Highlights: Defense an Investment in ‘Peace, Freedom’

Following are highlights of President Reagan’s State of the Union address Wednesday night before a joint session of Congress:

DEFENSE SPENDING--Reagan said his Administration has been forced to reduce its Pentagon spending proposals over the last four years by $100 billion while at the same time restoring the nation’s military strength. “You know, we only have a military industrial complex until a time of danger,” Reagan said. “Then it becomes the arsenal of democracy. Spending for defense is investing in things that are priceless--peace and freedom.”

TAX REFORM--He said he was instructing Treasury Secretary James A. Baker III to begin working with Congress for bipartisan tax simplification “for fairness and growth” with refinement of a modified flat tax proposal. The final version, he said, will retain the mortgage interest deduction and increase the personal exemption, but do away with most other deductions, exemptions and credits.

PRODUCTIVITY--The President hailed the “American Miracle,” with which, he said, “day by day we are shattering accepted notions of what is possible.” He said the U.S. economy doesn’t need “rest and supervision; it needs new challenge and greater freedom. And that word--freedom--is the key to the second American revolution we mean to bring about.”

SCHOOL PRAYER--Reagan urged Congress to “give children back a right they had for a century-and-a-half or more. No citizen need tremble, nor the world shudder, if a child stands in a classroom and breathes a prayer.”

ABORTION--He called for restrictions on abortion, saying it was “a terrible irony that while some turn to abortion, so many others who cannot become parents cry out for children to adopt.” He added that medical technology increasingly is showing that abortion is “the taking of human life.”

ARMS CONTROL--The President called for support of the MX missile and his “Star Wars” proposals, saying the U.S. “determination to maintain a strong defense” brought the Soviets back to arms negotiations, but the new weapons would support “our chances for a meaningful arms agreement.”

SPACE--He pledged “record” funding for research and development in space, including development of a permanently manned space station.

HEALTH, WELFARE--He called for a freeze on federal spending in fiscal 1986 while maintaining the “social safety net” for the elderly, disabled and unemployed and eliminating or reducing government subsidies, such as those for Amtrak. “Growth of our major health-care programs, Medicare and Medicaid, will be slowed, but protections for the elderly and needy will be preserved.”

MONETARY POLICY--Reagan said the Administration will continue to seek a policy that “ensures price stability without keeping interest rates artificially high or needlessly holding down growth.”

LINE-ITEM VETO--He asked for a constitutional amendment requiring the federal government to spend no more than it takes in, and for presidential authority to eliminate individual items in appropriations bills without vetoing an entire document.

DEREGULATION--Reagan said he wants to deregulate natural gas to “bring on new supplies and bring us closer to energy independence,” and will continue removing restraints on the bus, railroad and trucking industries.

TRADE--He called for a new round of trade negotiations with foreign nations to “expand trade and competition, and strengthen the global economy.”

CENTRAL AMERICA--The President urged continued support for the rebels fighting to topple the Sandinista regime in Nicaragua, “whose struggle is tied to our own security. It is essential that the Congress continue all facets of our assistance to Central America.”