In January 1975 I reported to the Congress that the state of the Union was not good. I proposed urgent action to improve the economy and to achieve energy independence in 10 years. I reassured America's allies and sought to reduce the danger of confrontation with potential adversaries. I pledged a new direction for America. 1975 was a year of difficult decisions, but Americans responded with realism, common sense, and self-discipline. By January 1976 we were headed in a new direction, which I hold to be the right direction for a free society. It was guided by the belief that successful problem-solving requires more than Federal action alone, that it involves a full partnership among all branches and all levels of government and public policies which nurture and promote the creative energies of private enterprises, institutions, and individual citizens. A year ago I reported that the state of the Union was better--in many ways a lot better--but still not good enough. Common sense told me to stick to the steady course we were on, to continue to restrain the inflationary growth of government, to reduce taxes as well as spending, to return local decisions to local officials, to provide for long-range sufficiency in energy and national security needs. I resisted the immense pressures of an election year to open the floodgates of Federal money and the temptation to promise more than I could deliver. I told it as it was to the American people and demonstrated to the world that in our spirited political competition, as in this chamber, Americans can disagree without being disagreeable. Now, after 30 months as your President, I can say that while we still have a way to go, I am proud of the long way we have come together. I am proud of the part I have had in rebuilding confidence in the Presidency, confidence in our free system, and confidence in our future. Once again, Americans believe in themselves, in their leaders, and in the promise that tomorrow holds for their children. I am proud that today America is at peace. None of our sons are fighting and dying in battle anywhere in the world. And the chance for peace among all nations is improved by our determination to honor our vital commitments in defense of peace and freedom. I am proud that the United States has strong defenses, strong alliances, and a sound and courageous foreign policy. Our alliances with major partners, the great industrial democracies of Western Europe, Japan, and Canada, have never been more solid. Consultations on mutual security, defense, and East-West relations have grown closer. Collaboration has branched out into new fields such as energy, economic policy, and relations with the Third World. We have used many avenues for cooperation, including summit meetings held among major allied countries. The friendship of the democracies is deeper, warmer, and more effective than at any time in 30 years.