[Delivered in person before a joint session] Mr. President, Mr. Speaker, Members of the 86th Congress, my fellow citizens: This is the moment when Congress and the Executive annually begin their cooperative work to build a better America. One basic purpose unites us: To promote strength and security, side by side with liberty and opportunity.

As we meet today, in the 170th year of the Republic, our Nation must continue to provide -- as all other free governments have had to do throughout time -- a satisfactory answer to a question as old as history. It is: Can Government based upon liberty and the God-given rights of man, permanently endure when ceaselessly challenged by a dictatorship, hostile to our mode of life, and controlling an economic and military power of great and growing strength?

For us the answer has always been found, and is still found in the devotion, the vision, the courage and the fortitude of our people. Moreover, this challenge we face, not as a single powerful nation, but as one that has in recent decades reached a position of recognized leadership in the Free World. We have arrived at this position of leadership in an era of remarkable productivity and growth.

It is also a time when man's power of mass destruction has reached fearful proportions. Possession of such capabilities helps create world suspicion and tension. We, on our part, know that we seek only a just peace for all, with aggressive designs against no one. Yet we realize that there is uneasiness in the world because of a belief on the part of peoples that through arrogance, miscalculation or fear of attack, catastrophic war could be launched.

Keeping the peace in today's world more than ever calls for the utmost in the nation's resolution, wisdom, steadiness and unremitting effort. We cannot build peace through desire alone. Moreover, we have learned the bitter lesson that international agreements, historically considered by us as sacred, are regarded in Communist doctrine and in practice to be mere scraps of paper.

The most recent proof of their disdain of international obligations, solemnly undertaken, is their announced intention to abandon their responsibilities respecting Berlin. As a consequence, we can have no confidence in any treaty to which Communists are a party except where such a treaty provides within itself for self-enforcing mechanisms.

Indeed, the demonstrated disregard of the Communists of their own pledges is one of the greatest obstacles to success in substituting the Rule of Law for rule by force. Yet step by step we must strengthen the institutions of peace -- a peace that rests upon justice -- a peace that depends upon a deep knowledge and dear understanding by all peoples of the cause and consequences of possible failure in this great purpose.

To achieve this peace we seek to prevent war at any place and in any dimension. If, despite our best efforts, a local dispute should flare into armed hostilities, the next problem would be to keep the conflict from spreading, and so compromising freedom. In support of these objectives we maintain forces of great power and flexibility.

Our formidable air striking forces are a powerful deterrent to general war. Large and growing portions of these units can depart from their bases in a matter of minutes. Similar forces are included in our naval fleets. Ground and other tactical formations can move with swiftness and precision, when requested by friendly and responsible governments, to help curb threatened aggression.

The stabilizing influence of this capacity has been dramatically demonstrated more than once over the past year. Our military and related scientific progress has been highly gratifying. Great strides have been made in the development of ballistic missiles. Intermediate range missiles are now being deployed in operational units.

The Arias intercontinental ballistic missile program has been marked by rapid development as evidenced by recent successful tests. Missile training units have been established and launching sites are far along in construction. New aircraft that fly at twice the speed of sound are entering our squadrons.

We have successfully placed five satellites in orbit, which have gathered information of scientific importance never before available.

Our latest satellite illustrates our steady advance in rocketry and foreshadows new developments in world-wide communications. Warning systems constantly improve. Our atomic submarines have shattered endurance records and made historic voyages under the North Polar Sea. A major segment of our national scientific and engineering community is working intensively to achieve new and greater developments.

Advance in military technology requires adequate financing but, of course, even more, it requires talent and time. All this is given only as a matter of history; as a record of our progress in space and ballistic missile fields in no more than four years of intensive effort. At the same time we clearly recognize that some of the recent Soviet accomplishments in this particular technology are indeed brilliant.

Under the law enacted last year the Department of Defense is being reorganized to give the Secretary of Defense full authority over the military establishment. Greater efficiency, more cohesive effort and speedier reaction to emergencies are among the many advantages we are already noting from these changes.

These few highlights point up our steady military gains. We are rightfully gratified by the achievements they represent. But we must remember that these imposing armaments are purchased at great cost. National Security programs account for nearly sixty percent of the entire Federal budget for this coming fiscal year.

Modern weapons are exceedingly expensive. The overall cost of introducing ATLAS into our armed forces will average $35 million per missile on the firing line. This year we are investing an aggregate of close to $7 billion in missile programs alone. Other billions go for research, development, test and evaluation of new weapons systems.

Our latest atomic submarines will cost $50 millions each, while some special types will cost three times as much. We are now ordering fighter aircraft which are priced at fifty times as much as the fighters of World War II. We are buying certain bombers that cost their weight in gold. These sums are tremendous, even when compared with the marvelous resiliency and capacity of our economy.

Such expenditures demand both balance and perspective in our planning for defense. At every turn, we must weigh, judge and select. Needless duplication of weapons and forces must be avoided. We must guard against feverish building of vast armaments to meet glibly predicted moments of so-called "maximum peril." The threat we face is not sporadic or dated: It is continuous.

Hence we must not be swayed in our calculations either by groundless fear or by complacency. We must avoid extremes, for vacillation between extremes is inefficient, costly, and destructive of morale. In these days of unceasing technological advance, we must plan our defense expenditures systematically and with care, fully recognizing that obsolescence compels the never-ending replacement of older weapons with new ones.

The defense budget for the coming year has been planned on the basis of these principles and considerations. Over these many months I have personally participated in its development. The aim is a sensible posture of defense. The secondary aim is increased efficiency and avoidance of waste. Both are achieved by this budgetary plan.

Working by these guide lines I believe with all my heart that America can be as sure of the strength and efficiency of her armed forces as she is of their loyalty. I am equally sure that the nation will thus avoid useless expenditures which, in the name of security, might tend to undermine the economy and, therefore, the nation's safety.

Our own vast strength is only a part of that required for dependable security. Because of this we have joined with nearly 50 other nations in collective security arrangements. In these common undertakings each nation is expected to contribute what it can in sharing the heavy load. Each supplies part of a strategic deployment to protect the forward boundaries of freedom.

Constantly we seek new ways to make more effective our contribution to this system of collective security. Recently I have asked a Committee of eminent Americans of both parties to re-appraise our military assistance programs and the relative emphasis which should be placed on military and economic aid.

I am hopeful that preliminary recommendations of this Committee will be available in time to assist in shaping the Mutual Security program for the coming fiscal year.

Any survey of the free world's defense structure cannot fail to impart a feeling of regret that so much of our effort and resources must be devoted to armaments. At Geneva and elsewhere we continue to seek technical and other agreements that may help to open up, with some promise, the issues of international disarmament.

America will never give up the hope that eventually all nations can, with mutual confidence, drastically reduce these non-productive expenditures.

II. The material foundation of our national safety is a strong and expanding economy. This we have -- and this we must maintain. Only with such an economy can we be secure and simultaneously provide for the well-being of our people.

A year ago the nation was experiencing a decline in employment and output. Today that recession is fading into history, and this without gigantic, hastily-improvised public works projects or untimely tax reductions. A healthy and vigorous recovery has been under way since last May. New homes are being built at the highest rate in several years.

Retail sales are at peak levels. Personal income is at an all-time high. The marked forward thrust of our economy reaffirms our confidence in competitive enterprise. But -- clearly -- wisdom and prudence in both the public and private sectors of the economy are always necessary. Our outlook is this: 1960 commitments for our armed forces, the Atomic Energy Commission and Military Assistance exceed 47 billion dollars.

In the foreseeable future they are not likely to be significantly lower. With an annual population increase of three million, other governmental costs are bound to mount. After we have provided wisely for our military strength, we must judge how to allocate our remaining government resources most effectively to promote our well-being and economic growth.

Federal programs that will benefit all citizens are moving forward. Next year we will be spending increased amounts on health programs; on Federal assistance to science and education; on the development of the nation's water resources; on the renewal of urban areas; and on our vast system of Federal-aid highways.

Each of these additional outlays is being made necessary by the surging growth of America. Let me illustrate. Responsive to this growth, Federal grants and long term loans to assist 14 major types of capital improvements in our cities will total over 2 billion dollars in 1960 -- double the expenditure of two years ago.

The major responsibility for development in these fields rests in the localities, even though the Federal Government will continue to do its proper part in meeting the genuine needs of a burgeoning population. But the progress of our economy can more than match the growth of our needs. We need only to act wisely and confidently.

Here, I hope you will permit me to digress long enough to express something that is much on my mind. The basic question facing us today is more than mere survival -- the military defense of national life and territory. It is the preservation of a way of life. We must meet the world challenge and at the same time permit no stagnation in America.

Unless we progress, we regress. We can successfully sustain security and remain true to our heritage of freedom if we clearly visualize the tasks ahead and set out to perform them with resolution and fervor. We must first define these tasks and then understand what we must do to perform them. If progress is to be steady we must have long term guides extending far ahead, certainly five, possibly even ten years.

They must reflect the knowledge that before the end of five years we will have a population of over 190 million. They must be goals that stand high, and so inspire every citizen to climb always toward mounting levels of moral, intellectual and material strength. Every advance toward them must stir pride in individual and national achievements.

To define these goals, I intend to mobilize help from every available source. We need more than politically ordained national objectives to challenge the best efforts of free men and women. A group of selfless and devoted individuals, outside of government, could effectively participate in making the necessary appraisal of the potentials of our future.

The result would be establishment of national goals that would not only spur us on to our finest efforts, but would meet the stern test of practicality. The Committee I plan will comprise educators and representatives of labor, management, finance, the professions and every other kind of useful activity.

Such a study would update and supplement, in the light of continuous changes in our society and its economy, the monumental work of the Committee on Recent Social Trends which was appointed in 1931 by President Hoover. Its report has stood the test of time and has had a beneficial influence on national development.

The new Committee would be concerned, among other things, with the acceleration of our economy's growth and the living standards of our people, their health and education, their better assurance of life and liberty and their greater opportunities. It would also be concerned with methods to meet such goals and what levels of government -- Local, State, or Federal -- might or should be particularly concerned.

As one example, consider our schools, operated under the authority of local communities and states. In their capacity and in their quality they conform to no recognizable standards. In some places facilities are ample, in others meager. Pay of teachers ranges between wide limits, from the adequate to the shameful.

As would be expected, quality of teaching varies just as widely. But to our teachers we commit the most valuable possession of the nation and of the family -- our children. We must have teachers of competence. To obtain and hold them we need standards. We need a National Goal. Once established I am certain that public opinion would compel steady progress toward its accomplishment.

Such studies would be helpful, I believe, to government at all levels and to all individuals. The goals so established could help us see our current needs in perspective. They will spur progress. We do not forget, of course, that our nation's progress and fiscal integrity are interdependent and inseparable.

We can afford everything we clearly need, but we cannot afford one cent of waste. We must examine every item of governmental expense critically. To do otherwise would betray our nation's future. Thrift is one of the characteristics that has made this nation great. Why should we ignore it now? We must avoid any contribution to inflationary processes, which could disrupt sound growth in our economy.

Prices have displayed a welcome stability in recent months and, if we are wise and resolute, we will not tolerate inflation in the years to come. But history makes clear the risks inherent in any failure to deal firmly with the .basic causes of inflation. Two of the most important of these causes are the wage-price spiral and continued deficit financing.

Inflation would reduce job opportunities, price us out of world markets, shrink the value of savings and penalize the thrift so essential to finance a growing economy. Inflation is not a Robin Hood, taking from the rich to give to the poor. Rather, it deals most cruelly with those who can least protect themselves.

It strikes hardest those millions of our citizens whose incomes do not quickly rise with the cost of living. When prices soar, the pensioner and the widow see their security undermined, the man of thrift sees his savings melt away; the white collar worker, the minister, and the teacher see their standards of living dragged down.

Inflation can be prevented. But this demands statesmanship on the part of business and labor leaders and of government at all levels. We must encourage the self-discipline, the restraint necessary to curb the wage-price spiral and we must meet current costs from current revenue. To minimize the danger of future soaring prices and to keep our economy sound and expanding, I shall present to the Congress certain proposals.

First, I shall submit a balanced budget for the next year, a year expected to be the most prosperous in our history. It is a realistic budget with wholly attainable objectives. If we cannot live within our means during such a time of rising prosperity, the hope for fiscal integrity will fade. If we persist in living beyond our means, we make it difficult for every family in our land to balance its own household budget.