Mr. Speaker, Mr. Vice President, Members of the Congress: It is a pleasure to return from whence I came. You are among my oldest friends in Washington -- and this House is my oldest home. It was here, more than 14 years ago, that I first took the oath of Federal office.

  It was here, for 14 years, that I gained both knowledge and inspiration from members of both parties in both Houses -- from your wise and generous leaders -- and from the pronouncements which I can vividly recall, sitting where you now sit -- including the programs of two great Presidents, the undimmed eloquence of Churchill, the soaring idealism of Nehru, the steadfast words of General de Gaulle.

  To speak from this same historic rostrum is a sobering experience. To be back among so many friends is a happy one. I am confident that that friendship will continue. Our Constitution wisely assigns both joint and separate roles to each branch of the government; and a President and a Congress who hold each other in mutual respect will neither permit nor attempt any trespass.

  For my part, I shall withhold from neither the Congress nor the people any fact or report, past, present, or future, which is necessary for an informed judgment of our conduct and hazards. I shall neither shift the burden of executive decisions to the Congress, nor avoid responsibility for the outcome of those decisions.

  I speak today in an hour of national peril and national opportunity. Before my term has ended, we shall have to test anew whether a nation organized and governed such as ours can endure. The outcome is by no means certain. The answers are by no means clear. All of us together -- this Administration, this Congress, this nation-must forge those answers.

  But today, were I to offer -- after little more than a week in office -- detailed legislation to remedy every national ill, the Congress would rightly wonder whether the desire for speed had replaced the duty of responsibility. My remarks, therefore, will be limited. But they will also be candid. To state the facts frankly is not to despair the future nor indict the past.

  The prudent heir takes careful inventory of his legacies, and gives a faithful accounting to those whom he owes an obligation of trust. And, while the occasion does not call for another recital of our blessings and assets, we do have no greater asset than the willingness of a free and determined people, through its elected officials, to face all problems frankly and meet all dangers free from panic or fear.

  The present state of our economy is disturbing. We take office in the wake of seven months of recession, three and one-half years of slack, seven years of diminished economic growth, and nine years of falling farm income. Business bankruptcies have reached their highest level since the Great Depression.

  Since 1951 farm income has been squeezed down by 25 percent.

  Save for a brief period in 1958, insured unemployment is at the highest peak in our history. Of some five and one-half million Americans who are without jobs, more than one million have been searching for work for more than four months. And during each month some 150,000 workers are exhausting their already meager jobless benefit rights.

  Nearly, one-eighth of those who are without jobs live almost without hope in nearly one hundred especially depressed and troubled areas. The rest include new school graduates unable to use their talents, farmers forced to give up their part-time jobs which helped balance their family budgets, skilled and unskilled workers laid off in such important industries as metals, machinery, automobiles and apparel.

  Our recovery from the 1958 recession, moreover, was anemic and incomplete. Our Gross National Product never regained its full potential. Unemployment never returned to normal levels. Maximum use of our national industrial capacity was never restored. In short, the American economy is in trouble. The most resourceful industrialized country on earth ranks among the last in the rate of economic growth.

  Since last spring our economic growth rate has actually receded. Business investment is in a decline. Profits have fallen below predicted levels. Construction is off. A million unsold automobiles are in inventory. Fewer people are working -- and the average work week has shrunk well below 40 hours. Yet prices have continued to rise -- so that now too many Americans have less to spend for items that cost more to buy.

  Economic prophecy is at best an uncertain art -- as demonstrated by the prediction one year ago from this same podium that 1960 would be, and I quote, "the most prosperous year in our history." Nevertheless, forecasts of continued slack and only slightly reduced unemployment through 1961 and 1962 have been made with alarming unanimity-and this Administration does not intend to stand helplessly by.

  We cannot afford to waste idle hours and empty plants while awaiting the end of the recession. We must show the world what a free economy can do -- to reduce unemployment, to put unused capacity to work, to spur new productivity, and to foster higher economic growth within a range of sound fiscal policies and relative price stability.

  I will propose to the Congress within the next 14 days measures to improve unemployment compensation through temporary increases in duration on a self-supporting basis -- to provide more food for the families of the unemployed, and to aid their needy children -- to redevelop our areas of chronic labor surplus -- to expand the services of the U.S. Employment Offices -- to stimulate housing and construction -- to secure more purchasing power for our lowest paid workers by raising and expanding the minimum wage -- to offer tax incentives for sound plant investment -- to increase the development of our natural resources -- to encourage price stability -- and to take other steps aimed at insuring a prompt recovery and paving the way for increased long-range growth.

  This is not a partisan program concentrating on our weaknesses -- it is, I hope, a national program to realize our national strength.

  II. Efficient expansion at home, stimulating the new plant and technology that can make our goods more competitive, is also the key to the international balance of payments problem.

  Laying aside all alarmist talk and panicky solutions, let us put that knotty problem in its proper perspective. It is true that, since 1958, the gap between the dollars we spend or invest abroad and the dollars returned to us has substantially widened. This overall deficit in our balance of payments increased by nearly $11 billion in the 3 years -- and holders of dollars abroad converted them to gold in such a quantity as to cause a total outflow of nearly $5 billion of gold from our reserve.

  The 1959 deficit was caused in large part by the failure of our exports to penetrate foreign markets-the result both of restrictions on our goods and our own uncompetitive prices. The 1960 deficit, on the other hand, was more the result of an increase in private capital outflow seeking new opportunity, higher return or speculative advantage abroad.

  Meanwhile this country has continued to bear more than its share of the West's military and foreign aid obligations. Under existing policies, another deficit of $2 billion is predicted for 1961 -- and individuals in those countries whose dollar position once depended on these deficits for improvement now wonder aloud whether our gold reserves will remain sufficient to meet our own obligations.

  All this is cause for concern -- but it is not cause for panic. For our monetary and financial position remains exceedingly strong. Including our drawing rights in the International Monetary Fund and the gold reserve held as backing for our currency and Federal Reserve deposits, we have some $22 billion in total gold stocks and other international monetary reserves available-and I now pledge that their full strength stands behind the value of the dollar for use if needed.

  Moreover, we hold large assets abroad-the total owed this nation far exceeds the claims upon our reserves -- and our exports once again substantially exceed our imports. In short, we need not -- and we shall not-take any action to increase the dollar price of gold from $35 an ounce -- to impose exchange controls -- to reduce our anti-recession efforts -- to fall back on restrictive trade policies -- or to weaken our commitments around the world.

  This Administration will not distort the value of the dollar in any fashion. And this is a commitment. Prudence and good sense do require, however, that new steps be taken to ease the payments deficit and prevent any gold crisis. Our success in world affairs has long depended in part upon foreign confidence in our ability to pay.

  A series of executive orders, legislative remedies and cooperative efforts with our allies will get underway immediately -- aimed at attracting foreign investment and travel to this country-promoting American exports, at stable prices and with more liberal government guarantees and financing -- curbing tax and customs loopholes that encourage undue spending of private dollars abroad -- and (through OECD, NATO and otherwise) sharing with our allies all efforts to provide for the common defense of the free world and the hopes for growth of the less developed lands.

  While the current deficit lasts, ways will be found to ease our dollar outlays abroad without placing the full burden on the families of men whom we have asked to serve our Flag overseas. In short, whatever is required will be done to back up all our efforts abroad, and to make certain that, in the future as in the past, the dollar is as "sound as a dollar." III.

  But more than our exchange of international payments is out of balance. The current Federal budget for fiscal 1961 is almost certain to show a net deficit. The budget already submitted for fiscal 1962 will remain in balance only if the Congress enacts all the revenue measures requested -- and only if an earlier and sharper up-turn in the economy than my economic advisers now think likely produces the tax revenues estimated.

  Nevertheless, a new Administration must of necessity build on the spending and revenue estimates already submitted. Within that framework, barring the development of urgent national defense needs or a worsening of the economy, it is my current intention to advocate a program of expenditures which, including revenues from a stimulation of the economy, will not of and by themselves unbalance the earlier Budget.

  However, we will do what must be done. For our national household is cluttered with unfinished and neglected tasks. Our cities are being engulfed in squalor. Twelve long years after Congress declared our goal to be "a decent home and a suitable environment for every American family," we still have 25 million Americans living in substandard homes.

  A new housing program under a new Housing and Urban Affairs Department will be needed this year. Our classrooms contain 2 million more children than they can properly have room for, taught by 90,000 teachers not properly qualified to teach. One third of our most promising high school graduates are financially unable to continue the development of their talents.

  The war babies of the 1940's, who overcrowded our schools in the 1950's, are now descending in 1960 upon our colleges-with two college students for every one, ten years from now -- and our colleges are ill prepared. We lack the scientists, the engineers and the teachers our world obligations require. We have neglected oceanography, saline water conversion, and the basic research that lies at the root of all progress.

  Federal grants for both higher and public school education can no longer be delayed. Medical research has achieved new wonders -- but these wonders are too often beyond the reach of too many people, owing to a lack of income (particularly among the aged), a lack of hospital beds, a lack of nursing homes and a lack of doctors and dentists.

  Measures to provide health care for the aged under Social Security, and to increase the supply of both facilities and personnel, must be undertaken this year. Our supply of clean water is dwindling. Organized and juvenile crimes cost the taxpayers millions of dollars each year, making it essential that we have improved enforcement and new legislative safeguards.

  The denial of constitutional rights to some of our fellow Americans on account of race -- at the ballot box and elsewhere -- disturbs the national conscience, and subjects us to the charge of world opinion that our democracy is not equal to the high promise of our heritage. Morality in private business has not been sufficiently spurred by morality in public business.

  A host of problems and projects in all 50 States, though not possible to include in this Message, deserves-and will receive -- the attention of both the Congress and the Executive Branch. On most of these matters, Messages will be sent to the Congress within the next two weeks.

  IV. But all these problems pale when placed beside those which confront us around the world.

  No man entering upon this office, regardless of his party, regardless of his previous service in Washington, could fail to be staggered upon learning -- even in this brief 10 day period -- the harsh enormity of the trials through which we must pass in the next four years. Each day the crises multiply. Each day their solution grows more difficult.

  Each day we draw nearer the hour of maximum danger, as weapons spread and hostile forces grow stronger. I feel I must inform the Congress that our analyses over the last ten days make it clear that -- in each of the principal areas of crisis -- the tide of events has been running out and time has not been our friend.

  In Asia, the relentless pressures of the Chinese Communists menace the security of the entire area -- from the borders of India and South Viet Nam to the jungles of Laos, struggling to protect its newly-won independence. We seek in Laos what we seek in all Asia, and, indeed, in all of the world-freedom for the people and independence for the government.

  And this Nation shall persevere in our pursuit of these objectives. In Africa, the Congo has been brutally torn by civil strife, political unrest and public disorder. We shall continue to support the heroic efforts of the United Nations to restore peace and order -- efforts which are now endangered by mounting tensions, unsolved problems, and decreasing support from many member states.

  In Latin America, Communist agents seeking to exploit that region's peaceful revolution of hope have established a base on Cuba, only 90 miles from our shores. Our objection with Cuba is not over the people's drive for a better life. Our objection is to their domination by foreign and domestic tyrannies.

  Cuban social and economic reform should be encouraged. Questions of economic and trade policy can always be negotiated. But Communist domination in this Hemisphere can never be negotiated. We are pledged to work with our sister republics to free the Americas of all such foreign domination and all tyranny, working toward the goal of a free hemisphere of free governments, extending from Cape Horn to the Arctic Circle.

  In Europe our alliances are unfulfilled and in some disarray. The unity of NATO has been weakened by economic rivalry and partially eroded by national interest. It has not yet fully mobilized its resources nor fully achieved a common outlook. Yet no Atlantic power can meet on its own the mutual problems now facing us in defense, foreign aid, monetary reserves, and a host of other areas;

  And our close ties with those whose hopes and interests we share are among this Nation's most powerful assets.

  Our greatest challenge is still the world that lies beyond the Cold War -- but the first great obstacle is still our relations with the Soviet Union and Communist China. We must never be lulled into believing that either power has yielded its ambitions for world domination -- ambitions which they forcefully restated only a short time ago.

  On the contrary, our task is to convince them that aggression and subversion will not be profitable routes to pursue these ends. Open and peaceful competition -- for prestige, for markets, for scientific achievement, even for men's minds -- is something else again. For if Freedom and Communism were to compete for man's allegiance in a world at peace, I would look to the future with ever increasing confidence.

  To meet this array of challenges -- to fulfill the role we cannot avoid on the world scene -- we must reexamine and revise our whole arsenal of tools: military, economic and political. One must not overshadow the other: On the Presidential Coat of Arms, the American eagle holds in his right talon the olive branch, while in his left he holds a bundle of arrows.

  We intend to give equal attention to both. First, we must strengthen our military tools. We are moving into a period of uncertain risk and great commitment in which both the military and diplomatic possibilities require a Free World force so powerful as to make any aggression clearly futile. Yet in the past, lack of a consistent, coherent military strategy, the absence of basic assumptions about our national requirements and the faulty estimates and duplication arising from inter-service rivalries have all made it difficult to assess accurately how adequate -- or inadequate -- our defenses really are.

  I have, therefore, instructed the Secretary of Defense to reappraise our entire defense strategy -- our ability to fulfill our commitments-the effectiveness, vulnerability, and dispersal of our strategic bases, forces and warning systems -- the efficiency and economy of our operation and organization-the elimination of obsolete bases and installations-and the adequacy, modernization and mobility of our present conventional and nuclear forces and weapons systems in the light of present and future dangers.

  I have asked for preliminary conclusions by the end of February -- and I then shall recommend whatever legislative, budgetary or executive action is needed in the light of these conclusions. In the meantime, I have asked the Defense Secretary to initiate immediately three new steps most clearly needed now: First, l have directed prompt attention to increase our air-lift capacity.