Statement About Revised Budget Estimates for Fiscal Years 1970 and 1971

TO SLOW DOWN the rise in prices, we have been faced with the urgent need to slow down the momentum of rising Federal spending.

We have responded to this need. From fiscal 1965 to 1969, the average annual increase in Federal spending was over 13 percent; in fiscal 1970, that rise was cut to 7.4 percent, and in the coming fiscal year, that spending momentum will be further cut in haft--to 3.7 percent.

I am issuing today the latest revisions of the budget for the fiscal years 1970 and 1971, as prepared for me by the Bureau of the Budget.

For fiscal 1970. the budget last February projected a surplus of $1.5 billion.

To hold the line on the spending side, we are offsetting increases in uncontrollable outlays, such as interest on the public debt, farm price supports, and public assistance grants, as well as a Federal employees pay raise, with reductions in other programs. By holding a tight rein on all others, we will succeed in meeting our overall spending target of approximately $198 billion.

However, tax revenues are running about 1 1/2 percent or $3 billion below previous projections. For this reason, rather than because of overruns of expenditures, we now estimate a deficit for 1970 of $1.8 billion.

For fiscal 1971, our budget revisions show an estimated deficit of $1.3 billion. This change of $2½ billion since my February budget message reflects principally:

1. A $ 1 billion shortfall in the revenues projected in the budget;

2. A further increase of $2 1/4 billion in statutory outlays not subject to executive control, including $1 billion in increased interest and one-half billion in increased unemployment insurance.

3. An increase of more than $1 billion to reflect the cost of the recently enacted Federal employee pay and postal wage increases, after deducting proposed postal rate increases;

4. About three-quarters of a billion dollars (net) for other pressing needs already announced, which became necessary after the February budget was prepared (more than one-half of it for release of Federal assistance money to aid State and local construction); and

5. Another three-quarters of a billion dollars growing out of completed congressional actions to date--actions in excess of my requests.

These, in turn, are offset to the extent of over $3 billion largely by:

6. My earlier proposal to the Congress to accelerate the collection of estate and gift taxes; and

7. A further proposal that I shall be making to the Congress to impose a tax on lead used in the manufacture of gasoline, a proposal closely related to our antipollution efforts as well as to our revenue needs.

The principle of comparability of pay for Federal employees may require an additional expenditure of slightly more than $1 billion in the latter half of fiscal 1971. Other programs should be reduced to pay for such an increase, should it become necessary, without adding to the deficit.

It should be noted that the deficit now projected for fiscal 1971 would have been more than covered by the amount of revenues the Congress chose to eliminate from my recommendations for the Tax Reform Act of 1969.

Despite this premature reduction by the Congress, our tax system would produce sufficient revenue to cover the present, restrained level of Government spending if we had normal economic growth without inflation today. Progress is being made toward that goal. However, if Government spending, in spite of the strict controls I have placed on it, were to exceed the potential yield of the tax system, I would not hesitate to ask the Congress for further increases in taxes when I present my new budget next January.

The Congress must cooperate if spending is to be controlled. If the Congress votes higher appropriations than I have requested for some programs, it should match these increases with cuts in other programs or raise the revenues to pay for them. Responsible action permits no other alternative.

As this administration's actions have proved, we are determined to slow down the rise in prices, which imposes too great a hardship on too many of our people. One vital element in this campaign has been to gain control of Federal spending and in that we must continue to succeed. I am equally determined to curb inflation.

Frankly, my concern about unemployment and my desire to bring about price stability without economic dislocation is why the campaign to control inflation cannot be accomplished quickly.

As I anticipated, price increases are beginning to slow down; as I forewarned, this has been accompanied by "slowing pains." We expect that economic activity will shortly resume a more rapid yet steady and more sustainable rate of increase that will not fuel a new inflation.

None of us can claim perfect vision of our economic outlook. I am confident, however, that by persevering in our policies as we have done in the past year, we shall achieve our goal of price stability in a climate of sound and sustainable economic growth.