GOOD MORNING, LADIES and gentlemen. Please be seated. Before we get to the questions I have a brief opening statement. I was talking with some of my staff members today, and I'm happy to say they tell me that our administration is doing very well and the country is in fine shape. This will be good news to all patriotic Americans who want to see our country do well. It will only displease those purveyors of gloom and doom who inject politics into everything, and who belittle all that is good about America and all that this great country is capable of doing. If they should be elected, our country will once again face the desperate situation that existed when I took office in January 1981.

Inflation was roaring ahead at 36 percent; interest rates were at a staggering 28 percent; 80 million Americans were out of work; and people in other countries were burning the American flag while our government sat idly by, afraid even to lift a finger to burn foreign flags in retaliation -- afraid to send our brave U.S. Marines and our battleships to teach those foreign pawns of Moscow a decent respect for the American flag that symbolizes all the hopes and dreams of this nation -- what Lincoln called the last best hope of earth.

Since that day in January 1981, when I acted promptly to save the country from total collapse, we proved that, as Franklin Roosevelt said, the only thing we have to fear is fear itself. And as John F. Kennedy warned, we had to get this country moving again. Because we acted quickly and decisively, inflation has been licked, interest rates have come down, and all Americans are better off than they were before.

Today, American flags are no longer being burned. Under the leadership of this administration, America once more stands tall at home and in the world, and as your president, I intend to keep it that way. And now, I know all of you have questions. Helen?

Q: Mr. President, the figures you just gave on the economy and interest rates. They don't seem to jibe with figures we're familiar with. Can you tell us the source of these figures? They sound inflated.

A: No, Helen, inflation is what we have put down. And Helen, I'm a little surprised that a member of the press should raise a question about these figures because I have been told they appeared in a publication -- that is, in a part of the press itself. So I think we would all do well to read things other than just what we write ourselves. (Laughter.) I don't mean you, Helen. I don't want anyone to accuse me of having a gender gap. (More laughter.) Yes -- Andrea?

Q: Sir, you said no American flags are now being burned. For several weeks, NBC-TV has been showing foreign demonstrations in which this has been happening.

A: Those were American flags only in a narrow technical sense. Actually, they were made in Japan, which, while it is a friendly country, is not American, and I think the television reporters know that, if they would only tell their viewers and listeners. One of my first actions on taking office was to order that all official American flags at our embassies and so on be made flame-retardant. I also had them Scotchgarded and starched to keep them cleaner and to make them stand out a little straighter in the wind. And there is no instance of any of those flags having been burned successfully, except perhaps for a little scorching around the edges. Yes, Lou?

Q: Sir, when you ran for president, you promised to balance the budget by the end of 1983. But today the budget is more out of balance than ever. Would you comment on that, please?

A: I'm glad you asked that question, Lou, because a balanced budget is something I feel strongly about, and we would have it today if only the Democrats in the House of Representatives would give it to us. But they have so far refused to cooperate. However, the door is still open to them, and I am going to try in every way I know how to get them to come up the sidewalk with a balanced budget.

Q: If I may, a follow-up, sir. You yourself have never offered a balanced budget. How do you expect Congress -- .

A: Lou, you and I have known each other a long time, and we both know that Congress has what I guess the political scientists would call "the power of the purse." And that's a lot of power. But I came here to Washington with a mandate to change things, and I am not going to give up in my efforts to balance the budget, even though Congress might. And when they hear from the people at home, I think some of them will change their minds. Also, I think most people are aware that I strongly favor a constitutional amendment to make sure that future presidents do balance the budget instead of leaving us burdened with debt as past presidents have done. Over here -- Sam?

Q: Sir, the statistics you gave make no mention of unemployment, which I think now stands at about 9 percent. What do you propose to do about that?

A: Well, let me say first of all that if there is one person unemployed in this country, it is one too many. But if the policies of past administrations had been followed, and we projected the results of those policies to now, we would today have an unemployment rate of 39 percent. So we have actually achieved a reduction of about 30 percent. Furthermore, these unemployed people pay little or no taxes, which lifts from them the burden of overtaxation that I have fought against and successfully. Also those unemployed who still have savings they can draw on will find that reduced inflation has made their savings more valuable, and also there are many good investments that can be made in the stock market today which would increase the value of those savings still more. So we might say that the unemployed never had it so good. And while we are not entirely satisfied with the picture today, it is far better than it has ever been before under previous administrationsm, and as we project our figures into the future, it is even brighter.

Q: Sir, a follow-up -- the cuts in welfare benefits have apparently been felt by many of the poor. What do you propose to do about that?

A: Well, I'm concerned about anyone who is on welfare, that is legitimately on welfare. And let me say that if there is one person legimiately on welfare, that is one too many. But I emphasized the word legitimately, because the welfare rolls have been padded, as I have always maintained, and I will give you an example.

I have heard of one woman on welfare who took the change from her food stamps in vodka, then turned around and sold the vodka at exorbitant prices, which she invested in, well -- bawdy houses -- which are not in line with our thinking about family life or fiscal responsibility. And she continued cashing food stamps while owning four grocery stores of her own, three condominiums, four Cadillacs and two laundromats.

So that will give you an idea of how welfare programs were shot through with waste, fraud and abuse, which we came into office to get rid of, despite the doubting Thomases. I don't mean you Helen. I've been neglecting this side of the room. Yes -- over here -- no behind you -- Ann -- .

Q: Sir, there have now been six reports on hunger in America, which show that many people, children in particular, are going hungry today. Will you comment on that?

A: Well, to start with, evidence of hunger and that sort of thing is only anecdotal. Whenever you have people who feel they are not getting enough to eat, you are going to hear all kinds of horror stories about "hunger." Of course, if there were actually one person really going hungry in America -- .

Q: It would be one too many?

A: -- That's right. And I can tell you that today in America, our farmers are outproducing farmers anywhere in the world -- making food abundant in this country. And anyone who can't get enough to eat here should try living behind the Iron Curtain, where people have to line up for hours just to get an orange or a piece of bread. So I think that anyone with American initiative and a will to work is not going to go hungry in this land. Yes?

Q: Sir, last night on CBS television they showed some footage of CIA Director William J. Casey and Attorney General William French Smith carrying a small safe out of the Democratic Party headquarters. I wonder if you would comment on that. And a follow-up, if I may.

A: Well, as you know, I've had some experience with movies and I know what can be done with cameras. I'll only say that if such a thing actually happened, Bill Casey, as head of the CIA, would not have taken part in it unless it was something necessary to our national security.

Q: Sir, do you think that if this did happen, it would call for the appointment of a special prosecutor?

A: Well, we're getting into hypothetical cases again. I'll just say that any time a special prosecutor needs to be appointed, I know the attorney general will ask for one -- that's his job, and I wouldn't try to second-guess him. But as I say, this is all speculative and hypothetical, and the fact that some Democratic congressmen have commented on those TV pictures seems to be a pretty clear indication that the Democrats are still playing politics and are up to their same old tricks. Yes -- one more question -- Lesley?

Q: Sir, since your last press conference, four months ago, another 200 American servicemen have been killed in Tierra del Fuego, and 100 more in Northern Ireland. Do you feel that those losses were necessary? Could not these lives have been saved?

A: Well, Lesley, let me say first of all that I think you know how I feel about those fighting men over there, and you know they wouldn't be there if it weren't a matter of solemn duty and patriotism, which every one of them feels. But they are there because those areas are of vital interest to the United States -- areas that our communist adversaries, who are behind the so-called "liberation movements," covet and would like to add to their empire. So it is a matter of the greatest importance to our country and to the entire free world that they man the ramparts of freedom for all of us and for our children and our children's children and our children's grandchildren and their grandchildren.

I don't need to tell you that the loss of one soldier or sailor or flier or coastguardsman or marine is one too many. And instead of people questioning or criticizing and making things difficult for our brave service people, I think they should get behind our men who are shouldering the burden over there and give them our prayers. I think God would rather hear those prayers welling up from a great and grateful nation than listen to the nit-picking and criticism from people who are interested only in politics, and who sometimes seem to forget what our nation is all about, and I guess they forget about God, too.

Because I thought this question might come up, I brought along a letter from one of the parents of a man who made the supreme sacrifice, after I wrote a personal letter to each and every one of those parents. I won't go into my letters, which were not important. I just mentioned to them that these dead shall not have died in vain and that this nation under God shall have a new birth of freedom and some things like that I wrote because I felt deeply about them.

This is the letter from Mrs. Milton Machree, of 23 W. 45th St. East, South Selwick, Iowa, 31175:

"Dear Mr. President: We want to thank you for your letter and for your prayers. May God bless you too. We know that you wouldn't have sent our boy to die in Tierra del Fuego unless it was necessary to save freedom and everything good in America. We have two more boys helping on the farm, who we are ready to send if you need them. And there is a younger one coming along that we are ready to send too if he does not carry his share of the chores and just keeps on thinking about girls all the time.

"We pray that you will keep on doing everything you are doing for our country and for freedom and price supports and cutting the capital-gains tax and everything. We've seen 'Hellcats of the Navy' three times and we know we can always count on you to win. God bless you again sir, and may He smite those godless politicians who oppose you and who never bless us in their speeches and may they be damned forever to burn in eternal hell. God bless you and keep you."

And that letter is signed, Mother Machree. Well, that's just one letter, but I think it speaks for all Amerians and tell how they feel about keeping our country great and strong and proud.

Q: But sir -- .

A: Thank you, Mr. President.

Golly, the time really slips by. There were a lot of you that had questions I know you wanted to ask and I hope to get to you next time. I guess we'll all have to do a little more fast talking. (Laughter.) See you next year.