Mr. Speaker, Mr. Vice President, Members of Congress: It's a great privilege to be here to outline a new budget and a new approach for governing our great country. I thank you for your invitation to speak here tonight. I know Congress had to formally invite me, and it could have been a close vote.

  So, Mr. Vice President, I appreciate you being here to break the tie.

  I want to thank so many of you who have accepted my invitation to come to the White House to discuss important issues. We're off to a good start.

  I will continue to meet with you and ask for your input. You have been kind and candid, and I thank you for making a new President feel welcome.

  The last time I visited the Capitol, I came to take an oath on the steps of this building. I pledged to honor our Constitution and laws, and I asked you to join me in setting a tone of civility and respect in Washington. I hope America is noticing the difference, because we're making progress. Together, we are changing the tone in the Nation's Capital.

  And this spirit of respect and cooperation is vital because, in the end, we will be judged not only by what we say or how we say it, we will be judged by what we're able to accomplish. America today is a nation with great challenges but greater resources. An artist using statistics as a brush could paint two very different pictures of our country.

  One would have warning signs: increasing layoffs, rising energy prices, too many failing schools, persistent poverty, the stubborn vestiges of racism. Another picture would be full of blessings: a balanced budget, big surpluses, a military that is second to none, a country at peace with its neighbors, technology that is revolutionizing the world, and our greatest strength, concerned citizens who care for our country and care for each other.

  Neither picture is complete in and of itself. And tonight I challenge and invite Congress to work with me to use the resources of one picture to repaint the other, to direct the advantages of our time to solve the problems of our people. Some of these resources will come from Government -- some, but not all.

  Year after year in Washington, budget debates seem to come down to an old, tired argument: on one side, those who want more Government, regardless of the cost; on the other, those who want less Government, regardless of the need. We should leave those arguments to the last century and chart a different course.

  Government has a role, and an important role. Yet, too much Government crowds out initiative and hard work, private charity and the private economy. Our new governing vision says Government should be active but limited, engaged but not overbearing. And my budget is based on that philosophy. It is reasonable, and it is responsible.

  It meets our obligations and funds our growing needs. We increase spending next year for Social Security and Medicare and other entitlement programs by $81 billion. We've increased spending for discretionary programs by a very responsible 4 percent, above the rate of inflation. My plan pays down an unprecedented amount of our national debt.

  And then, when money is still left over, my plan returns it to the people who earned it in the first place. A budget's impact is counted in dollars but measured in lives. Excellent schools, quality health care, a secure retirement, a cleaner environment, a stronger defense: These are all important needs, and we fund them.

  The highest percentage increase in our budget should go to our children's education. Education is not my top priority -- education is my top priority, and by supporting this budget, you'll make it yours, as well. Reading is the foundation of all learning. So during the next 5 years, we triple spending, adding $5 billion to help every child in America learn to read.

  Values are important, so we've tripled funding for character education to teach our children not only reading and writing but right from wrong. We've increased funding to train and recruit teachers, because we know a good education starts with a good teacher. And I have a wonderful partner in this effort.

  I like teachers so much, I married one. Laura has begun a new effort to recruit Americans to the profession that will shape our future, teaching. She will travel across America to promote sound teaching practices and early reading skills in our schools and in programs such as Head Start. When it comes to our schools, dollars alone do not always make the difference.

  Funding is important, and so is reform. So we must tie funding to higher standards and accountability for results. I believe in local control of schools. We should not, and we will not, run public schools from Washington, DC. Yet when the Federal Government spends tax dollars, we must insist on results.

  Children should be tested on basic reading and math skills every year between grades three and eight.

  Measuring is the only way to know whether all our children are learning. And I want to know, because I refuse to leave any child behind in America. Critics of testing contend it distracts from learning. They talk about teaching to the test. But let's put that logic to the test. If you test a child on basic math and reading skills and you're teaching to the test, you're teaching math and reading.

  And that's the whole idea. As standards rise, local schools will need more flexibility to meet them, so we must streamline the dozens of Federal education programs into five and let States spend money in those categories as they see fit. Schools will be given a reasonable chance to improve and the support to do so.

  Yet if they don't, if they continue to fail, we must give parents and students different options: a better public school, a private school, tutoring, or a charter school. In the end, every child in a bad situation must be given a better choice because, when it comes to our children, failure is simply not an option.

  Another priority in my budget is to keep the vital promises of Medicare and Social Security, and together we will do so. To meet the health care needs of all America's seniors, we double the Medicare budget over the next 10 years. My budget dedicates $238 billion to Medicare next year alone, enough to fund all current programs and to begin a new prescription drug benefit for low-income seniors.

  No senior in America should have to choose between buying food and buying prescriptions. To make sure the retirement savings of America's seniors are not diverted into any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security and for Social Security alone.

  My budget puts a priority on access to health care, without telling Americans what doctor they have to see or what coverage they must choose. Many working Americans do not have health care coverage, so we will help them buy their own insurance with refundable tax credits. And to provide quality care in low-income neighborhoods, over the next 5 years we will double the number of people served at community health care centers.

  And we will address the concerns of those who have health coverage, yet worry their insurance company doesn't care and won't pay. Together this Congress and this President will find common ground to make sure doctors make medical decisions and patients get the health care they deserve with a Patients' Bill of Rights.

  When it comes to their health, people want to get the medical care they need, not be forced to go to court because they didn't get it. We will ensure access to the courts for those with legitimate claims. But first, let's put in place a strong, independent review so we promote quality health care, not frivolous lawsuits.

  My budget also increases funding for medical research, which gives hope to many who struggle with serious disease. Our prayers tonight are with one of your own who is engaged in his own fight against cancer, a fine Representative and a good man, Congressman Joe Moakley. I can think of no more appropriate tribute to Joe than to have the Congress finish the job of doubling the budget for the National Institutes of Health.

  My New Freedom Initiative for Americans with disabilities funds new technologies, expands opportunities to work, and makes our society more welcoming. For the more than 50 million Americans with disabilities, we must continue to break down barriers to equality. The budget I propose to you also supports the people who keep our country strong and free, the men and women who serve in the United States military.

  I'm requesting $5.7 billion in increased military pay and benefits and health care and housing. Our men and women in uniform give America their best, and we owe them our support. America's veterans honored their commitment to our country through their military service. I will honor our commitment to them with a billion-dollar increase to ensure better access to quality care and faster decisions on benefit claims.

  My budget will improve our environment by accelerating the cleanup of toxic brownfields. And I propose we make a major investment in conservation by fully funding the Land and Water Conservation Fund. Our national parks have a special place in our country's life. Our parks are places of great natural beauty and history.

  As good stewards, we must leave them better than we found them. So I propose providing $4.9 billion over 5 years for the upkeep of these national treasures. And my budget adopts a hopeful new approach to help the poor and the disadvantaged. We must encourage and support the work of charities and faith-based and community groups that offer help and love, one person at a time.

  These groups are working in every neighborhood in America to fight homelessness and addiction and domestic violence, to provide a hot meal or a mentor or a safe haven for our children. Government should welcome these groups to apply for funds, not discriminate against them. Government cannot be replaced by charities or volunteers.

  Government should not fund religious activities. But our Nation should support the good works of these good people who are helping their neighbors in need. So I propose allowing all taxpayers, whether they itemize or not, to deduct their charitable contributions. Estimates show this could encourage as much as $14 billion a year in new charitable giving, money that will save and change lives.

  Our budget provides more than $700 million over the next 10 years for a Federal compassion capital fund, with a focused and noble mission, to provide a mentor to the more than one million children with a parent in prison and to support other local efforts to fight illiteracy, teen pregnancy, drug addiction, and other difficult problems.

  With us tonight is the mayor of Philadelphia. Please help me welcome Mayor John Street.

  Mayor Street has encouraged faith-based and community organizations to make a significant difference in Philadelphia. He's invited me to his city this summer to see compassionate action. I'm personally aware of just how effective the mayor is.

  Mayor Street's a Democrat. Let the record show, I lost his city -- big time. But some things are bigger than politics. So I look forward to coming to your city, to see your faith-based programs in action. As Government promotes compassion, it also must promote justice. Too many of our citizens have cause to doubt our Nation's justice when the law points a finger of suspicion at groups instead of individuals.

  All our citizens are created equal and must be treated equally. Earlier today I asked John Ashcroft, the Attorney General, to develop specific recommendations to end racial profiling. It's wrong, and we will end it in America. In so doing, we will not hinder the work of our Nation's brave police officers.

  They protect us every day, often at great risk. But by stopping the abuses of a few, we will add to the public confidence our police officers earn and deserve. My budget has funded a responsible increase in our ongoing operations. It has funded our Nation's important priorities. It has protected Social Security and Medicare.

  And our surpluses are big enough that there is still money left over. Many of you have talked about the need to pay down our national debt. I listened, and I agree. We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years.

  At the end of those 10 years, we will have paid down all the debt that is available to retire. That is more debt, repaid more quickly than has ever been repaid by any nation at any time in history. We should also prepare for the unexpected, for the uncertainties of the future. We should approach our Nation's budget as any prudent family would, with a contingency fund for emergencies or additional spending needs.

  For example, after a strategic review, we may need to increase defense spending. We may need to increase spending for our farmers or additional money to reform Medicare. And so, my budget sets aside almost a trillion dollars over 10 years for additional needs. That is one trillion additional reasons you can feel comfortable supporting this budget.

  We have increased our budget at a responsible 4 percent. We have funded our priorities. We paid down all the available debt. We have prepared for contingencies. And we still have money left over. Yogi Berra once said, "When you come to a fork in the road, take it."

  Now, we come to a fork in the road;

  We have two choices.

  Even though we have already met our needs, we could spend the money on more and bigger Government. That's the road our Nation has traveled in recent years. Last year Government spending shot up 8 percent. That's far more than our economy grew, far more than personal income grew, and far more than the rate of inflation.

  If you continue on that road, you will spend the surplus and have to dip into Social Security to pay other bills. Unrestrained Government spending is a dangerous road to deficits, so we must take a different path. The other choice is to let the American people spend their own money to meet their own needs.

  I hope you will join me in standing firmly on the side of the people. You see, the growing surplus exists because taxes are too high and Government is charging more than it needs. The people of America have been overcharged, and on their behalf, I am here asking for a refund. Some say my tax plan is too big.

  Others say it's too small. I respectfully disagree.

  This plan is just right. I didn't throw darts at a board to come up with a number for tax relief. I didn't take a poll or develop an arbitrary formula that might sound good. I looked at problems in the Tax Code and calculated the cost to fix them.

  A tax rate of 15 percent is too high for those who earn low wages, so we must lower the rate to 10 percent. No one should pay more than a third of the money they earn in Federal income taxes, so we lowered the top rate to 33 percent. This reform will be welcome relief for America's small businesses, which often pay taxes at the highest rate.