Following is the prepared text of President Carter's State of the Union address:

Mr. President, Mr. Speaker, Members of the 96th Congress, my fellow citizens:

Tonight I want to examine in a broad sense the state of our American union -- how we are building a new foundation for a peaceful and prosperous world.

Our children born this year will come of age in the 21st Century. What kind of society, what kind of world are we building for them? Will we ourselves be at peace? Will our own children enjoy a better quality of life? Will a strong and united America still be a force for freedom and prosperity around the world?

Tonight, there is every sign that the state of our union is sound. Our economy offers greater prosperity to more of our people than ever before. Real per capital income and real business profits have risen substantially. Farm exports are setting all-time records, and farm income last year was up more than 25 percent. Our liberties are secure. Our military defenses are strong and growing stronger. And more importantly tonight, America is at peace.

Our earliest national commitments modified and reshaped by succeeding generations have served us well. But the problems we face today are different in nature from those that confronted earlier generations of Americans. They are more subtle, more complex, more interrelated. At home, few of these problems can be solved by government alone.

But Americans as a united people -- working with our allies and friends -- have never been afraid to face and to solve problems either here or abroad.

The challenge to us is to build a new and firmer foundation for the future -- for a sound economy, for a more effective government, for political trust, and for a stable peace -- so that the America our children inherit will be even stronger and better than our own.

We cannot resort to simplistic or extreme solutions which substitute myths for common sense.

In our economy it is a myth that we must choose endlessly between inflation and recession. Together, we build the foundation for a strong economy with lower inflation without contriving either a recession with its high unemployment, or unworkable mandatory government controls.

In our government it is a myth that we must choose between compassion and competence. Together, we build the foundation for a government that works -- and that works for people.

In our relations with our potential adversaries it is a myth that we must choose between confrontation and capitulation. Together we build the foundation for a stable world of both diversity and peace. 7 Million New Jobs

Together, we have already begun to build the foundation for confidence in our economic system. During the last two years, in bringing our economy out of the deepest recession since the 1930s, we have created over 7,000,000 new jobs. The unemployment rate has gone down 25 percent. Now we must redouble our fight against the persistent inflation that has wracked our country for more than a decade.

Inflation is a burden for all Americans, but it is a disaster for the poor, the sick and the old. No American family should be forced to choose among food, warmth, health care or decent housing because the cost of any of these basic necessities has climbed out of reach.

Three months ago, I outlined a balanced anti-inflation program that couples responsible government restraint with responsible wage and price restraint. It is based upon my knowledge that there is a more powerful force than government compulsion -- the force created by the cooperative efforts of millions of Americans working toward a common goal.

Business and labor have been increasingly supportive. It is imperative that we in government do our part. We must stop excessive government growth, and control spending habits.

I have sent to this Congress a stringent, but fair, budget -- one that, just since I ran for President, will have cut the federal deficit in half.

The Congress had a good record last year, and I now ask this 96th Congress to continue our partnership in holding the line on excess federal spending. It will not be easy. We must be strong and persistent. This budget is a clear message that, with the help of you and the American people, I am determined to bring inflation under control.

The 1980 budget provides enough spending restraint to begin unwinding inflation, but enough support to keep American workers productive and to encourage investment to provide new jobs. We will continue to mobilize our nation's resources to reduce our trade deficit and to maintain the strength of the American dollar.

We have demonstrated in this restrained budget that we can build on the gains of the past two years to provide additional support to educate disadvantaged children, to care for the elderly, to provide nutrition and legal services for the poor and to strengthen the economic base of our urban communities and rural areas. This year we will take our first steps to develop a national health plan.

We must never accept a permanent group of unemployed Americans, with no hope and no stake in building our society. For those left out of our economy because of discrimination, lack of skills or poverty, we must maintain high levels of training, and we must provide jobs.

A responsible budget is not our only weapon to control inflation. Health Care Costs

We must act now to protect all Americans from health care costs that are rising $1 million an hour, 24 hours a day -- doubling every five years. We must take control of the largest contributor to that inflation -- skyrocketing hospital costs.

There will be no clearer test of the commitment of this Congress to the anti-inflation fight than the legislation I will submit again this year to hold down inflation in hospital care. Over the next five years my proposal will save Americans a total of $60 billion, of which $25 billion will be savings in the federal budget. The American people have waited long enough. This year we must act on hospital cost containment.

We must also fight inflation by improvements and better enforcement of antitrust laws, and by reducing government obstacles to competition in the private sector. More Deregulation

We must begin to scrutinize the overall effect of regulation on our economy. Through deregulation of the airline industry we have increased profits, cut prices for all Americans, and begun for one of the few times in history actually to dismantle a major federal bureaucracy. This year we must begin the effort to reform our regulatory process for the railroad, bus and trucking industries.

America has the greatest economic system in the world. Let's reduce government interference and give it a chance to work.

And I call on Congress to take other anti-inflation action -- to expand our exports and protect American jobs threatened by unfair trade; to conserve energy; increase production and speed development to solar power; and to reassert our nation's technological leadership. American workers who enlist with us in the fight against inflation deserve not just our gratitude, but the protection of the real wage insurance proposal I have made.

To be successful, we must change our attitudes as well as our policies. We cannot afford to live beyond our means, to create programs we can neither manage nor finance, or to waste our natural resources; and we cannot tolerate mismanagement and fraud. Above all, we must meet the challenge of inflation as a united people.

With the support of the American people, government in recent decades has helped to dismantle racial barriers; has provided assistance for the jobless and retired; has fed the hungry; has protected the safety, health and bargaining rights of workers; and has helped to preserve our natural heritage.

But it is not enough to have created a lot of government programs. Now we must make the good programs more effective, and improve or weed out those which are wasteful or unnecessary.

With the support of the Congress, we have begun to reorganize and get control of the bureaucracy. We are reforming the Civil Service system, so that we can recognize and reward those who do a good job, and correct or remove those who do not.

This year we must extend major reorganization efforts to education, economic development and the management of our natural resources. We need to enact a sunset law so that when government programs have outlived their value they will automatically be terminated.

There is no such thing as effective and non-controversial reorganization and reform can never be easy, but we know that honest and effective government is essential to restore public faith in our public action. Campaign Financing

None of us can be satisfied when two-thirds of American citizens chose not to vote last year in the national election. Too many Americans feel powerless against the influence of private lobbying groups and the flood of private campaign money which threatens our electoral process. This year, we must regain the public's faith by requiring limited public financing for Congressional election campaigns.

A strong economy and an effective government will restore confidence here in America. But the path to the future must be charted in peace. We must continue to build a new and firm foundation for a stable world community.

We are building that new foundation from a position of national strength -- the strength of our own defenses, of our friendship with other nations, and of our oldest ideals. America's military power is a major force for security and stability in the world. We must maintain our strategic capability and continue the progress of the last two years with our NATO allies, with whom we have increased our readiness, modernized our equipment, and strengthened our defense forces in Europe. I urge you to support the strong Defense budget I have proposed.

But national security in our age requires more than military might. In less than a lifetime, world population has doubled; colonial empires have disappeared; and a hundred new nations have been born. Mass communications, literacy, and migration to the world's cities have all awakened new yearnings for economic justice and human rights among people everywhere.

In such a world, the choice is not which superpower will dominate the world. None can and none will. The choice instead is between a world of anarchy and destruction, or a world of cooperation and peace.

In such a world, we seek not to stifle inevitable change, but to influence its course in helpful and constructive ways that enhance our values, our national interests, and the cause of peace.

Towering over all this volatile changing world, like a thundercloud in a summer sky, looms the awesome power of nuclear weapons.

We will continue to help shape the forces of change; to anticipate emerging problems of nuclear proliferation and of conventional arms sales; and to use our great strength and influence to settle international conflicts in other parts of the world before they erupt and spread.

We have no desire to be the world's policeman. America does want to be the world's peacemaker. Ties With Allies

We are building the foundation for truly global cooperation -- not only with Western and industrial nations, but with the developing countries as well. Our ties with Japan and our European allies are stronger than ever -- and so are our friendly relations with the people of Latin America, Africa, and the Western Pacific and Asia.

We have won new respect in this hemisphere with the Panama Canal Treaties. We have gained new trust within the developing world through our opposition to racism, our commitment to human rights, and our support for majority rule in Africa.

The Multilateral Trade Negotiations are now reaching a successful conclusion, and Congressional approval is essential to the economic well-being of our country and of the world. This will be one of our top priorities in 1979.

We are entering a hopeful era in our relations with one-fourth of the world's people who live in China. The visit of Vice Premier Deng Hsiao-ping next week will help to inaugurate that new era. And with prompt Congressional action on authorizing legislation, we will continue our commitment to a prosperous, peaceful, and secure life for the people of Taiwan.

I am grateful that in the past year -- as in the year before -- no American had died in combat anywhere in the world. And in Iran, Nicaragua, Cyprus, Namibia and Rhodesia, our country is working for peaceful solutions to dangerous conflicts.

In the Middle East -- under most difficult circumstances -- we have sought to help ancient enemies lay aside deep-seated differences that have produced four bitter wars in this century. Commitment to Israel

Our firm commitment to Israel's survival and security is rooted in our deepest convictions and in our knowledge of the strategic importance to our own nation of a stable Middle East. To promote peace and reconciliation in the region, we must retain the trust and confidence both of Israel and of the Arab nations that are sincerely searching for peace.

I am determined to use the full beneficial influence of our nation so that the precious opportunity for lasting peace between Israel and Egypt will not be lost.

The new foundation of international co-operation we seek excludes no nation. Co-operation with the Soviet Union serves the cause of peace, for in the nuclear age, world peace must include peace between the superpowers -- and it must mean the control of nuclear arms.

Ten years ago, the United States and the Soviet Union made the historic decision to open the Strategic Arms Limitation Talks, or SALT. The purpose of SALT, then, as now, is not to gain a unilateral advantage for either nation, but to protect the security of both nations -- to reverse the costly and dangerous momentum of the arms race -- to preserve a stable balance of nuclear forces -- and to demonstrate to a concerned world that we are determined to help preserve the peace.

The first SALT agreement was concluded in 1972. Since then, during six years of negotiation -- by both Republican and Democratic leaders -- nearly all issues of SALT II have been resolved. If the Soviet Union continues to negotiate in good faith, a responsible agreement will be reached.

It is important that American people understand the nature of the SALT process. SALT Safeguards

SALT II is not based on sentiment. It is based on self-interest -- of the United States and the Soviet Union. Both nations share a powerful common interest in reducing the threat of a nuclear war. I will sign no agreement which does not enhance our national security.

SALT II will not rely on trust. It will be verifiable. We have very sophisticated, proven means -- including our satellites -- to determine for ourselves whether the Soviet Union is meeting its treaty obligations. I will sign no agreement which cannot be verified.

The American nuclear deterrent will remain strong after SALT II. For example, just one of our relatively invulnerable Poseidon submarines -- less than two percent of our total nuclear force of submarines, aircraft, and land-based missiles -- carries enough warheads to destroy every large-and medium-sized city in the Soviet Union. Our deterrent is overwhelming -- and I will sign no agreement unless our deterrent force will remain overwhelming.

A SALT agreement cannot substitute for wise diplomacy or a strong defense, nor will it end the danger of nuclear war. But it will certainly reduce that danger. It will strengthen our efforts to ban nuclear tests and to stop the spread of atomic weapons to other nations. And it can begin the process of negotiating new agreements which will further limit nuclear arms.

The path of arms control backed by a strong defense -- the path our nation and every president has walked for 30 years -- can lead to a world of law and of international negotiation and consultation, in which all peoples might live in peace.

In this year, 1979, nothing is more important than that the Congress and the people of the United States resolve to continue with me on that path of nuclear arms control and peace.

I have outlined some of the changes that have transformed the world and which are continuing as we meet here tonight. But we need not fear change. The values on which our nation was founded -- individual liberty, self-determination, the potential for human fulfillment in freedom -- all of these endure. We find these democratic principles praised even in books smuggled out of totalitarian nations, and on wall posters in lands we thought were closed to our influence.

Our country has regained its special place of leadership in the world-wide struggle for human rights. ERA Ratification

And that is a commitment we must keep at home, as well as abroad. The civil rights revolution freed all Americans, black and white, but its full promise remains unrealized. I will continue to work with all my strength for equal opportunity for all Americans -- and for affirmative action for those who carry the extra burden of past denial of equal opportunity. We remain committed to improving our labor laws to better protect the rights of all American workers. And our nation must make it clear that the legal rights of women as citizens are guaranteed under the laws of our land by ratifying the Equal Rights Amendment.

As long as I am president, at home and around the world, America's influence will be marshaled to advance the cause of human rights.

To establish those values, two centuries ago a bold generation of Americans risked their property, position, and life itself.

We are their heirs. And they are sending us a message across the centuries. The words they made so vivid are now growing faintly indistinct, because they are not heard often enough. They are words like justice, equality, unity, sacrifice, liberty, faith and love.

These words remind us that the duty of our generation of Americans is to renew our nation's faith -- not focused just against foreign threats but against selfishness, cynicism, and apathy.

The new foundation I have discussed tonight can help up build a nation and a world where every child is nurtured and can look to the future with hope -- where the resources now wasted on war can be turned towards human needs -- where all people have enough to eat, a decent home, and protection from disease. It can help us build a nation and a world where all people are free to seek the truth and to add to human understanding, so that all of us may live our lives in peace.

Tonight, I ask you to join me in building that new foundation -- a better foundation -- for our country and our world.