will have the broad organizational base that will ultimately be needed to meet many of our energy needs in the most effective manner and to balance energy and natural resource considerations in the future.

That same consolidation and reorganization of the executive branch that I proposed in 1971 would also have created new departments for community development, human resources and economic affairs. The basic problems of fractionated, sometimes overlapping and often conflicting organizations that prompted these original proposals remain acute today. I therefore urge the Congress to join with me in a serious effort to achieve an effective reorganization in these areas.

In view of the close relationship between food assistance programs and other income security programs, I will also propose new legislation to transfer the food stamp and related programs from the Department of Agriculture to the Department of Health, Education and Welfare.

Another important organizational proposal still awaiting Congressional action is the creation of an independent Legal Service Corporation. My Administration will work closely with the Congress in the weeks ahead to obtain final passage of our proposal which would provide the poor with quality legal representation, would create an organization free from political pressures, and would include safeguards to ensure its responsible operation. Legal services legislation has already passed the House. I am hopeful that reasonable legal services legislation will now be passed by the Senate.

A major new opportunity for better Federal management has been initiated at my direction by the Office of Management and Budget. Frequently termed "management by objective," it involves the identification of specific, high-priority objectives for each year for each of the departments and agencies. During the year, progress in reaching these objectives can be closely measured and reported to agency heads and to me. In the years ahead I expect this technique will help make the Government both more responsive and more accountable.

Nothing is more important to improving the efficiency of our Government than the recruiting of top flight personnel for Federal jobs--including positions in the career civil service. We will be working in the months ahead to ensure that executive compensation, career development and training all attract and hold the best possible personnel in the public service.

The compensation we provide our top officials is integral to these efforts to recruit and retain the best men and women for Government service. Salaries of Federal judges, Members of the Congress, and heads and assistant heads of executive agencies have not been adjusted for 5 years, during which time comparable pay rates in the private sector increased 30 percent and pay for other Federal employees has increased significantly. The report of the Commission on Executive, Legislative and Judicial Salaries notes that this lag in compensation also produces serious salary compression among the top ranks of career employees. I am therefore recommending a three-stage increase in executive, legislative and judicial salaries in the budget, at the rate of 7 1/2 percent annually for each of the next three years. This will make salaries within the top levels of the Federal Government more competitive with industry. And it will help us to make Government work better.

CAMPAIGN REFORM

For several years it has been clear that reforms were needed in the way we elect public officials. The intense public focus placed on the campaign abuses of 1972 has now generated sufficient support for this issue that we now have an opportunity to make a genuine breakthrough.

In a national radio address on May 16 of last year, I announced my proposal for a non-partisan commission on campaign reform. This commission would have reexamined the entire Federal election process to come up with a comprehensive set of legislative recommendations. The Commission would have filed a public report no later than December 1, 1973.

Eight months have now passed since that proposal was submitted to the Congress and the Commission is not even close to being created. If it had been created expeditiously, we would now have its report recommending meaningful reforms for Federal campaigns and as I had originally hoped, those reforms might be in place prior to the 1974 elections.

In light of the delay, I have now decided to submit a comprehensive set of Administration proposals on campaign reform for consideration by the Congress during this session. While I do not believe mine will be the only workable proposals, I do hope they will lead to meaningful debate and reform in this critical area. To that end, I look forward to working with the Congress in a long-overdue effort to clean up the Federal election process.

AMERICA AND THE WORLD

When this Administration took office, it was apparent that the world had changed in fundamental ways, and that America's foreign policy had to change in equally fundamental ways.

We needed to end our military involvement in the Vietnam war in a manner consistent with our responsibilities and commitments as a major world power.

We needed to adjust to the changes in the strategic situation between the Soviet Union and the United States which presented a unique opportunity to build a solid foundation for peace but which also threatened our own security if that foundation could not be built.

We needed to end a quarter century of hostile isolation which had kept one-fourth of the world's population outside the framework of international cooperation. The world could not afford another generation of hostility between the United States and the People's Republic of China.

We needed to adjust our partnerships with Western Europe and Japan, recognizing their increasing political and economic strength and self-reliance, and emphasizing our important common goals.

We needed to alter the world monetary system to reflect the new realities of the international economic system and America's place in it.

During the past five years we have made striking progress in meeting each of these needs.

CONTINUING RESPONSIBILITY IN

VIETNAM

The United States is at peace for the first time in more than a decade. But peace must be something more than the absence of the active engagement of American forces in conflict.

We must guard against the tendency to express relief at our military extrication from Southeast Asia by "washing our hands" of the whole affair. Men and women are still dying there. We still have a responsibility there. We must provide those ravaged lands with the economic assistance needed to stabilize the structures of their societies and make future peace more likely. We must provide, as well, the continued military aid grants required to maintain strong, self-reliant defense forces. And we will continue to insist on full compliance with the terms of the agreements reached in Paris, including a full accounting of all of our men missing in Southeast Asia.

BUILDING NEW RELATIONSHIPS

As we work through detente to reduce conflict in areas of the world where both we and the Soviet Union have important interests, we must also continue to work to reduce the potential causes of conflict between us.

We must persevere in our negotiations with the Soviet Union to place further limits on strategic arms competition and in our talks with the Warsaw Pact nations to reduce forces in Europe in a way that will increase security and stability for all.

We will pursue our relations with the Soviet Union in the climate of detente established two years ago in Moscow and reaffirmed by General Secretary Brezhnev's visit to Washington last year. During the fateful weeks of the Middle East war last October, the strength of our detente was severely tested. Since then, American diplomatic leadership and initiative have played a central role in the search for a final settlement in the long troubled Middle East. This began with the cease-fire of October 22, worked out with the Soviet Union's assistance, and was later strengthened by the Six-Point Agreement in November to consolidate the cease-fire, then by the Geneva Peace Conference--under the co-sponsorship of the United States and the Soviet Union-and most recently by the agreement on the disengagement of Egyptian and Israeli military forces, which is being implemented in cooperation with the United Nations Emergency Force. These steps are but the beginning of broadened efforts to find a lasting settlement of the area's problems.

The process of building a normal relationship with the People's Republic of China continues. Liaison offices have been established in our respective capitals and there continues to be fruitful contact between our governments at very high levels.

STRENGTHENING OUR FREE WORLD

PARTNERSHIPS

As our relationships with old adversaries are changing, so are our relationships with old friends. Western Europe and Japan have put behind them the postwar struggle to rebuild their economies, re-order their societies and re-establish their political force. Their success in these endeavors is something we helped to foster and in which we can take pride. But now times have changed and our past role in their success cannot be the sole basis for a continuing relationship. We must instead adjust our relationships to recognize their new economic capacities and their international political objectives. We must accommodate all of these within the framework of the friendship and goodwill of our allies and our whole past history of cooperation in the pursuit of our common goals. This is a cornerstone of the structure of peace we are seeking to build.

With our closest neighbors, here in the Western Hemisphere, we shall continue to seek additional ways of working cooperatively to solve the problems which face the Americas. Secretary of State Kissinger will be meeting in a few weeks with the foreign ministers of Latin America to begin a new and constructive dialogue in the family of American states.

INTERNATIONAL TRADE AND COMMERCE

As we turn from an era of confrontation to one of cooperation, trade and commerce become more important. We have moved from a position of virtual economic hegemony in the world to a new role in a more interdependent world economy. We must create an equitable and efficient system of integrating our own economy with that of the rest of the world.

Much has already been accomplished on this front. The markets of the USSR and China are now accessible, thereby providing jobs for American workers. Our major trading partners in Western Europe and Japan share our interest in further reducing international trade barriers and increasing world trade. The rigid and outmoded international monetary system which over-valued the dollar and impeded our foreign trade has been decisively altered. After two years of trade deficits, America achieved a trade surplus in 1973.

But we must persevere in our international monetary, investment and trade negotiations. The greatest tasks still lie ahead and the stakes are high. Avoiding the economic and political disruptions associated with international monetary turmoil and restrictive trade and investment practices increases in importance as international interdependence grows.

As I noted earlier in this message, prompt passage of the pending Trade Reform Act is essential to achieving the goal of a less restrictive and more equitable international economic system. In addition, we must move forward with the current negotiations to reform the international payments system under the auspices of the International Monetary Fund, reforms which will markedly increase the opportunities for nations to trade and invest profitably.

We must also strengthen our resolve as the world's most prosperous nation to help less fortunate countries. In the world of today, no nation will be fully secure or prosperous until all nations are. As in the past, we will take pride in our efforts to work with developing nations which aspire to greater economic and social well-being. The United States has called for the World Food Conference which will be held in November under the auspices of the United Nations. We will also actively observe 1974 as World Population Year, as proclaimed by the United Nations.

MAINTAINING A STRONG DEFENSE FORGE

But as we work for .peace, we must be conscious that the opportunity to build a structure of peace came because our arms have served as a deterrent to war. We must maintain that deterrent.

In the last five years, outlays for the Department of Defense have been reduced by about 1/3--measured in constant dollars--and military personnel have been cut from 3.5 million to 2.2 million.

This year, I will recommend a substantial increase in the 1975 budget for the Department of Defense. These increases are necessary to improve the readiness of our armed forces, to build up levels of essential equipment and supplies and to preserve Present force levels in the face of rising costs.

CONCLUSION

Throughout these five years, I have had one overriding aim: to establish a structure of peace in the world that can free future generations from the scourge of war. Others may have different priorities; this has been and will remain my first priority, the chief legacy that I hope to leave from the eight years of my Presidency.

As we strengthen the peace, we must also continue each year a steady strengthening of our society here at home. Our conscience requires it. Our interests require it. We must insist on it.

As we create more jobs, as we build a better health care system, and improve education; as we develop new sources of energy, as we provide more abundantly for the elderly and the poor, as we strengthen the system of private enterprise that produces our prosperity--as we do all this and more, we solidify those essential bonds that hold us together as a Nation. Even more importantly, we advance what in the final analysis government in America is all about; more freedom, more security, a better life, for each one of the 211 million individual persons who are America.

We cannot afford to neglect progress at home while pursuing peace abroad. But neither can we afford to neglect peace abroad while pursuing progress at home.

With a stable peace, all is possible; without peace, nothing is possible.

Earlier in this message, I comment that "one of the continuing challenges facing us in the legislative process is that of the timing and pacing of our initiatives . . . selecting each year among many worthy projects those that are ripe for action at that time . . ."

What is true in terms of our domestic initiatives is true also in the world. This period we now are in--these few years-presents a juncture of historic forces unique in this century, which provide an opportunity we may never have again to create a structure of peace solid enough to last a lifetime and more--not just peace in our time but peace in our children's time as well. It is on the way we respond to this opportunity, more than anything else, that history will judge whether we in America have met our responsibility.

I have full confidence that we will meet that responsibility.

RICHARD NIXON

The White House,

January 30, 1974.