Annual Budget Message to the Congress for Fiscal Year 1957.

To the Congress of the United States:

I send you today the Budget of the United States Government for the fiscal year 1957 which begins July 1, 1956. This budget also includes the fiscal results of all Government operations for the year ended June 30, 1955, and revised estimates for the current fiscal year ending June 30, 1956.

[table in original] BUDGET TOTALS
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated

Budget receipts                      $60.4 $64.5 $66.3
Budget expenditures                64.6 64.3 65.9

Budget surplus (+) or deficit (--) 4.2 +.2 +.4

 

The budget I am proposing for 1957 is a balanced budget. It is my expectation that the budget will also be in balance for the fiscal year 1956.

Although balanced, the margin of estimated surplus in each of these budgets is slim. This calls for the utmost cooperation between the executive and legislative branches to prevent increases in expenditures or reductions in receipts that would create a deficit.

The present encouraging budgetary outlook arises from a favorable combination of factors involving both receipts and expenditures. Substantial reductions in Government expenditures have been achieved in the past 3 years. A significant increase in revenues is currently anticipated as the result of our present unprecedented prosperity. In the achievement of this prosperity, the historic 7.4-billion-dollar tax reduction and reform program of 1954--so advisable during the transition to a peacetime economy then taking place--and the confidence born of prudent fiscal and credit management have been strong energizing factors.

Budget expenditures in the fiscal year 1956 are now estimated at 64.3 billion dollars. This is a reduction in Government spending for the third successive year. It is a decrease of 10 billion dollars from the amount actually spent by the Federal Government in the fiscal year which began July 1, 1952. It is a cut of 13.6 billion dollars from the amount proposed in the budget for the fiscal year beginning July 1, 1953, submitted to the Congress in January of 1953 before this administration took office.

For the fiscal year 1957, total expenditures are estimated to rise approximately 1.6 billion dollars over the anticipated level for 1956. This increase will be more than offset by the rise in receipts estimated to result from continued growth in the national economy. Efforts to obtain additional economies in Government operations must continue, for the balance achieved in the budget for 1957 is a balance at a high level of receipts and expenditures. The search for additional savings that can be effected while strengthening our security posture and providing essential Government services must be relentless.

We will take full advantage of the proposals of the Commission on Organization of the Executive Branch of the Government, which has completed with high distinction the task of analyzing the activities of the Government. We will continue to give the taxpayer greater and greater value for each dollar spent. We will continue to foster orderly growth of our economy through sound fiscal policies. The confidence in the future among consumers and businessmen generated by those policies must be maintained.

BUDGET POLICIES

We seek, above all, the attainment of a just and durable peace. Thus, the resources of the world can be directed to building a better life for all people. The people of the Soviet Union and of the countries under its domination are undoubtedly as anxious as the people of other nations to achieve this objective. I regret that the Soviet leaders have not as yet given any tangible evidence of an intention to agree on a plan of disarmament that can be verified by adequate inspection. In the absence of such tangible evidence, we must follow the course reflected in this budget of steadily strengthening the defense of the United States and its allies, so that the free world will remain strong enough to deter possible aggressors or to retaliate immediately and effectively if attacked.

At the same time, the Government of the United States will steadfastly seek all possible ways of further progress toward our goal of peace. We will speed the development of the civilian uses of atomic energy and make the resulting benefits available, under appropriate controls, to other nations for the well-being of mankind. We will propose logical methods for advancing disarmament. We will promote international trade and investment. We will not falter in our cooperative efforts to build the economic, as well as defensive, strength of the free world through the Mutual Security Program.

At home, programs instituted by the Executive and the Congress have helped to nurture an unprecedented prosperity without inflation. Our objective is to foster and encourage conditions in which this prosperity can be sustained and can be more fully shared by agriculture and certain sectors of our industrial economy. The growth and movement of our population and the complexity of our dynamic society are continually creating needs which must be met if we are to build wisely for the future. For years, many activities which are desirable for fostering sound economic growth have been postponed because of the overriding needs of war and defense.

Defense needs are still overriding and must continue to be met in full measure. However, budget revenues now permit us to undertake some new and expanded programs for enhancing opportunities for human well-being and economic growth. This budget reflects that purpose.

These two national objectives of securing a lasting peace and of sustaining widespread prosperity and well-being are closely linked to our third goal of financial strength and stability.

In the words of Washington's farewell address, we must meet our defense needs by maintaining a respectable posture of defense. There is no magic number of dollars or of military units and weapons that would solve all our defense problems and guarantee our national security. Neither can total mobilization in peacetime be the answer to our defense needs. It is essential to have a stable, long-range defense program suited to our needs which avoids fluctuations in response to transitory pressures.

We are equally well aware that overenthusiastic and illconsidered Government efforts to promote economic development could lead to inflation, and could also choke off private initiative, which is the well-spring of economic development and of a better life. Inflation would bring suffering to the very groups whose well-being the Government would be trying to serve.

With a sense of proportion and with a sound progressive policy, we can continue our sure advance toward our objectives. The results to date of sound financial management so demonstrate. While continuing substantial expenditures for military defense and mutual security, with some increases where needed, we can now propose the expansion of certain domestic programs, and, at the same time, strengthen our financial position by a balanced budget. But we must make sure that we do not undermine our financial strength by laying the groundwork for future budget deficits.

BUDGET DOCUMENT

A budget is not just a book of figures describing fiscal operations-it is a comprehensive plan of action for meeting our national objectives. As such, it affects every phase of the life and activity of the Nation. It is necessarily complex. Like the plans for a building, the budget must be sketched from various points of view to give a dear idea of its content and composition. Accordingly, despite some repetition, the various items in the budget are classified and grouped in different ways to help in the analysis of their overall significance.

In this section of the budget message, I shall summarize budget expenditures in terms of a few broad purposes and also in terms of their controllability through the budget process. Following this discussion, there are two summary tables setting forth budget expenditures and new obligational authority by major programs and by Government agencies.¹ These tables are followed in the message by a discussion of my recommendations for each of the major programs of the Government.

¹Omitted.

The detailed part of the budget document which follows the message contains four parts: (1) Additional summary tables1; (2) detailed appropriation accounts for each agency; (3) information on trust funds and working funds; and (4) a number of special analyses which throw light on the budget from still different viewpoints. These analyses show, for example, the expenditures for Federal credit programs, public works, aid to State and local governments, research, and economic statistics, all of which are common to many programs and agencies.

The detailed schedules and statements of the budget have been simplified this year to make them more useful to the Congress in general and to the appropriations committees in particular. This simplification has also resulted in reducing the size of the budget document 50 pages and the appendix a further 175 pages.

BUDGET EXPENDITURES

Expenditures by purpose.--When we look at the budget in terms of a few broad purposes, we find that the greatest portion, 64 percent, of the expenditures in the fiscal year 1957 will be for deterring possible aggression and for strengthening the international alliances to which we belong. The next largest part, 21 percent, will be devoted to civil benefits of various kinds. Interest, largely on the public debt, will amount to nearly 11 percent. Expenditures for civil operations and administration are estimated at 4 percent of the total.

[table in original with three columns]] BUDGET EXPENDITURES BY PURPOSE
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Protection, including collective security $42.7 $41.4 $42.4
Civil benefits 13.7 13.8 13.9
Interest 6.4 6.9 7.1
Civil operations and administration 1.7 2.1 2.2
Reserve for contingencies .1 .2

Total 64.6 64.3 65.9

Protection, including collective security.--In this summary classification of broad purposes, expenditures for protection include more than the four major national security programs. They embrace the military functions of the Department of Defense, including construction and procurement; the Mutual Security Program; the Atomic Energy Commission; and other programs such as stockpiling, expansion of defense production, civil defense, and our foreign information activities.

[ table in original with three columns] EXPENDITURES FOR PROTECTION, INCLUDING COLLECTIVE SECURITY
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Major national security programs:
   Department of Defense--Military Functions $35.5 $34.6 $35.5
   Mutual Security Program--military 2.3 2.5 2.5
   Atomic Energy Commission 1.9 1.7 1.9
  Stockpiling and defense production expansion .9 .7 .4

   Subtotal 40.6 39.5 40.4
Related programs 2.1 1.9 2.0
  Total 42.7 41.4 42.4

In planning such great security programs, it is clear that we must never permit ourselves to be panicked by temporary crises or beguiled by a campaign of smiles without deeds. We continue to maintain and to strengthen our national security forces.

This budget provides for increased expenditures for the military functions of the Department of Defense, emphasizing airatomic power, guided missiles, research and development, continental defense, and the re-equipping of our forces with new types of weapons. Outlays for conventional weapons and for stockpiling will be decreased. Under the Mutual Security Program, budget expenditures in 1957 for military assistance and for economic and technical assistance are estimated at about the same level as in the fiscal years 1955 and 1956. Expenditures for atomic energy, including peaceful applications, will rise in 1957 to a somewhat higher total than for any previous year. I am also recommending an expansion of our foreign information activities so that we can more successfully advance understanding abroad of our policies and their peaceful intent.

Civil benefits.--A great variety of Government programs provide civil benefits and services for the Nation as a whole and for specific groups. They encourage the private development and growth of our economy and provide certain economic safeguards for individuals and groups in order that our dynamic system of free choice may operate effectively in the modern world.

Some of these benefits and services are in the form of public works or loans which add to Federal assets. Expenditures for long-range development, such as those for health research and for grants to States for construction, also lay the foundation for future economic progress and development. However, the bulk of the benefits and services are for current expenses, including veterans' benefits; aids to agriculture; aids and subsidies to shipping, airlines, and the postal service; and grants to States for public assistance and administration of employment offices and unemployment insurance.

[table in original with three columns] EXPENDITURES FOR CIVIL BENEFITS
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Additions to Federal assets $3.8 $2.3 $2.4
Long-range development 1.7 2.0 2.4
Current expense items 8.2 9.5 9.1

Total 13.7 13.8 13.9

My recommendations for the fiscal year 1957 under this heading of civil benefits are designed to build for the future by assisting further in the strengthening of agriculture; in the promoting of labor standards; in the building of schools; in the expansion of research and training in science, health, and agriculture; in the modernization of our highways; in the improvement of housing and urban facilities; in the enlargement of our airway traffic capacity; in the replacement of our merchant fleet; and in the conservation of our natural resources.

The estimated expenditure for each of the civil benefits and services represents the best judgment of this administration of what is required and can be used effectively during the coming year to meet our growing needs.

In discharging the responsibility for fostering a growing prosperity that is widely shared, I have been mindful of two principles.

First, we will progress fastest by relying on private initiative as the mainspring for economic growth and a better life for all. In encouraging economic growth, the Government should act on the basis of enabling private activity to expand and not on a basis of replacing private with public activity. My recommendations, therefore, are designed to encourage private initiative and to contribute toward, or, in some cases, to undertake tasks which private enterprise cannot perform alone.

Second, the interests of our citizens are best advanced by encouraging State and local governments to strengthen themselves and thus keep as much Government responsibility as possible in the States and communities, close to the people themselves. The Federal actions which I am proposing are designed to meet real and pressing needs which most smaller governmental units cannot cope with by themselves. Our endeavor is to help fill the gap between the need for essential services, on the one hand, and the present ability of State and local governments to meet those needs, on the other. Wherever possible and logical, I propose that responsibility and costs be shared by these other governmental units.

A corollary of these two principles is that where Federal action is necessary, it should be taken, if possible, in a way that need not entail large or continuing Federal outlays. For some activities, Federal guaranties will encourage the availability of private credit. For other activities, partnership with private or State and local government interests will multiply the effectiveness of Federal expenditures.

Many services performed and privileges granted by the Government in the public interest also convey a special, added benefit to individuals or groups who can afford to pay for them In some cases, the services are now provided without charge. In other cases, the fees are substantially below the costs of providing the services. Thus, the general taxpayer is required to subsidize operations which should be self-supporting. The scope and cost of these hidden subsidies have grown considerably during the past decades. I firmly believe in the principle that Government services which give a special benefit to users should be financed by adequate charges paid by the users.

In furtherance of this principle, I strongly recommend that the Congress enact legislation to increase postal rates so that users are no longer subsidized from general funds.

Civil operations and administration.--Budget items for civil operations and administration are predominantly the traditional expenses of the Government. They are the largest in number but not the largest in amount. They cover the bulk of the expenditures for the legislative branch, the judiciary, and various regulatory activities, as well as the administrative expenses of many cabinet departments and independent agencies. They also include expenses for tax collection and various central management services.

These programs have a greater significance than their small proportion of the total budget would indicate. I am recommending selective increases in appropriations and expenditures for a number of them.

For example, we should increase our representation abroad-particularly in a number of countries with which our relations are becoming increasingly vital. A strengthening of our foreign relations will pay dividends in terms of better mutual understanding and friendship. Likewise, my proposals for reducing the backlogs of cases pending in our Federal courts and before our regulatory commissions will bring benefits greater than their costs. Increased funds for central property and records management will enable us to achieve greater economies in carrying out the other activities of our Government.

Expenditures by controllability.--Another way of looking at and grouping budget expenditures is from the point of view of their controllability through the budget process. Each year when a budget is being determined, a large amount cannot be substantially modified by actions of the executive branch or of the Congress through the appropriations process but only by longer term review and action. In the fiscal year 1957, about one quarter of the estimated budget expenditures are dictated by factors not readily subject to administrative discretion through the budget process.

Interest is the largest example of such an expenditure. Most of the other relatively uncontrollable programs, such as agricultural price supports, veterans' compensation and pensions, and various grants to States, are in the field of civil benefits as classified in the previous section.

[table in original with three columns of figures] BUDGET EXPENDITURES INDICATING CON'IROLLABILITY
[Fiscal years. In millions]

1955 1956 1957
Description actual estimated estimated
Major national security programs $40,626 $39,467 $40,370
Major programs which are not readily controllable:
Veterans' compensation, pensions, and selected benefit programs 3,519 3,770 3,842
Veterans' unemployment compensation 106 115 118
Grants to States for public assistance 1,427 1,488 1,478
Commodity Credit Corporation (net)¹ 3,414 2,211 1,694
Removal of surplus agricultural commodities 59 225 265
Conservation of agricultural land resources 235 220 220
Federal-aid highway grants 595 740 800
Grants to States for unemployment compensation and employment service administration 194 230 255
Payment to the unemployment trust fund 64 87 81
Claims and relief acts 142 168 185
Payments to Federal employees' retirement funds 30 234 296
Payment to railroad retirement fund for military service credits 2
Unemployment compensation for Federal employees 19 32 33
Legislative and the judiciary 96 135 164
Interest 6,438 6,875 7,066

Total 16,338 16,530 16,499

All other programs 7,606 8,273 8,996

Total 64,570 64,270 65, 865

1 For purposes of comparability, includes expenditures from appropriations to reimburse the Corporation.

NEW AUTHORITY TO INCUR OBLIGATIONS

Before any budget expenditures can be made, the Congress must first authorize Federal agencies to incur obligations. This authority, ordinarily provided in the form of appropriations, may or may not lead to the immediate expenditure of funds. In the case of salaries and the purchase of supplies, the expenditure will ordinarily follow closely the incurring of the obligation. For other items such as ships, aircraft, and complex military equipment, the expenditure may follow the incurring of the obligation by several years.

Unexpended balances of appropriations carried over from prior years ran to nearly 80 billion dollars when this administration took office and represented an enormous backlog of commitments for which expenditures had to be made in the fiscal year 1954 and subsequent years. These balances represented, infact, c.o.d. orders which had to be paid for in cash when the goods were delivered and constituted a heavy overhanging load for the budget on top of the appropriations being enacted currently.

By the end of fiscal year 1956 we expect to have reduced these balances by well over a third, to below 50 billion dollars, a level believed more reasonable in its relation to actual needs for current operations.

For the fiscal year 1957, requested new authority to incur obligations is about the same as estimated budget receipts and slightly greater than estimated expenditures. However, the backlog of unexpended balances of appropriations will be further reduced as some appropriations enacted in prior years will be allowed to lapse. This continues the policy of the two previous budgets I sent to the Congress, in which I emphasized the importance of actions to eliminate excessive accumulations of unexpended balances, which so frequently invite commitments leading to unnecessary future expenditures.

Of the total new authority I am recommending for the fiscal year 1957, action by this session of the Congress will be required for 58.3 billion dollars. The remainder consists of previously enacted permanent authorizations under which new authority becomes available each year without new action by the Congress. An example is interest on the public debt.

[table in original with three columns of figures] NEW AUTHORITY TO INCUR OBLIGATIONS
[Fiscal years. In billions]

1955 1956 1957
Proposed for enactment in this session:
Recommended at this time $49.7
Proposed for later transmission:
Under existing legislation $0.6 .1
Under proposed legislation .2 8.5

Total .8 58.3
Enacted prior to this session:
Current authorizations $49.3 52.7
Permanent authorizations 7.8 8.5 8.0

Total 57.1 62.0 66.3

LEGISLATIVE PROGRAM

I have outlined in my message on the State of the Union the legislative proposals which I consider vital to our continued progress. Detailed recommendations will be presented to the Congress on certain of these proposals. The budgetary estimates for the fiscal year 1957 for my legislative proposals are summarized in the table below.

These estimates cover only the proposals for which financial authorizations cannot be enacted prior to enactment of enabling legislation. Often they supplement programs for which expenditures are included elsewhere in the budget. For example, the amounts shown in the following table for my proposals for strengthening agriculture are only part of the total in the budget for agricultural programs.

Pending final determination of the amounts required for the recommended program for highways, the dollar estimates included in this budget under proposed legislation cover only the continuance of the present annual authorization. The new highway program should be soundly financed so as not to create budget deficits.

[table in original with two columns of figures] SUMMARY OF LEGISLATIVE PROPOSALS
[Fiscal year 1957. In millions]

Program   Recommended new authority to incur obligations  Estimated expenditures
NEW LEGISLATION
Agriculture--soil bank and accompanying proposals ¹ $450 ¹ $400
Area redevelopment 50 10
Atomic energy plant construction 144 40
Bureau of Reclamation and Corps of Engineers projects 46 21
Department of Defense--military public works and
personnel incentives (net) 1,117 200
Flood indemnity 100 25
Postal rate increases -- 350 -- 350
Public health--new proposals 76 24
School construction--general assistance program 376 150
Tennessee Valley Authority steam plants (revenue bonds) 68 24
Other proposals 68 47

Total, new legislation 2,145 591

EXTENSION OF EXISTING LEGISLATION

College housing 100
Federal-aid highways and forest highways 898
Mutual Security Program 4,860 990
Public assistance grants 166 166
School construction--assistance in federally affected areas 88 5
Other proposals 6 29

Total, extension of existing legislation 6,118 1,190
Reserve for contingencies 250 225

Total, legislative proposals 8,512 2,006

1 In addition, proposed refunds to farmers of Federal taxes on gasoline used in farm operations are estimated at 60 million dollars in 1957.

 

BUDGET RECEIPTS AND TAX POLICY

I have already indicated in my State of the Union message the broad outlines of our tax policies. I shall summarize them here.

We have noted that in 1954 reductions in spending made possible-and appropriate in the existing circumstances of transition to a peacetime economy--the largest dollar tax cut in any year in our history. Almost 7½ billion dollars were cut from the sums required of the taxpayers and every taxpayer in the country benefited. Almost two-thirds of the savings went directly to individuals. This tax cut also helped to build up the economy, to make jobs in industry, and to increase the production of the many things desired to improve the scale of living for the great majority of Americans.

The strong expansion of the economy, coupled with a constant care for efficiency in Government operations and an alert guard against controllable waste and duplication, has brought us to a prospective balance between income and expenditure. This is being achieved while we continue to strengthen the military security forces and enlarge services to the public.

To reach a balanced budget in the fiscal year 1956 and in the fiscal year 1957, it will be necessary in addition to continuing everyday efforts to keep spending under control, to continue all the present excise taxes without any reduction and the corporation income taxes at their present rates for another year beyond April 1, 1956.

Based on the extension of these tax rates, budget receipts in the fiscal year 1957 are estimated at 66.3 billion dollars, 1.8 billion dollars higher than in the current year.

[table in original with three columns of figures] BUDGET RECEIPTS
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Individual income taxes $31.7 $33.6 $35.1
Corporation income taxes 18.3 20.3 20.3
Excise taxes 9.2 9.9 9.9
Other taxes (net of transfers to trust funds) 2.1 2.0 2.1
Miscellaneous receipts 2.6 2.5 2.8
Refunds of receipts (--) 3.4 3.8 3.9

Total 60.4 64.5 66.3

It is unquestionably true that our present tax level is very burdensome and, in the interest of long term and continuous economic growth, should be reduced when we prudently can. It is essential, in the sound management of the Government's finances, that we be mindful of our enormous national debt and of the obligation we have toward future Americans to reduce that debt whenever we can appropriately do so. Under conditions of high peacetime prosperity, such as now exist, we can never justify going further into debt to give ourselves a tax cut at the expense of our children. So, in the present state of our financial affairs, I earnestly believe that a tax cut can be deemed justifiable only when it will not unbalance the budget, a budget which makes provision for some reduction, even though modest, in our national debt. In this way we can best maintain fiscal integrity.

PUBLIC DEBT

On the basis of present estimates, we should be able to end the current fiscal year with a small reduction in the public debt, and a small further reduction is anticipated for the fiscal year 1957.

[table in original with three columns of figures] PUBLIC DEBT
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Public debt at start of year $271.3 $274.4 $274.3
Change due to budget deficit (+) or surplus
(-) +4.2 -.2 -.4
Other changes in public debt -- 1.1 +.1 --.1

Public debt at end of year 274.4 274.3 273.8
Public debt subject to legal limit at end of year 273.9 273.8 273.3

The immediate economic effects of the public debt depend partly on its management. During each year various issues of Government securities become due and refinancing must be arranged. In the past several years, the Treasury has cooperated closely with the Federal Reserve System to assure that the management of the debt is consistent with our general monetary and credit policies. These actions have helped sustain a sound and growing business activity without inflation or deflation.

The Treasury has also taken steps toward lengthening the average maturity of the debt so as to avoid its becoming concentrated too heavily in short-term issues. Further, the number of financing operations each year has been reduced. These actions lessen the impact of Treasury financing on the market, and give the Federal Reserve System greater freedom in its operations.

Last year the Congress extended through June 1956 a temporary increase during the fiscal year in the statutory debt limit from 275 billion dollars to 281 billion dollars, so that the Treasury could meet its heavy temporary borrowing needs during the first half of the fiscal year 1956, when tax receipts are seasonally low. The Treasury is currently operating within I billion dollars of the temporary debt ceiling, and on cash balances that at some periods offer little flexibility in the management of Government finances. Even with a balanced budget in 1956 and 1957, seasonal borrowing in the first half of fiscal year 1957 will temporarily bring the debt above the 275 billion dollar limit. Therefore, a continuation of the legislation allowing a temporary increase during the year in the statutory debt limit is required.

RECEIPTS FROM AND PAYMENTS TO THE PUBLIC

The budget receipt and expenditures discussed so far reflect transactions in funds belonging to the Federal Government. The Government also collects and pays out sizable sums for the various funds which it holds in trust for others, such as old-age and survivors insurance, railroad retirement, unemployment compensation, veterans' life insurance, and Federal employees' retirement.

SUMMARY OF MAJOR TRUST FUNDS
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Balance in funds at start of year $44. 9 $45. 9 $48.4
Receipts 9.1 11.2 11.5
Expenditures 8.1 8.7 9.7
Balance in funds at close of year 45.9 48. 4 50.2

These trust funds are currently accumulating surpluses because payments into them are being made by a great many more people than are now drawing benefits. The rate of accumulation is gradually declining as more people become eligible for benefits, but will still amount to an estimated 1.8 billion dollars in the fiscal year 1957.

The flow of money between the public and the Government as a whole is shown in the table below by consolidating budget transactions with trust fund transactions and by eliminating intragovernmental payments and receipts. The relationship of receipts from and payments to the public is sometimes used to measure the inflationary or deflationary impact, if any, of Government financial operations on the economy.

RECEIPTS FROM AND PAYMENTS TO THE PUBLIC, EXCLUDING BORROWING
[Fiscal years. In billions]

1955 actual 1956 estimated 1957 estimated
Receipts from the public $67. 8 $73. 5 $75.4
Payments to the public 70. 5 71. 0 72. 9
Excess of receipts from the public 2.4 2.4
Excess of payments to the public 2.7

An excess of Federal cash receipts from the public is estimated for both the fiscal years 1956 and 1957.

SUMMARY TABLES

The following two pages present tables showing key budget figures on both new authority to incur obligations and expenditures for each major program and for each major agency.¹ These tables are followed by a discussion of the programs covered by the budget, including the legislative recommendations.

¹ Omitted.

MAJOR NATIONAL SECURITY

Budget expenditures for major national security programs in the fiscal year 1957 are estimated at 40.4 billion dollars, 903 million dollars more than estimated for the fiscal year 1956.

To build our military strength effectively and efficiently, peaks and valleys in security spending and in defense production must be avoided. I want to emphasize again the importance of a sound, long-range program which does not arbitrarily assume a fixed date of maximum danger. Military planning must combine present defense with the probable needs of a long period of uncertain peace.

Department of Defense.--During the past 3 years our defense program has been successfully reoriented to reflect the changing nature of the threat to our security, the revised requirements brought about by the end of the Korean conflict, and the increasing availability of new weapons of unprecedented strategic and tactical importance.

This reorientation has been accomplished by developing our defense program on the basis of the following policies and concepts:

1. Gearing our defense preparations to a long period of uncertainty instead of to a succession of arbitrarily assumed dates of maximum danger.

2. Maintaining the Capability to deter a potential aggressor from attack and to blunt that attack if it comes--by a combination of immediate retaliatory power and a continental defense system of steadily increasing effectiveness.

3. Developing military forces which minimize numbers of men by making maximum use of science and technology.

4. Relating the number and degree of readiness of major units in the active forces to the practical limitations on the rapid deployment of major military forces from the United States immediately upon the outbreak of aggression, and relying, for the remainder, on ready reserve forces.

5. Utilizing military personnel on active duty with maximum effectiveness so as to hold to a minimum the number of men withdrawn from work in the civilian economy.

6. Concentrating our efforts on those forces which' best complement the forces our allies are most capable of raising and supporting.

7. Maintaining a strong and expanding peacetime industrial structure, readily convertible to the tasks of defense and war.

The readjustment of our military forces in line with these principles is providing this Nation with the greatest military power in its peacetime history. My recommendations for the fiscal year 1957 continue the same basic policies and concepts.

This budget provides funds for an average of 2,815,700 military personnel on active duty during the fiscal year 1957. Total military personnel on active duty will increase to 2,838,400 at the end of fiscal year 1957 from the number of 2,814,100 estimated to be on active duty at the end of the current fiscal year. In order to permit flexibility in planning and operations, a military personnel ceiling has been authorized for the fiscal year 1957, totaling 2,906,000, excluding Army cadets, Navy aviation cadets, and midshipmen. However, no increase will be made above the military personnel levels provided for in this budget except upon detailed justification to, and approval by the Secretary of Defense.

During the fiscal year 1957 there will be significant increases in certain combat elements, particularly units employing new weapons and units assigned to continental defense. These increases, together with the continued modernization of the weapons and equipment, will further enhance the combat power and effectiveness of our forces.

My recommendations for the military functions of the Department of Defense for the fiscal year 1957 will require congressional authorizations amounting in total to 35.7 billion dollars. Of this amount, it is proposed that 785 million dollars be provided by transfer of existing authority from revolving funds. Thus, the new authority proposed for 1957 is 34.9 billion dollars, which is 1.8 billion dollars more than the amount voted by the Congress for the current fiscal year. Expenditures are expected to total 35.5 billion dollars, compared with a present estimate of 34.6 billion dollars for the current fiscal year.

The increases in new authority to incur obligations and in expenditures in the fiscal year 1957 reflect, in large part, the cost of keeping our forces modern.

Continued improvements in technology and weapons can be expected and they will tend to increase costs unless offsetting savings can be found. Replacement, maintenance, and operations will require a high level of expenditures in the fiscal year 1957 and for years to come. Therefore, the management of our military programs must have continuing study and scrutiny. Constant efforts must be made to plan carefully in advance, to increase efficiency, and to reduce costs and expenditures.

Military personnel costs for the active forces, which include pay, allowances, subsistence, clothing, and related items, will be the same in the fiscal year 1957 as in 1956.

Retention of trained and experienced personnel is one of the most difficult problems confronting the armed services today. Every reasonable measure must be taken to increase the attractiveness of a service career. Therefore, I am again recommending legislation to provide added incentives for the members of our Armed Forces. My principal proposals are for the uniform provision of medical care for dependents, adequate and equitable benefits for survivors, improved career inducements for medical Personnel, and reasonable rentals for those occupying substandard Government quarters. This budget also provides for a proposed increase in the proportion of career officers to total officer personnel.

The cost of operation and maintenance will rise in the fiscal year 1957, notwithstanding a decrease in the number of civilian personnel. Major reasons for the higher costs are (1) the greater number of air bases, radar sites, and other installations which must be supported in the coming fiscal year, (2) the sizable increase in the numbers of weapons and amount of equipment which must be operated and maintained, and (3) the growing complexity of new weapons and equipment.

Major procurement and production expenditures in the fiscal year 1957 will be about the same as in the current fiscal year. However, there will be a shift in emphasis within this total in line with the policy of modernizing our forces.

Approximately 6.8 billion dollars is estimated for procurement of aircraft, chiefly for the Air Force and the Navy. The accelerated production programs for the B-52 long-range jet bomber and the F-101 and F-104 supersonic interceptors will be continued in the fiscal year 1957. In addition, there will be substantial procurement of the Navy's new supersonic F-8U fighter.

Expenditures for the procurement of guided missiles will be the highest in our history, increasing by more than one-third over 1956 and about double the amount spent for this purpose during 1955.

Expenditures for electronic and communications equipment will remain high during the fiscal year 1957, to meet the needs for continental defense and our combat forces. Expenditures for ammunition, combat vehicles, trucks, and other major equipment items, will continue to decline because our requirements have now been met in large part.

This budget provides for continuation of the Navy, shipbuilding program at a slightly higher level than in the fiscal year 1956 in order to carry forward the modernization of the fleet, most of which was built during World War II. In addition to those already authorized by the Congress, there is included in the proposed shipbuilding program for 1957 the construction of a sixth carrier of the Forrestal class, additional nuclear-powered submarines, guided-missile destroyers and frigates, and an experimental nuclear-powered cruiser. Provision is also made for developing a practical nuclear power plant for future installation in ships of the large carrier class. Conversion of ships now in the fleet will be undertaken to provide them with additional nuclear weapons and with guided missile capabilities, and to permit them to operate modern high-speed aircraft.

Military public works will continue slightly below the level of the current year. This budget provides for the construction in the fiscal year 1957 of facilities associated with the continental air defense system, including Nike sites; further additions to the aircraft warning systems, including the Distant Early Warning Line; guided missile facilities; and air bases for the Navy and Air Force.

Expenditures for our Reserve components in the fiscal year 1957 will be considerably greater than in 1956, reflecting an increase during the year of about 130,000 reservists in drill pay status and further expansion of facilities for the Reserve forces. The number of Reserve personnel engaged in regularly paid drills is expected to increase to 1.1 million by the end of 1957. In addition, this budget provides for 6 months' active duty training under the Reserve Forces Act of 1955 for about 80,000 Reserve forces personnel.

Research and development expenditures will be somewhat higher in the fiscal year 1957 than in the current year. Major emphasis will be placed on projects related to guided missiles, continental air defense, and to the application of nuclear energy for the propulsion of aircraft and ships. It is my belief that increased returns in military research and development can be obtained through a relatively stable program at approximately the present level which can utilize effectively our scientific and technological resources. Military research and development now engages a substantial proportion of the scientists and engineers employed in research and development in the Nation. Care must be exercised in selecting the projects to be supported, and efforts must be concentrated on those of high priority.

Continued progress has been made during the past year improving the management of the Department of Defense. The Secretary of Defense is giving careful study to the recommendations of the Commission on Organization of the Executive Branch of the Government and its task forces on defense activities. Some of these recommendations have already been put into effect; in certain other cases, they have been adopted in modified form, consistent with the objectives of the Commission report. Responsibility for supplying all food, which costs 1.2 billion dollars annually, has .been placed under the Secretary of the Army. A single food-supply system for bulk procurement and storage will eliminate duplicate storage facilities and costly cross-hauling. The three military departments have also been directed to undertake joint planning and utilization of all the health and medical resources of the Department of Defense.

Financial management has been made. more effective by increasing the scope of stock funds. These funds currently cover inventories of over 8.2 billion dollars, and their coverage will be expanded. Stock funds are used to buy supplies and equipment, and to control inventories centrally. Each of the services then meets its needs by purchasing from this central stock. This method makes possible a better distribution of supplies and equipment with a minimum inventory. It encourages cost consciousness throughout each of the services. As a result, in the last 3 fiscal years 2.5 billion dollars have been recovered from the stock funds as inventories were reduced. Further reductions in inventories this year will make available additional surplus capital of 785 million dollars in the Army, Navy, and Marine Corps stock funds. This surplus is applied in this budget to reduce the amount of new authority to incur obligations which would otherwise be required for the fiscal year 1957.

Industrial funds are being used to serve the same kind of businesslike purpose in commercial- and industrial-type installations. During the fiscal year 1957 industrial fund financing will be extended to additional activities in each of the services. This will greatly increase the volume of business, currently amounting to about 1.8 billion dollars, conducted under such funds.

Civil defense.--The key to our civil defense is the expanded continental defense program, including the distant early warning system. Additional progress has been made in the civil defense program under the Federal Civil Defense Administration, whose expenditures are classified with those for civil disasters in the commerce and housing section of the budget. Comprehensive studies are being conducted jointly by the Federal Civil Defense Administration, the States, and critical target cities to determine the best procedures that can be adopted in case of an atomic attack. Such planning has vital national importance and parallels the necessity for maintaining a strong military establishment.

This budget provides for a strengthened effort on the part of the Federal Government to assist the States and cities in devising the most effective common defense. It includes funds to extend civil defense preparations in more metropolitan target zones in accordance with recent recommendations of a special committee on civil defense. Funds also are included to accelerate procurement of field-type emergency hospitals and increase stockpiles of medical and radiological supplies.

Development and control of atomic energy.--We have long sought and we continue to seek, jointly with other nations, means to banish the threat of nuclear warfare which still confronts the world. Pending a trustworthy agreement, however, we must continue to increase our nuclear weapons stockpile which, together with the means of delivery, is the principal deterrent to armed aggression in the world. At the same time, we shall speed the development of the peaceful uses of atomic energy and make the resulting benefits, under appropriate controls, available to other nations for the well-being of all mankind. To this end we continue to hope that an international atomic energy agency will be established at an early date.

The United Nations Conference on the Peaceful Uses of Atomic Energy at Geneva last summer, which grew out of a proposal by the United States, not only facilitated the exchange of technical information but served to emphasize the great promise of atomic energy for peace.

So that we may further demonstrate this great promise, I recommend again that the Congress take early action to authorize the construction of a nuclear-powered ship, using an atomic propulsion plant already developed, which will carry the message of "Atoms for Peace" to the ports of the world. The Atomic Energy Commission has sufficient funds available for construction and installation of the propulsion plant and machinery, and I shall request additional funds for the fiscal year 1956 for the Department of Commerce for construction of a suitable hull.

Total expenditures for atomic energy in 1957 are estimated at 1.9 billion dollars, 230 million dollars more than in 1956.

Operating expenditures will increase from 1.4 billion dollars in the fiscal year 1956 to 1.6 billion dollars in 1957. Greater quantities of uranium ores and concentrates will be purchased. Production from the Commission's plants will increase but at reduced unit costs as the expanded facilities, soon to be completed, come into full operation. Research and development work in numerous areas, both civilian and military, will be expanded.

Capital expenditures in the fiscal year 1957 are expected to decline somewhat from 1956 levels. I shall propose to the Congress legislation to authorize new construction in 1957, principally for improvements to increase the efficiency, capacity, and safety of production plants and for research and development facilities.

The civilian applications of nuclear energy will receive even greater attention, not only in terms of Government expenditures, but also through the Commission's efforts to stimulate more participation and investment by private and public groups, particularly in the development of atomic power. As such participation increases, the share of power development costs financed by the Government should decrease. As part of its encouragement of the development of atomic power, the Commission plans in 1957 to Continue specialized training of nuclear engineers and to expand its support of the training of nuclear engineers through fellowships and through provision of specialized training equipment to a number of universities. The Commission will also construct a special reactor for use by the Department of Defense in developing methods for preserving food through irradiation.

Great emphasis is being placed on the development of a larger variety of nuclear propulsion plants. To this end, funds are included under proposed legislation for additional developmental facilities at the National Reactor Testing Station in Idaho.

The Atomic Energy Commission will also step up research on controlled thermonuclear reactions as new discoveries may justify. This program, while long range, gives promise of yet greater dimensions to the potential peaceful uses of nuclear energy.

Continuing progress in basic research is fundamental to further advances in nuclear energy. The Commission will increase in the fiscal year 1957 its support of basic research in the physical and life sciences, including development and design studies of high-energy particle accelerators. The 1957 construction program will include new buildings at three of the Commission's laboratories.

Stockpiling and defense production expansion.--As a result of the financial assistance provided under the Defense Production Act, substantially increased supplies of aluminum, copper, nickel, and other strategic materials are now available both for industry and for the national stockpile. To assure continued flexible authority for mobilization preparedness to meet future emergencies, I recommend extension of the Defense Production Act for 2 years.

An increasing number of stockpile objectives are being filled. Moreover, the high level of industrial activity has reduced the availability of some materials for stockpiling and required diversion of part of the new supply of a few materials to meet shortages in key industries. As a result, net expenditures for the stockpile and for defense production expansion are expected to decline from 713 million dollars in the fiscal year 1956 to 378 million dollars in 1957. No new authority to incur obligations is recommended for the fiscal year 1957, since sufficient authority is already available for continued rapid progress toward completion of established minimum objectives and for limited procurement to maintain essential elements of the mobilization base.

Under the administration; s policy of finding constructive uses for our surplus agricultural commodities, strategic materials are being acquired by barter transactions with foreign suppliers. The Department of Agriculture plans to acquire additional strategic materials by barter during 1957. In the fiscal years 1956 and 1957, expenditures amounting to about 65 million dollars will be made under the appropriations for. stockpiling to reimburse the Department of Agriculture for materials added to the national stockpile.

Mutual Security Program.--Through the Mutual Security Program we shall continue to work jointly with our friends and allies in building and maintaining the defensive and economic strength of the free world. This long-range program, which includes military, economic, and technical assistance, is essential to our national security. Our assistance supplements the major efforts of other free nations, who themselves are bearing a large proportion of the total cost of our joint efforts. I shall subsequently transmit to the Congress my specific requests for authorization of appropriations for the fiscal year 1957 Mutual Security Program. These requests will cover my recommendations for military assistance and direct forces support, discussed in this section of the message, as well as for economic, technical, and other programs which are discussed in the international affairs and finance section.

Expenditures for the total Mutual Security Program in the fiscal year 1957 are estimated at 4.3 billion dollars, about 100 million dollars more than in 1956. Recommended new authority to incur obligations is 4.9 billion dollars, an increase of 2.2 billion dollars over the 2.7 billion dollars enacted for 1956. Requested new obligational authority for 1957 exceeds estimated expenditures for 1957 by approximately 600 million dollars reflecting the amount for additional funding of long lead-time items for delivery in future years.

Wherever possible, foreign currency proceeds from the sale of surplus agricultural products abroad under the Agriculture Trade and Development Act will be used to meet mutual security objectives.

Mutual Security Program, military.--The program of military assistance for the fiscal year 1957 is planned primarily to continue equipping and training forces which we have helped develop and strengthen over the past years. Total expenditures for military assistance and direct forces support in the fiscal year 1957 are estimated at approximately the current rate of 2.5 billion dollars annually. To carry forward these programs, I am recommending new obligational authority of 3 billion dollars. Within this amount, 445 million dollars is requested for direct forces support in the fiscal year 1957 to supply items such as petroleum, rations, uniforms, and military construction services directly to the military forces of our allies.

In the fiscal years 1955 and 1956, the backlog of unexpended balances made it possible to maintain an adequate level of expenditures and deliveries while the amount of new authority to incur obligations was reduced. The backlog of unexpended balances for military assistance (including reservations for common item orders) is being reduced from a total of 7.7 billion dollars at the beginning of the fiscal year 1955 to an estimated 4.5 billion dollars at the end of the current fiscal year. If deliveries of military equipment are to be maintained at the current rate, as I believe they must be, this level of unexpended balances should not now be further reduced.

Our planning for the future includes helping to provide modern weapons that the forces which we help support can effectively use. In view of the long lead-time required, funds must be made available in advance so that the necessary negotiations and planning may be undertaken and procurement initiated for complex items such as jet aircraft, missiles, and electronics systems. Hence, for the fiscal year 1957, I am requesting new authority to incur obligations somewhat above the projected level of expenditures. Deliveries of equipment and the expenditure of funds will necessarily be spread over a number of years as defense plans involving modern weapons are completed and as our allies demonstrate their readiness to support a modern defense system adequately.

My recommendations will enable us to provide our NATO partners with the modern defense weapons and equipment which we are furnishing in increasing numbers to our own NATO forces in Europe. Although many European countries are now in a position to finance a greater share of the cost of maintaining their existing forces, they will require continuing help if our common defense effort is to be strengthened by modern weapons and techniques.

About one-half of the fiscal year 1957 program will be concentrated in Korea, Pakistan, Taiwan, and Turkey. The program will provide for necessary replacements and effective maintenance of material furnished in past years, and will also permit the further training of existing forces. In addition, we will continue to supply basic military equipment where necessary to strengthen further defensive capabilities in the Far and Middle East. Likewise, we will continue to provide moderate amounts of equipment to help maintain certain military units of our friends in Latin America who are cooperating in the development of hemispheric defenses.

INTERNATIONAL AFFAIRS AND FINANCE

The international programs which I am recommending for the fiscal year 1957 will vigorously carry forward our fundamental national policy to maintain peace and help build a strong, prosperous, and unified community of free nations.

During this past year, the United States has made positive new proposals aimed at relaxing international tensions. But it remains clear that the search for lasting peace will require patience, strength, and continued vigilance.

We will persist in exploring every possible means of solving the difficult problems which continue to divide the world. Meanwhile, we must further strengthen and improve the system of collective security. Moreover, it is of the utmost importance that, in cooperation with other free nations, we proceed steadily with long-range, positive programs to sustain and improve the conditions of human well-being which are necessary if peace with freedom is to endure.

To accomplish these objectives, I am proposing expenditures of 2.1 billion dollars in the fiscal year 1957 for our international programs.

Mutual Security Program, economic.--My recommendations for continuing military assistance trader the Mutual Security Program were discussed previously, and the amounts involved were included as part of our major national security activities. Some of the countries to which we provide military assistance, however, do not have the economic capacity to support effective defensive forces which are necessary to our mutual security. We must continue to provide assistance to such countries to enable them to support the greater defensive strength that is our common goal. It is particularly important that we continue to help those nations which require assistance in order to participate effectively in regional collective security arrangements, notably those in Asia. This budget, therefore, includes funds for carrying on the defense support program in critical areas in southern Europe, the Middle East, South Asia, Southeast Asia, and the Far East.

The development of military strength as a deterrent to aggression, however, meets only a part of the challenge which faces the free world. Because the conditions of poverty and unrest in less developed areas make their people a special target of international communism, there is a need to help them achieve the economic growth and stability necessary to preserve their independence against Communist threats and enticements.

For our assistance to be as effective as possible, it must be based upon a realistic appraisal of potentialities for economic development and a careful determination of priorities among the many pressing needs in the less developed areas. My recommendations for the Mutual Security Program include funds for continuing selective loans and grants to certain less developed countries following experience gained in past years.

I am also recommending continuation of the worldwide technical cooperation program at a slightly increased level. Technical cooperation is an indispensable element in the successful attack which is being made on the basic problems of hunger, disease, and illiteracy. Through the efforts of American experts working in cooperating countries and by the training of foreign technicians in the United States, the knowledge and experience of our people are being shared in a cooperative effort to solve fundamental problems in health, education, public administration, agriculture, and industry which confront less developed countries. By these means we are helping to provide the skills which are required for economic development. In addition to continuing our own technical cooperation program, my recommendations provide for our annual contribution to the expanded technical assistance program of the United Nations and to the similar work of the Organization of American States.

We shall also continue and expand in the fiscal year 1957 our international program to provide training in the peaceful uses of atomic energy. Funds for this purpose are included in this budget as part of the Mutual Security Program.

Provision should be made for further contributions for the relief and rehabilitation of refugees from Palestine. In view of the current unrest in the Near East, our continued support is essential both for humanitarian reasons and to assist in achieving peace and stability in the area.

The budget also includes amounts for the escapee program and for contributions to the Intergovernmental Committee for European Migration and the United Nations Refugee Fund, which aid in the relief and resettlement of refugees from behind the Iron Curtain and in emigration from Europe.

I shall recommend effective flexibility in the use of funds under the Mutual Security Program to enable us to respond to new situations which may arise. I also consider it essential that the Mutual Security Act be amended to assure greater continuity in providing economic assistance for development projects and programs which we approve and which require a period of years for planning and completion. Accordingly, I shall ask for limited authority to make longer term commitments for assistance for such projects, to be fulfilled from appropriations made in future years.

In furtherance of our basic foreign economic policy objective of stimulating international trade and investment, I am requesting a review of existing legislation to determine whether changes will be necessary to permit an expansion of the investment guaranty program. Under this program, private United States investors may be guaranteed against loss of their foreign investments or earnings through expropriation or inconvertibility of foreign currencies. The number of private investors and foreign governments participating in this program has steadily increased. We also need to encourage investment overseas by avoiding unfair tax duplications, and to foster foreign trade by further simplification and improvement of our customs legislation.

Export-Import Bank.--The Export-Import Bank is assisting in the expansion of international trade and investment through direct loans and guaranties of private loans. Its loan and guaranty commitments are estimated at 960 million dollars in the fiscal year 1957, an increase of 255 million dollars over the previous year. Because of greater participation in loans by commercial banks and other sources of private capital, direct Federal disbursements in the fiscal year 1957 are estimated at less than one-third of the total new commitments. Repayments on loans made in prior years are expected to exceed disbursements from Export-Import Bank funds, thus providing estimated net receipts of 100 million dollars. Sales of portions of the existing loan portfolio to private financial institutions may increase this return.

Foreign information and exchange activities.--The present international situation has made the work of the United States Information Agency increasingly vital to our national interest. I consider it of paramount importance that we expand our effort to bring the truth before the people of the world, explain our peaceful objectives, and show in its true light the Communist attempt to divide and destroy free world unity.

To this end, I strongly recommend that appropriations for our information program be increased by 48 million dollars from the level in the current fiscal year. This increase will provide for expanded use of overseas exhibits and other techniques to emphasize such subjects as our Atoms for Peace program, our proposals for mutual aerial inspection as a first step toward disarmament, and the many scientific and cultural achievements by which progressive capitalism under free, representative government is contributing to a peaceful, prosperous world. Overseas libraries will be expanded, and increased emphasis will be given to supplying books to foreign readers at low prices. Where appropriate, the program will capitalize on the effectiveness of television.

I am recommending a modest increase in appropriations for the educational exchange programs of the Department of State which constitute a basic element of our long-term effort to attain a better mutual understanding with other peoples of the world. These programs bring to this country leaders of public opinion and facilitate the mutual exchange of students, teachers, and research scholars. In addition to appropriated funds, part of the foreign currencies received from the sale of surplus agricultural commodities abroad will be used to meet certain overseas costs of educational exchange.

With the financial support of the President's Emergency Fund for International Affairs, we have sponsored, in cooperation with private industry, agricultural and industrial exhibits at international trade fairs which have effectively demonstrated the achievements of private enterprise in a free economy. Similarly, our cultural achievements have been presented throughout the world by American actors, dancers, and musicians during the past year. These trade fair and cultural presentations have been enthusiastically received abroad and have contributed significantly to a better understanding of our values and objectives as a nation. In view of the effectiveness of these activities, legislation will be recommended to authorize them on a continuing basis.

Conduct of foreign affairs.--The Department of State is not now adequately equipped with either the staff or facilities which are required if it is to provide the timely, informed, and coordinated policy guidance which is vital to the success of our total international effort. I strongly recommend, therefore, that the Congress enact the requested increase of 89 million dollars in the appropriations for the Department of State for the fiscal year 1957.

A substantial part of this increase is for construction of an extension to the present Department of State building. This extension will permit all the Washington staff of the Department, including the International Cooperation Administration, to be accommodated in a single building rather than scattered, as at present, among 30 separate buildings. In addition, my recommendations include funds to cover costs in the first year of a long-range program to provide adequate physical facilities, including housing, for our diplomatic and consular establishments abroad.

Steps are already underway to strengthen the staff of the Department. This budget provides for further improvements, as well as for carrying forward the recruitment, training, employee benefit, and other programs initiated during the past 2 years. Increases are also proposed to permit the prompt and efficient discharge of our expanding consular responsibilities and to provide for the collection of more comprehensive commercial and economic data needed by American businessmen and Government agencies.

To provide for closer international economic cooperation and continued expansion of United States trade abroad, it is particularly important that our membership in the Organization for Trade Cooperation be approved. While this will not alter congressional control of our tariff, import, and customs policies, it will help us to remove discriminations against American exports and further strengthen our ties with other nations of the free world.

VETERANS' SERVICES AND BENEFITS

The greatest portion of budget expenditures for veterans is for direct benefits, such as compensation and pensions, indemnity payments, readjustment benefits, and hospital and medical care. These direct benefit costs have been increasing. At the same time overhead costs are being reduced through improved administration.

Budget expenditures for veterans' programs are estimated to total 4.9 billion dollars in the fiscal year 1957, 86 million dollars more than in 1956 and 422 million dollars more than in 1955.

We now have more than 22 million veterans. When benefits for dependents and survivors are considered, nearly one-haft of our population is potentially entitled to veterans' benefits.

Therefore, continuing and careful attention must be given to veterans' services and benefits. These services and benefits will be increasingly significant as the veteran population ages, because benefit entitlement resulting from non-service-connected infirmities associated with advancing age will replace eligibility for service-connected benefits as the major factor in the cost of veterans' programs.

The Congress and the public will want to join with this administration in giving careful consideration to the findings of the Commission on Veterans' Pensions which I appointed to study this problem. This Commission, which will report later this year, is reviewing thoroughly the relation of the existing nonmedical programs for veterans to each other and to the numerous civil benefits which the Nation now provides for the aged, the needy, the infirm, and the disabled--both veterans and others.

Steps to relate military service survivor benefits to old-age and survivors insurance benefits are already underway in a bill pending before the Congress. The additional cost of this legislation for those receiving veterans' benefits is provided in this section of the budget. The estimates of military expenditures, under proposed legislation, include an amount to cover the Government's share, as employer, of the old-age and survivors insurance contribution.

Readjustment benefits.--A year ago, I issued a proclamation terminating accrual of eligibility for various wartime benefits. While it is still necessary to draft individuals for service in our Armed Forces, this service at present imposes neither the hazards of conflict nor as serious a disruption of education and other preparation for civilian life as was imposed upon our combat servicemen. The forthcoming report of the Commission on Veterans' Pensions will provide a useful framework for further consideration of the needs of our servicemen for readjustment benefits under present conditions.

The program of readjustment benefits for World War II veterans is drawing to a close. World War II veterans will account for less than 7 percent of the 1957 readjustment expenditures of the Veterans Administration. For most of these veterans, unemployment compensation rights ended July 25, 1952, and educational programs will cease July 25, 1956. The ending of the loan guaranty program on July 25, 1957, will bring to a close a third major program. In each case, the law has set a termination date which establishes a proper balance between the nature of the benefit and a reasonable time for using it.

The timeliness and aptness of our veterans' readjustment programs are attested in many ways. Under the "GI bill," 7.8 million World War II veterans have received education and 4.5 million have acquired homes. Practically all World War II veterans have assumed their civilian status in our economy and share equitably in the general prosperity. As a group, they have made the transition from military to civilian life and do not require extension of these readjustment benefits. For those few individuals who have not completed the change to civilian life in 10 years, approaches other than veterans' readjustment benefits seem to be indicated.

The education and training of Korean veterans will account for the bulk of the readjustment benefit expenditures during 1957. The average of 540,000 veterans in training under this program during the year will be the highest for any year.

Loan guaranty expenditures are estimated to increase slightly, requiring 38 million dollars for acquisition of properties and for losses on defaulted loans. It is expected that 640,000 new loans, totaling 7.3 billion dollars, will be guaranteed or insured during the fiscal year. As in the past, nearly all will be for housing. This program will continue until 1965 for veterans of the Korean conflict.

Veterans who served in the Armed Forces during the period June 27, 1950, to January 31, 1955, are eligible for unemployment compensation under Federal law. These benefits are estimated at 118 million dollars in the fiscal year 1957.

Compensation and pensions. The most important elements in the continuing upward trend in expenditures for veterans' programs are compensation and pensions. Under existing legislation, significant increases in the cost of these direct payments may be anticipated annually until the end of this century, when payments may be twice their present yearly total of nearly 3 billion dollars. This long-term outlook arises chiefly from the very large number of veterans who may become entitled to pension benefits not connected with disabilities arising from their service.

In the fiscal year 1957, expenditures are estimated to increase 119 million dollars as a result of three factors. The largest is the increased number of pensions paid to veterans of World War I and their dependents. These pensions are non-serviceconnected benefits granted widows in financial need or needy veterans with disabilities which prevent them from following a substantially gainful occupation. Expenditures for these programs have doubled since 1950 and may double again in the next 5 years if the current trend continues.

Recently discharged veterans of the Korean conflict and of peacetime service who have service-connected disabilities are a second source of growth in compensation and pension expenditures. It is estimated that about 35,000 new cases will be added to the disability compensation rolls during the next fiscal year.

Third, under the pending legislation to provide old-age and survivors insurance benefits to survivors of military personnel, many widows and children now receiving veterans' benefits would be eligible for increased compensation payments. These increased benefits would be partially offset by decreased payments from the veterans' indemnity and insurance appropriations. In the fiscal year 1957, the net additional expenditures are estimated at 30 million dollars, but in subsequent years this amount is expected to be somewhat lower.

During the fiscal year 1957 almost 3 billion dollars of compensation and pensions will be paid to approximately 2.8 million veterans, plus the survivors of over 850,000 deceased veterans. More than 10 percent of the veterans of World War II will be receiving compensation payments totaling 1 billion dollars for service-connected disabilities. About 20 percent of the veterans of World War I will draw non-service-connected pensions in the fiscal year 1957. The possible trend is indicated by the fact that 85 percent of the living veterans of earlier wars will draw such pensions.

Hospitals and medical care.--Veterans' hospital and medical expenses will continue to rise through the fiscal year 1957 as the number of patients in Veterans Administration hospitals is expected to increase 1.4 percent over 1956 to a daily average of 111,500. Almost two-thirds of these hospital patients and most of the 17,000 veterans in Veterans Administration homes are receiving treatment for conditions which are not related to their military service.

Outpatient care, which is only for service-connected conditions, is expected to be somewhat below the levels of 1955 and 1956. The number of medical and dental examinations and treatments is estimated to be 2,398,000 in 1957, a decline of 20,000 from 1956•

I recommend the enactment of 53 million dollars of new authority to incur obligations for construction and improvements at Veterans Administration facilities. About one-half of this amount is for urgently needed replacement of a major part of one mental hospital and for preparation of architectural plans for replacement of four 500-bed general medical hospitals. The other half provides for additional modernization and improvement work at existing facilities.

Insurance and servicemen' s indemnities.--Budget expenditures under this heading are primarily for indemnities to survivors of servicemen who die during active duty and for reimbursements to the life insurance trust funds for claims traced to military hazards. These expenditures are estimated at 80 million dollars in the fiscal year 1957. This amount is substantially lower than in 1956, when a large number of insurance settlements were made for servicemen previously reported missing during hostilities in Korea.

Trust funds.--Insurance protection of over 38 billion dollars is provided through nearly 6 million national service and United States Government life insurance policies. The number of these policies in force has steadily declined, as issuance of additional insurance was ended in 1951. During the past calendar year, 25,000 policies matured and 319,000 were terminated.

Transactions of these trust funds are excluded from budget receipts and expenditures. For the fiscal year 1957, cash receipts will exceed disbursements on policies held by World War II veterans, while benefit payments will exceed premiums on insurance held by the older age groups. The net accumulation is reserved for future claims.

LABOR AND WELFARE

The labor and welfare programs of the Government contribute notably to the achievement of our objectives of greater human well-being and a growing economy. These programs are designed to promote individual opportunity and foster self-reliance by assisting in the improvement and protection of people's health, the promotion of education and research, the training and placement of workers, the rehabilitation of the disabled, and the provision of security against economic want.

Most of the labor, health, education, and welfare services are administered by the States and their subdivisions. In fact, four fifths of the 3 billion dollars of budget expenditures estimated for labor and welfare in the fiscal year 1957 is for grants to State and local governments. Outside the regular Federal budget, substantial benefits are provided through the social insurance and retirement trust funds.

Budget expenditures for labor and welfare in the fiscal year 1957 are an estimated 228 million dollars greater than in the current fiscal year, and 442 million dollars higher than actual expenditures in 1955. The increase in 1957 stems largely from my proposals to strengthen and expand education, health, and research services substantially. These budget recommendations will contribute greatly to the well-being of all our people, both through those activities which relate directly to individuals and families and those which operate indirectly through improved community services and private enterprise.

In some instances, legislation will be required. My legislative recommendations therefore include measures to authorize assistance to States for building schools, for promoting occupational safety, and for reducing juvenile delinquency; a broad program for improvement of the Nation's health; completion of the program of poliomyelitis immunization grants to States; continuance of the present Federal formula for grants for State public assistance payments, with adjustments for old-age insurance benefits in certain cases; and further expansion of coverage of the old-age and survivors insurance system.

Under existing laws, I am recommending increased appropriations directed mainly to the expansion of medical research, greater support for basic scientific research and training, enlargement of protective and preventive services in the fields of health and welfare, improvement of our labor and manpower services, and construction of hospitals and other necessary health and research facilities.

Labor and manpower.--Recently enacted legislation has resulted in substantial improvements in the economic safeguards for workers. Minimum wages set by Federal law have been raised from 75 cents to 1 dollar an hour, and coverage of the Federal-State unemployment compensation system has been extended to employees of small firms and of the Federal Government. This budget provides for the enforcement and administration of these improvements.

To improve economic safeguards further, I recommend that the Congress extend the protection of the minimum wage law to additional workers. The facilities of the executive branch will be available to assist the Congress in finding ways of achieving this goal. Legislation is also needed to raise benefits and provide more funds for rehabilitation under the federally administered Longshoremen's and Harbor Workers' Compensation Act. In addition, a system of benefits for workers who are temporarily disabled from nonoccupational causes should be established in the District of Columbia. This budget also provides for studies by the Department of Labor to assist the States in improving their workmen's compensation laws.

In addition to improved workmen's compensation, we need effective measures to advance occupational safety. Therefore, I recommend that the Congress enact a new program to provide technical aid and limited financial assistance to the States for promoting occupational safety.

The current high level of general prosperity spotlights the adverse economic plight of low-income rural areas and of urban areas with persistent unemployment. As part of governmentwide efforts to alleviate these problems, additional work will be done in the labor and manpower field. This will include the designation of areas eligible for special assistance, the provision of labor market information, and vocational advice for individuals.

The 1957 budget recommendations for grants for administration of the employment services and unemployment insurance provide for stepping up job counseling and testing in the public employment offices. For example, job counseling interviews will be increased from 1.6 million in the fiscal year 1956 to 2 million in 1957. These increased activities are aimed at better utilization of our labor force--with particular emphasis on placing the older and the handicapped workers in jobs most suitable for them. Procedures for taking and reviewing unemployment compensation claims will also be improved. In addition, the budget estimate covers increases by the State governments in salary rates for the State employees who administer this program.

The Federal payment to the unemployment trust fund is estimated at 81 million dollars in the fiscal year 1957. This is the part of the Federal unemployment tax collections during the fiscal year 1956 which it is estimated will not be used for the unemployment insurance and employment service program. Almost 50 million dollars of this payment will be used to complete a reserve of 200 million dollars available for loans to States which deplete their own reserves for benefit payments. About 32 million dollars will be credited to the unemployment trust accounts of the States.

During the current year significant improvements were authorized in our labor and manpower statistics programs. This budget provides, at minor additional cost, for further improvements, particularly in the consumer price index and in reports on labor turnover and current employment.

Public assistance and old-age and survivors insurance.--Grants to the States for old-age assistance and aid to dependent children, the blind, and the totally disabled are estimated at 1.5 billion dollars in the fiscal year 1957, the largest expenditure item in the welfare category of the Federal budget.

Our welfare policies have a twofold emphasis: To provide basic economic protection for older people and for widowed mothers and children through self-sustaining social insurance; and, where possible, to prevent need as well as to relieve it. My budget recommendations for both existing and proposed programs reflect this emphasis.

Old-age and survivors insurance--financed through a trust fund outside the regular budget--is now providing benefits at a rate of more than 5 billion dollars a year to more than 6 million persons over age 65 and to 1½ million mothers and children. The number of beneficiaries is growing. More than nine-tenths of all employed persons in the country are now insured. Legislation should be enacted to bring in the groups still excluded-for example, employees of the Federal Government.

For a large group of needy people not receiving OASI benefits, public assistance remains the only public resource. One out of every three people over 80 years of age is on the public assistance rolls, as compared with only about 1 in every 10 in the age group 65 to 69 which, for the most part, has the insurance protection. To avoid hardship to present public assistance recipients, I propose that the present formula for determining the Federal share of assistance payments be temporarily extended. This will allow time to reappraise the need for the present high level of the Federal contribution to public assistance as the effects of the recent strengthening of old-age and survivors insurance protection become more fully apparent. Meanwhile, to reflect the fact that more and more people are becoming eligible for old-age and survivors insurance benefits, I recommend legislation to fix at 50 percent the Federal share of supplementary old-age assistance payments by the States to beneficiaries of this insurance who are added to the assistance rolls after the fiscal year 1957.

The Federal Government should also do more to assist the States to adopt preventive measures which will reduce need and increase self-help among those who depend upon public welfare. Likewise, special provision should be made for improving medical care of public assistance recipients through legislation to permit separate Federal matching of State and local expenditures for this purpose.

Promotion of public health.--One of the most important goals of this administration is to assure continued progress in research, training, and provision of health facilities so that the medical professions can help the American people to enjoy better health. To this end I am proposing a substantial, yet orderly, expansion of our existing health services and new measures necessary to fill significant gaps in the Nation's programs for promoting good health.

I again urge the Congress to act favorably and promptly on recommendations made last year to provide mortgage insurance for the construction of health facilities, to train health personnel, to expand mental health programs, to abate water pollution, and to strengthen State and local public health services.

In addition, provision should be made to assist the extension and improvement of health insurance protection for our people. The Congress has taken no action on my legislative proposals to meet these objectives. The Secretary of Health, Education, and Welfare is working on plans whereby private insurance organizations generally may pool risks to cover abnormal losses possible under broader health plans, and, if necessary, appropriate permissive legislation will be recommended. Should this approach not be successful, a Federal reinsurance service should receive renewed consideration.

I recommend also that the Congress enact legislation to authorize Federal assistance for the construction of medical and dental research and teaching facilities. Expansion of these facilities is necessary to provide for a continuing increase in the medical research program of the Nation, and will help our hard-pressed medical and dental schools to provide better training for more students.

The law providing for a poliomyelitis immunization program, which was enacted last year, should be extended beyond its present expiration date of February 15, 1956. This budget includes, under proposed legislation for the fiscal year 1956, the necessary funds to complete the program of grants to assist States in the immunization of children and expectant mothers.

Special services are needed to promote the health of our Indian population and to assist the Territory of Alaska in dealing with the problem of mental health. I recommend legislation to authorize construction of sanitation facilities on certain Indian reservations and tribal lands. Legislation should be enacted also to transfer to the Territorial Government of Alaska responsibility for care of the mentally ill, with temporary Federal aid for building and operating treatment centers.

I recommend the transfer of Freedmen's Hospital to Howard University, with provision for construction of a new teaching hospital.

For health legislation proposals, the total of additional expenditures in the fiscal year 1957 is estimated at 44 million dollars.

Under presently existing legislation, budget expenditures for public health programs other than the poliomyelitis vaccination grants are estimated at 395 million dollars for the fiscal year 1957. A major increase of 24 million dollars is proposed for the research and training activities of the National Institutes of Health. Grants to States for construction of hospitals and other health facilities will increase by 18 million dollars, and the recommended appropriation will result in further increases in later years. As part of our policy of strengthening enforcement of the food and drug laws I am recommending a substantial increase for the Food and Drug Administration. In addition, I am recommending increased appropriations to attack the problem of air pollution; to expand grants to States for child welfare services; and to expand health services to Indians, including construction of three hospitals. These increases are partly offset by reduced construction expenditures, primarily for the District of Columbia hospital center.

Promotion of education.--The educational problems of the Nation are acute. School enrollments are growing. Classrooms are overcrowded. We do not have enough teachers.

Americans are demonstrating their increased concern with these problems by working together now, more than ever, in parent-teacher organizations and other citizen groups. Members of these groups--many of which participated in the recent White House Conference on Education--have stressed the need for measures by all levels of Government to improve our schools.

As a principle of our governmental system, we believe in State and local responsibility for public education. This means not only local direction of public schools but also local financial support augmented by the States. States and communities have made definite progress toward meeting our educational problems. They are reducing the classroom shortage by building an increasing number of schools each year. But we still lack more than 200,000 classrooms. In order to increase further the number of new buildings completed over the next 5 years, I propose that the Federal Government supplement the current efforts of the States and their subdivisions in financing public school construction.

In continued recognition of the special school enrollment problems created in many communities by military and civilian activities of the Federal Government, I am recommending extension for 2 years of the authority for providing assistance in paying for new school buildings in federally affected areas. Under present law no applications can be received after June 30, 1956. An additional appropriation of 88 million dollars for the fiscal year 1957 is recommended for the proposed extension. With the enactment of legislation to authorize general Federal assistance for school construction, the necessity for the further extension of special Federal aids for construction and for maintenance and operation in these school districts will require reconsideration.

The United States Office of Education, through its advisory services and its research and statistics, affords another channel whereby the Federal Government can aid in the improvement of our schools. I am recommending a substantial increase for the fiscal year 1957 in the budget of the Office, mostly for the new cooperative research program authorized by the Congress, which will assist the States in their efforts to deal effectively with educational problems.

An increase of 4 million dollars in estimated expenditures for the education and welfare of our Indian population will make it possible to complete the necessary staffing of schools and to increase the number of Indians relocated in urban areas.

General-purpose research, libraries, and museums.--Because of the direct importance of basic research to our defense program and our national welfare and economic progress, this budget proposes a substantial increase in Federal support of general-purpose research and education in the sciences. This increase is considered by our national security and scientific research agencies to be vitally necessary. Even with this added support, basic research will constitute less than 10 percent of the Government's annual investment in research and development.

For these reasons, I recommend that the appropriation for the regular activities of the National Science Foundation be substantially increased from 16 million dollars in the current fiscal year to 41 million dollars in the fiscal year 1957. This will enable the Foundation to extend an additional 13 million dollars of support to meritorious basic research projects in colleges and universities; will provide 7 million dollars for the construction of special-purpose facilities needed for basic scientific research, including the Nation's first major radio astronomy center; and will make available an additional 5 million dollars for expanding the Foundation's experimental program designed to improve science teaching in our schools and colleges and to encourage a greater number of able students to enter careers in science.

A supplemental appropriation for the Foundation of 28 million dollars will be required in the current year to complete financing of the United States program for the International Geophysical Year. The additional amount is mainly for the earth-circling satellite project, in which the Department of Defense is also participating.

Also fundamental to science is the work of the National Bureau of Standards. Increased expenditures of 4 million dollars are recommended in the fiscal year 1957 to strengthen research in the physical sciences and to p/an new buildings to replace present inadequate research facilities.

For the Bureau of the Census, I am recommending appropriations for collecting needed data on two important aspects of our national life. The census of governments will provide, for the first time since 1942, comprehensive financial information about the more than 100, 000 State and local government units. The national housing inventory will measure the significant changes in the Nation's housing supply which have taken place since 1950. Expenditures for the Census Bureau as a whole will decline, however, as work on the current censuses of agriculture, business, manufactures, and mineral industries draws to a conclusion.

In addition to necessary operating funds for the Smithsonian Institution, I am recommending an appropriation of 34 million dollars for the construction of a Museum of History and Technology authorized at the last session of the Congress. This museum, the first new Smithsonian building to be federally financed in more than 40 years, will permit for the first time an adequate permanent display of collections which now far exceed the capacity of existing buildings.

Correctional and penal institutions.--Construction of two new prison institutions is required to help ease overcrowded conditions in existing penitentiaries and to provide for youthful fenders and more adequate custody of the most dangerous and troublesome prisoners. These new facilities account for almost all of an 18-million-dollar increase over 1956 in appropriations requested for the Federal prison system.

Other welfare services.--The school lunch program is supported with surplus commodities as well as by regular appropriations. Increased efforts in the removal of agricultural surpluses are expected to result in a greater distribution of such foods to schools, reaching an estimated value of up to 130 million dollars in the current fiscal year. These increased efforts will continue in the fiscal year 1957. Additionally, the recommended direct appropriation of 83 million dollars for the school lunch program for the fiscal year 1957 will provide the same level of such expenditures as in 1955 and 1956.

This Nation still has hundreds of thousands of disabled citizens who should be restored to productive employment and thereby helped to achieve economic independence. This budget continues full support of the expanded State-Federal vocational rehabilitation program at a rate which will permit the States to continue enlarging their rehabilitation services as rapidly as their own funds permit.

Another growing social problem of concern to the entire Nation is juvenile delinquency. During the last 8 years there has been a 60-percent increase in the number of children appearing before our courts. The States and communities need technical assistance and financial aid to help them halt this trend. I therefore renew my request that Congress enact legislation promptly to authorize Federal aid to the States for strengthening their services for prevention and treatment of juvenile delinquency.

Social insurance and retirement trust funds.--Unemployment insurance, old-age and survivors insurance, railroad retirement, and Federal civilian employees' retirement are financed from trust funds, the transactions of which are not included in budgetary receipts and expenditures. The balances in the funds, now about 40 billion dollars, are invested in Government bonds.

Increased coverage in the old-age insurance program, increases in the interest paid to this trust fund, and improved coordination of income and old-age insurance tax collection procedures are recommended elsewhere in this message. The estimates of trust fund receipts and disbursements for the fiscal year 1957 do not reflect proposed legislation.

AGRICULTURE AND AGRICULTURAL RESOURCES

This budget carries forward the broad agricultural objectives that we have been striving to achieve through new legislation, redirection of emphasis, and improved administration during the past 3 years. It provides for the strengthened agricultural program which I proposed in my recent special message to the Congress.

Thus, this budget permits an intensification of our efforts to aid farmers in making the difficult readjustment from the abnormal situation of the war and postwar period to a realistic peacetime outlook for markets, so that they may share more equitably in the prosperity which other sectors of the economy are now enjoying. It also provides for continued emphasis on research and educational activities and on soil and water conservation, and for an enlarged program to help low-income farmers improve their situation.

Gross budget expenditures for agricultural programs are estimated at 9.1 billion dollars in 1957. These expenditures include loans made and commodities purchased by the public enterprise agencies in the Department of Agriculture and the Farm Credit Administration. Receipts from agricultural programs, which reflect loan repayments and commodity sales of these public enterprise agencies, are estimated at 5.7 billion dollars in 1957. The resulting estimate of net budget expenditures is 3.4 billion dollars, about the same as estimated for 1956.

New authority to incur obligations of 2.9 billion dollars is recommended for the fiscal year 1957, as compared with 3.3 billion dollars in 1956. Excluding the Commodity Credit Corporation, new authority to incur obligations for agricultural programs will be 621 million dollars higher in 1957 than in 1956.

Most of the increases are for the new measures which were set forth in detail in my recent special message on agriculture. New authority to incur obligations of 450 million dollars is included under proposed legislation primarily for that part of the program dealing with the soil bank. This includes an acreage reserve to reduce current and accumulated surpluses of crops in most serious difficulty, and a conservation reserve to achieve other needed adjustments in the use of agricultural resources. In addition to reducing production of surplus crops and shifting land to more desirable uses, it will aid farmers in financing the transition to a farming pattern appropriate for today's markets.

The budget also provides funds for other measures recommended in the special message. These measures are mainly for strengthening and redirecting existing programs. They include stepped-up purchasing and distribution of perishable commodities which are temporarily in excess supply; a strengthened program for disposal of surplus stocks of staple commodities; a strengthened rural development and credit program for low income farm families; additional research emphasizing both lower costs of production and new products and markets; and the program for farm improvement and better land use in the Great Plains States.

I am also recommending new legislation to permit refunds to farmers of Federal taxes on gasoline used in their farm operations. It is estimated that tax refunds to farmers under this legislation will amount to 60 million dollars in 1957.

Taken together my new proposals will entail new outlays of 500 million dollars in the fiscal year 1957.

Stabilization of farm prices and farm income.--Programs to stabilize farm prices and farm income account for over 60 percent of the estimated gross budget expenditures for agriculture and agricultural resources in the fiscal year 1957. The principal part of these expenditures is for the price support operations of the Commodity Credit Corporation. Gross expenditures for these operations, reflecting new price support loans and purchases of commodities during the year, are estimated at 5.1 billion dollars. Applicable receipts from repaid loans and sales of commodities will amount to 3.5 billion dollars, leaving net expenditures of 1.6 billion dollars. In recent years receipts have been substantially less than new outlays, and inventories of the Commodity Credit Corporation have been rising steeply. On October 31, 1955, CCC loans and commodity inventories amounted to 7.7 billion dollars as compared with 6.6 billion dollars a year earlier.

Government support of farm prices above world prices under programs which were attuned to war and were too long continued has been a major cause of the present accumulation of farm surpluses. These now overhang the market and create uncertainty and great concern on the part of the producers. World War II, with its terrible losses and destruction, enabled the liquidation of our prewar surpluses, and the Korean conflict helped to liquidate those that accumulated after the end of World War II. But the sharp rise of world prices during these war periods, together with our high rigid price supports, encouraged expansion of production throughout the world.

The chief domestic beneficiaries of our price support policies in the past have been the 2 million large highly mechanized farming units representing about 35 percent of our farms but producing about 85 percent of our agricultural products. Under the price support program that has been functioning the greater proportion of the dollars go to the largest producers; in the case of wheat, for example, approximately three-fourths of the loan dollars go to one-third of the borrowers. Individual cotton loans in excess of 1 million dollars have been made.

We should today resist new efforts to have the Government restore high rigid price supports which would aggravate the problem. The Agricultural Act of 1954 and the new programs recommended in my special agricultural message are designed to make a broad frontal attack on the surplus problem without repeating our previous mistakes of stimulating production beyond available markets and thus piling up price-depressing surpluses.

In contrast to expenditures, the price support operations of the Commodity Credit Corporation should be reviewed from the standpoint of losses actually sustained in the disposition of commodities. In the main, these losses represent the difference between commodity acquisition and storage costs on the one hand, and receipts from sale of the same commodities on the other. Since the commodities usually are not sold in the same fiscal year in which they are acquired, realized losses for a year are not the same as the net expenditures for that year. In the fiscal year 1955, realized losses amounted to approximately 800 million dollars, of which more than one-half were losses on dairy products. Estimated future losses on the loans and .commodity inventories the Corporation held at the end of that year are 2.4 billion dollars, of which about two-thirds represent anticipated losses on corn and wheat.

As a nation, we have in the past and, if necessary, will in the future provide substantial sums of money as a part of our efforts to have farmers share more fully in the prosperity of the country. But farmers know that Government money alone will not do the job. Furthermore, farmers do not want to be dependent on Government assistance. They want the opportunity to obtain a better living standard for their families through their own efforts. The Government's responsibility is to help create the conditions in which farmers can have this opportunity.

We intend to continue our vigorous efforts to find markets at home and abroad for our present surpluses of farm commodities.

The Agricultural Trade Development and Assistance Act of 1954 was amended in the past session of the Congress to permit an increase from 700 million dollars to 1.5 billion dollars in the amount of loss that the Corporation might incur in sales of commodities for foreign currencies. Agreements negotiated up to December 31, 1955, under this law provide for disposition of commodities worth 504 million dollars at market value, which in many cases is substantially below amounts paid the farmers. The actual loss cannot be calculated until the foreign currencies are used. Additional agreements which may amount to as much as 385 million dollars are under negotiation.

The International Wheat Agreement, a multilateral agreement between wheat importing and wheat exporting countries of which the United States is a member, expires on July 31, 1956. The desirability of extending this agreement is under study and a determination will be made at a later date. This budget assumes that wheat exports during the 1956-57 marketing year will total about 275 million bushels and that most of this wheat will move at world prices under federally assisted programs.

Expenditures under the permanent appropriation for the disposal of Surplus agricultural commodities are expected to be substantially higher in the fiscal years 1956 and 1957 than in 1955, consistent with our determination to stand ready with purchase programs to remove temporary market gluts whenever serious ones occur, and to utilize effectively the surplus commodities acquired. Our present pork buying program, which was started in November of last year, is an example.

While our special efforts to expand exports and our increased purchases of perishable commodities have an important place in our overall agricultural program, they should not be expected to take the place of vigorous competition for markets, based on price and production adjustments. My recommendations for new legislation, increased research and education, and the further operation of the Agricultural Act of 1954 will all contribute to this first line of attack on the agricultural surplus problem.

Rural electrification, rural telephones, and farm credit.--The budget recommendations for the Rural Electrification Administration represent a continuation of our policy of making loans available to meet the farmers' needs for electrification and telephones. The budget provides for approval of loans for electrification in the amount of 185 million dollars in 1957, which is the same as that for 1956 and 20 million dollars higher than in 1955. It also provides for approval of loans for rural telephones in the amount of 80 million dollars, the same as for 1956, and 27 million dollars higher than for 1955. Disbursements on loans and expenditures for administration for both programs are estimated at 239 million dollars, 16 million more than in 1956.

The total of Farmers' Home Administration direct and insured loans is expected to approach 260 million dollars in 1957 as compared with 193 million dollars in 1955. A substantial part of this expansion is in insured private loans, which are not reflected in budget expenditures. Legislation will be proposed to broaden the authority under the Bankhead-Jones Farm Tenant Act to permit the Farmers' Home Administration to make certain loans for farm housing previously possible only under title V of the Housing Act of 1949, as amended. With this change, further extension of the authority for farm housing loans under title V beyond its present termination date of June 30, 1956, will not be necessary.

Several agencies will increase their participation in the Rural Development Program that I recommended in my special message during the past session of the Congress. This program will be conducted broadly as well as in selected counties, and will involve special educational work by the cooperative Federal-State Extension Service, research on farming and marketing problems of low-income farmers by Federal and State agencies, and assistance in providing employment information by the Department of Labor. To assure adequate funds and to permit broader coverage in the financing of small farms, I am recommending an additional 15 million dollars of lending authority for the Farmers' Home Administration under proposed legislation.

Consistent with our policy of withdrawing the Federal Government from activities that can more properly be carried on privately, legislation was recommended and enacted last year providing for systematic retirement of the Federal investment in the banks for cooperatives which are supervised by the Farm Credit Administration. Although the effect of this legislation on the budget will be small, it is expected that farmers through their cooperatives will be able to acquire, over a period of years, the present equity of the Federal Government in these credit institutions.

Agricultural land and water resources.--My recommendations for agricultural land and water resources for the fiscal year 1957 are an integral part of a broad program designed to give additional emphasis to conservation of our natural resources. They provide for an increase in the regular services of the Soil Conservation Service and for the expected growth in the relatively new watershed protection and flood prevention program. The soil bank program proposed in my special agricultural message will contribute also to our conservation objectives.

Expenditures under the existing agricultural conservation program assist farmers in applying soil conservation practices and in making proper use of land diverted from the production of surplus crops. Payments to farmers in the fiscal year 1957 will be principally to cover the cost of the program carried out for the crop year 1956, as authorized in the 1956 appropriation act. I recommend a forward authorization of 250 million dollars for the 1957 crop year agricultural conservation program--the same level as for 1956.

Research and other agricultural services.--My budget recommendations provide for further expansion of research, mainly in cooperation with State agencies. Additional funds requested for educational activities will permit greater concentration of effort on direct counseling of individual farmers in the development of programs for their entire farms; also, on the educational phases of our Rural Development Program for low-income families.

The budget includes funds for the recommendations on research and education in my special message on agriculture. The seriousness of the production adjustment and income problems of American agriculture arising from increased production at home and abroad and from declining prices of major agricultural commodities requires that we materially strengthen selected areas of research in agriculture.

NATURAL RESOURCES

Resource development is the responsibility of everyone. In many cases State, local, and private groups can best carry out needed programs themselves. In other cases, Federal participation is the necessary element in accomplishing broad national aims, where projects are beyond the means or needs of local groups. Under the partnership policy of this administration, emphasis is placed on sharing the cost of projects with the groups which receive direct benefits from them. This approach serves to multiply the effect of Federal expenditures in the stimulation of conservation and development. The recommendations in this budget will result in further advances toward 'our broad goal of a steadily growing program for resource development through the cooperative efforts of States, local communities, private citizens, and the Federal Government.

The importance of the partnership policy in the development of water resources is being emphasized in a report of the Advisory Committee on Water Resources Policy. This report will also stress the need for strengthening our procedure for the formulation and review of proposed water resources projects. Some of the Advisory Committee's recommendations will require changes in existing law, and specific legislative proposals will be transmitted to the Congress.

Budget expenditures for natural resources programs in the fiscal year 1957 are estimated at 1 billion dollars, about the same level as in 1956. Programs for flood control, reclamation, and multiple-purpose water resources development will expand over the 1956 levels and will require about 60 percent of the net expenditures in 1957. The management and development of the national forests, parks, public domain lands, and Indian lands will require about 25 percent of the total. The remainder will be for minerals programs, fish and wildlife resources, and other developmental activities.

In addition to their economic returns, many resource development programs yield financial receipts. These receipts come mostly from sale of power generated at Government facilities, sale of timber from national forests and public lands, and mineral leases on public lands including the Outer Continental Shelf. Some of the receipts are used to finance current operations and are applied against the gross expenditures of the agency; these are estimated at 266 million dollars in the fiscal year 1957. Other receipts, estimated at 544 million dollars in 1957, are deposited directly in the Treasury, and are then shared with States and counties as authorized by the Congress, appropriated for specific Federal programs, or added to the general revenues of the Government.

Land and water resources.--The policies underlying recommendations for water and related land resources in this and other sections of the budget are intended to help provide an adequate water supply for our people in the years to come and to aid in checking destructive forces of water, as well as to achieve the benefits for navigation, fish and wildlife conservation, and recreation resulting from the proper development of these resources.

A large share of the net expenditures of 690 million dollars for land and water resources in 1957 will be for continuation or completion of construction on water resources projects of the Corps of Engineers and Bureau of Reclamation, and for maintenance and operation of existing facilities.

These agencies will continue construction in 1957 on 187 projects and units for flood control, beach erosion control, irrigation, and multiple-purpose developments which will provide such additional benefits as hydroelectric power, municipal water supply, or navigation. Funds recommended for these projects will maintain present construction schedules on power projects and will continue nonpower projects at economic rates of construction. Under the recommendations in this budget, 10 of these projects and units can be completed.

In accordance with the policy of encouraging non-Federal responsibility for water resources projects, with Federal cooperation where national interests are involved, I have supported legislation which would change certain presently authorized Federal projects to partnership projects. Funds for the Federal share of the Markham Ferry project in Oklahoma were appropriated for the fiscal year 1956, and construction by non-Federal interests of this project and the Priest Rapids project in Washington is expected to be underway in the fiscal year 1957. Work on the Cougar multiple-purpose project in Oregon, begun as a Federal project in the fiscal year 1956, will continue in 1957 on a basis which, under pending partnership legislation, will permit local interests to install power facilities and assure adaptation of the power features to requirements of the city of Eugene.

This budget provides for starting construction on a number of new projects which are already authorized and on which advance planning has reached the stage where the design and scope of the major structures have been clearly determined, a firm estimate of cost has been prepared, and a current analysis of economic justification shows a favorable relationship between benefits and costs.

A supplemental appropriation is recommended for 1956 to enable the Corps of Engineers to accelerate its flood-control work in the Northeastern States and to reimburse the Corps for expenditures made for relief work following the floods in August and October 1955. The supplemental appropriation will allow 5 flood-control reservoirs to be started in the fiscal year 1956. Additional flood-control projects for this area are included in the budget for 1957.

The Corps of Engineers is also actively engaged in emergency repair work, in cooperation with the Federal Civil Defense Administration, in the far western flood areas, and will be appraising without delay the need for additional flood-protection measures.

For the fiscal year 1957, I recommend that the Corps of Engineers start work on 18 local flood-protection projects, 11 floodcontrol reservoirs, 2 beach erosion projects, and a new power plant at the Fort Peck Dam in Montana, all of which are authorized. I also recommend that the Bureau of Reclamation start work on 4 authorized projects or major features to provide irrigation benefits and to utilize available power at existing dams. The total cost of these authorized projects recommended for starting in the fiscal year 1957 is estimated at 189 million dollars, with first year expenditures of 10 million dollars.

Some steps have been taken by the Congress to enact legislation authorizing the Bureau of Reclamation to construct the Upper Colorado River Basin and the Fryingpan-Arkansas developments. These comprehensive developments are needed for irrigation, power, flood control, and industrial and municipal water supply and are beyond the capacity of local initiative, public or private. I again urge their authorization and have made provision in this budget under proposed legislation for their initiation. I also recommend authorization and funds for the Bureau of Reclamation to initiate 3 other projects for further development of water resources in the West. The estimated total cost of the 5 proposed projects is 1.1 billion dollars, with 1957 expenditures estimated at 9 million dollars.

This budget includes 20 million dollars under proposed legislation to enable the Corps of Engineers and the Bureau of Reclamation to participate, in 1957, in new partnership water developments, such as the Green Peter-White Bridge Reservoir in Oregon, the Bruces Eddy Reservoir in Idaho, and the John Day Reservoir in Washington and Oregon. The proposed legislation would also authorize the Bureau of Reclamation to assist local organizations by means of loans and grants for small reclamation projects.

Budget recommendations provide for progress in the collection of basic data on hydrology, topography, and other physical factors needed in the planning and design of water development projects. Investigations of proposed projects and advance planning of authorized projects will go forward at rates which will provide for the orderly development of needed water resources.

I also hope that the Congress will complete action to authorize a new survey to determine whether hydroelectric power can be economically developed from the tides at Passamaquoddy Bay in Maine, and have included 1 million dollars under proposed legislation to begin this survey in the fiscal year 1957.

The Bonneville Power Administration will continue construction of transmission lines based on power generation schedules for Federal dams under construction in the Pacific Northwest. Expenditures of the Southeastern and Southwestern Power Administrations will be for operation and maintenance of transmission systems and for marketing power.

The Tennessee Valley Authority will continue wore in the fiscal year 1957 on steam-electric generation units started in 1955 and prior years, under previous appropriations.

Since nearly all major hydroelectric sites in the Tennessee Valley have now been developed, an additional steam-electric unit at the John Sevier plant and two additional units at the Johnsonville plant will be needed to meet currently anticipated power loads through the calendar year 1958. There is pending before the Congress legislation which the administration has proposed for financing steam-power facilities of the TVA through the sale of revenue bonds. So that the work may begin promptly, a starting supplemental appropriation for 1956 is recommended for the Sevier unit. Items are included in the budget to finance the continuation of this work and initiate construction of the Johnsonville units in 1957 with the proceeds of the revenue bonds.

When these new units are completed, the Tennessee Valley Authority will have a capacity of 6.7 million kilowatts in its steam-electric plants and 2.7 million kilowatts in its hydroelectric plants.

Construction will also begin in the fiscal year 1957 on a new navigation lock at Wilson Dam. The present locks are structurally weak and inadequate to handle growing traffic demands. The construction will be financed from appropriated funds. The TVA will also continue work in the development of the resources of the region in cooperation with State and local agencies.

Under these recommendations, gross expenditures of the Tennessee Valley Authority in the fiscal year 1957 are estimated to decline by 57 million dollars from the 1956 level, as construction nears completion on power facilities underway. Receipts from operation are expected to increase by 9 million dollars. As a result of these trends, it is estimated that the Authority will have net receipts of 27 million dollars in 1957 as compared with net expenditures of 39 million .dollars in 1956. It is expected that in 1957 the TVA will return to the Treasury 75 million dollars from power revenues as repayment of principal only on Treasury advances made in earlier years for construction of power facilities.

National forests and other public lands.--Funds are provided in this budget to expand forestry research and soil conservation work on the lands in the national forests, public domain, national parks and wildlife refuges, and on Indian lands which are held in trust by the Government. Increases are also provided for timber sales and mineral leasing activities on Federal and Indian lands. These recommendations will result in increased receipts from management of public lands.

The recommendations for the National Park Service will provide additional facilities and services to meet more adequately the requirements of the constantly increasing number of visitors, which will approximate 54 million in 1957. These recommendations move toward realization of a comprehensive development plan to make possible the accommodation of the estimated 80 million persons who will use areas of the national park system by 1966.

Increases are recommended for more adequate operation and maintenance of fish hatcheries and wildlife refuges, and for maintenance and repair of physical facilities of the Bureau of Indian Affairs.

Mineral resources.--This budget gives recognition to the recommendations of the Cabinet Committee on Minerals Policy. The Bureau of Mines and the Geological Survey will expand investigations and research directed toward discovery of additional sources of essential minerals, improvement of mining techniques, and better utilization of mineral supplies. Funds are provided for the Office of Minerals Mobilization to continue to develop and evaluate supply data for metals and minerals so that adequate supplies and production facilities will be assured for our national security and economic growth.

COMMERCE AND HOUSING

The major role of commerce and housing programs is to encourage economic growth and the development of private enterprise and local communities.

Toward this goal, I am proposing both legislative action and increased appropriations to improve and expand our basic transportation facilities, especially the Interstate Highway System, the Federal airway system, the federally operated waterways and navigation aids, and the merchant fleet.

Similarly, to assure continued high levels of residential construction we shall encourage private financing primarily through the use of Government guaranties, insurance and other aids. As in the past, direct Government expenditures will be confined to meeting those housing and community needs which cannot be financed by private enterprise alone. Accordingly, to stimulate balanced development of local communities, this budget makes further proposals for removal and prevention of slums, for housing for minority groups and for older people, and for other special community needs. It also provides for new measures to aid local communities with persistent unemployment in discovering a sound basis for redevelopment, and to help victims of future flood disasters rehabilitate themselves.

Gross expenditures for commerce and housing, including proposed legislation, are estimated at 6.3 billion dollars in the fiscal year 1957. Applicable receipts, chiefly for the Post Office and for various housing programs, are estimated at 4.2 billion dollars. Net budget expenditures of 2.1 billion dollars will be less than in 1956 because of the increases in postal rates which I am again proposing.

Highways.--Obviously, a greatly improved highway system is vital for both economic development and national defense, as well as to reduce traffic deaths and injuries. The Federal Government has a special interest in completing as early as possible the 40,000 miles of the Interstate Highway System, which connects major centers of population and industry. Last February in a special message to the Congress I endorsed the recommendation of an advisory committee that the Federal Government assume the principal responsibility for financing completion of this key highway network. This program is even more urgently needed today.

I consider it essential that construction of the interstate system be fully authorized now as a single integrated program in order that it may be accomplished over a period of approximately 10 years with the greatest economy. I am confident that the expanded program can be soundly financed so as not to create budget deficits.

Pending final determination of the amounts involved for the Interstate Highway System, therefore, the dollar estimates included in this budget under proposed legislation cover only the continuance of the present annual level of 875 million dollars in authorizations for Federal-aid highways including 175 million dollars exclusively for the interstate system. The budget also includes 22.5 million dollars for forest highways, continuing the present level.

Expenditures for highways by the Department of Commerce and the Department of the Interior under previous authorizations will continue to rise to an estimated 844 million dollars in 1957. These include additional grants under a supplemental authorization of 10 million dollars which I am proposing for the fiscal year 1956 in order to rebuild Federal-aid highways damaged in last year's widespread floods.

Promotion of aviation.--During the past 5 years, the rapidly expanding use of the Federal airway system and the increasing speeds of both conventionally powered planes and military jet aircraft have produced serious traffic congestion. To maintain our high standards of safety, aircraft have had to be delayed or flights canceled, with a resulting heavy cost in time and money to both the operators and users of the planes.

As a step in meeting the immediate problem, I am recommending new authority to incur obligations of 40 million dollars in 1957. This will enable the Department of Commerce to expand further the capacity of the present airway system by installing greatly improved air navigation and traffic control facilities.

To keep pace with further advances in aviation, I shall shortly initiate a comprehensive study of the Nation's long-range needs for aviation facilities. This study will take into account both civil and military needs in order to avoid costly duplication of equipment and systems. I shall expect it to point the way to the development, installation and operation of the most efficient and economical air navigation system within the capabilities of our technology.

In addition to the expenditures to expand the capacity of the airway system, expenditures for operating the present airway system must rise substantially to handle the expanding traffic, to operate new facilities provided under earlier appropriations, and to take over from the Department of Defense the costs of operating certain radar installations serving common military-civilian needs. Federal grants to help local communities build airports are also increasing as a result of the legislation enacted last year. In total, expenditures of the Civil Aeronautics Administration will rise by an estimated 50 million dollars to 200 million dollars in the fiscal year 1957.

Subsidy payments by the Civil Aeronautics Board to commercial airlines will again be reduced in the fiscal year 1957 as a result of rising profits of the carriers and continued vigilance of the Board in keeping subsidy rates at the lowest possible level. These subsidies amounted to 58 million dollars in the fiscal year 1955 and are estimated at 34 million dollars in 1957.

The research achievements of the National Advisory Committee for Aeronautics are making possible significant advances in the capabilities of our military aircraft and guided missiles. However, increased effort is needed for timely solution of the problems of flight at faster speeds, higher altitudes, and longer ranges. Accordingly, I am again recommending an increase in the appropriations for this important work.

Promotion of water transportation.--The Department of Commerce and the shipping industry have begun systematic replacement of the merchant fleet built during World War II. Negotiations are now underway with the operators to advance their ship construction plans and to determine replacement schedules for the next 15 to 20 years. Three long-term contracts have already been signed. The program is designed to (1) assure a modern merchant fleet adequate for commercial and defense needs, (2) maintain the shipyard employment and facilities which are essential to our mobilization base, and (3) minimize construction costs by avoiding peak demands. As next year's installment, I am recommending the funds necessary for construction subsidies and defense allowances for 22 new ships, as well as trade-in allowances for the ships replaced. In addition, this budget proposes appropriations for the design and construction of two new types of cargo ships--types which could be produced cheaply and in quantity in event of mobilization.

I am renewing for the fiscal year 1956 my earlier recommendation for a supplemental appropriation of 13 million dollars for the Commerce Department's share of a nuclear-powered peace ship, to be built jointly with the Atomic Energy Commission. Work on this ship should go forward as rapidly as possible. Moreover, funds are included in the budget for a nuclear-powered merchant ship, to be built over a longer period, incorporating experience gained from the peace ship and from later research and development.

To finance construction of both conventional and nuclearpowered ships, I am recommending new authority to incur obligations for the Department of Commerce of 165 million dollars in the fiscal year 1957. Because of the long lead-time required for ship construction, only a small part of this new authority will be spent in 1957 ; the anticipated expenditures of 75 million dollars are mainly from appropriations made for ship construction in earlier years. Operating subsidy payments of, 124 million dollars in 1957 are estimated to cover the differences in selected costs between operating American-flag and foreign ships.

Expenditures for navigation aids and facilities are rising as projects recently initiated reach active construction phases. In addition to providing for continuation of work by the Corps of Engineers on 61, projects started in prior years, this budget includes funds for starting 41 new authorized navigation projects including 28 small projects costing less than 150,000 dollars each.

Funds were added by the Congress to the 1956 budget to begin construction of Eufaula Reservoir and Dardanelle lock and dam. This would, in effect, commit the Federal Government to a cost of over 1 billion dollars for the development of the Arkansas River for navigation, since the major benefits from these two structures would not be realized until the entire navigation development is completed. I regard the development of the Arkansas River for navigation as not being of sufficiently high priority at this time to justify this large financial commitment. Therefore, I am not requesting funds for continuation of work on these two structures.

Postal service.--The Post Office Department is progressing steadily toward its goal of a better postal service at lower costs. Decentralization of management into 15 regions, first recommended in 1908, has finally been accomplished, permitting decisions by experienced field personnel able to understand the needs of their customers. Changes in laws and personnel policies have encouraged better use of staff and brought new incentives for employee efficiency. Overhaul of the Department's fiscal operations has eliminated nearly 5,000 needless positions, speeded up information required for good management, and reduced backlogs of all types, including a 2-year backlog in overdue railroad and airline claims. We have begun to acquire, through longterm leases and the recently enacted lease-purchase authority, modern postal buildings and other facilities long needed to speed up and reduce the cost of handling the ever-increasing volume of mail.

Despite these achievements, the Post Office Department cannot be self-sustaining if it pays salaries, transportation rates, and other costs based upon 1956 conditions, but must continue to charge rates which were largely determined before Pearl Harbor. The postal deficit of 467 million dollars estimated for the fiscal year 1957 represents a subsidy averaging more than 15 cents per dollar of postal service. Legislation is again being proposed that would initially increase postal revenues by 350 million dollars a year. Legislation is also being proposed to pay the Department for services to certain groups which it is now required to perform either free or at greatly reduced rates.

I urge prompt congressional action on this legislation, which will drastically reduce the 1957 postal deficit and will make it possible for the postal service to become self-supporting in subsequent years.

Community development and facilities.--The great population growth in the past 15 years and the accompanying shifts-from farms to cities, from rural communities to metropolitan areas, and from central cities to suburbs--have accelerated the decay of large sections of our major cities, and caused many metropolitan areas and small towns to outgrow their basic facilities.

With the help of Federal grants and loans for slum clearance and urban renewal, major progress in removing urban blight is in sight for the first time. - By the end of the fiscal year 1957, an estimated 233 communities will have workable plans providing for a wide range of local actions needed to prevent or eliminate slums. Such plans are now required as a condition of Federal assistance for urban renewal. In these and other cities 49 specific projects will have been completed by the end of 1957; 237 other redevelopment projects will be actively underway; and 112 projects will be in the planning stage. Net expenditures, chiefly for grants and loans, will increase to 74 million dollars; these include the additional grants for community planning by metropolitan areas and smaller cities under legislation that will be proposed to increase the present limited program.

Substantial increases are also expected in the fiscal year 1957 in loans to small communities for building public facilities and in advances to local governments for planning public works. Additional appropriations for planning advances are recommended for 1957.

As part of the new program to assist in the industrial redevelopment of chronic labor surplus areas, I am proposing revisions in the present urban renewal and other community facilities legislation. The main emphasis in these programs, however, should continue to be improvement of the homes and living environment of our families.

Public housing.--Continued Federal assistance for low-rent public housing will be necessary in 1957 to meet the most critical needs of low-income families. An increasing number of such families will be displaced by the clearance of slums and by the enforcement of housing codes under the growing urban renewal program. I am, consequently, recommending that the Public Housing Administration be authorized to enter into annual contributions contracts with local housing authorities for an additional 35,000 dwelling units a year for 2 years. In addition, I urge that the Congress restore the provisions of the Housing Act of 1954, repealed in 1955, which limited new public housing to communities with workable programs for the prevention and elimination of slums, or with slum clearance projects underway.

As the number of older people in our population has increased, action to meet their special housing needs has become highly important. Several administrative steps have already been taken in the public housing program. In addition, legal restrictions on admission to public housing projects should be amended to provide a limited preference to elderly low-income families, as well as to permit admission of elderly single persons.

Gross expenditures-for public housing programs, chiefly for construction loans and payment of annual contributions to local housing authorities, are estimated at 598 million dollars in 1957. Receipts, mostly from private refinancing of Federal loans, are estimated at 515 million dollars, leaving net expenditures of 83 million dollars.

Other aids to housing.--Applications for insurance of mortgages and home improvement loans by the Federal Housing Administration under its regular programs are expected to continue in the fiscal years 1956 and 1957 close to the 1955 levels. In addition, applications for the special urban renewal mortgage insurance authorized by the Housing Act of 1954 are expected to rise from less than 2,000 units in 1955 to 75,000 units in 1957.

To make this full program possible, legislation will be required to increase the present mortgage insurance authority. The authority to insure home improvement loans, now scheduled to expire on September 30, 1956, should be made permanent and broadened to assure effective Federal assistance in the national campaign to rehabilitate and modernize existing housing. Amendments are also needed to encourage construction of private units for rental or sale to elderly persons.

The Department of Defense expects to arrange for financing and construction of 100,000 military housing units during 1956 and 1957 under new mortgage insurance authorized by the Housing Amendments of 1955. This insurance authority should be extended beyond the present expiration date of September 30, 1956.

The Federal National Mortgage Association will make commitments for immediate or deferred purchases of 423 million dollars in mortgages insured under the urban renewal, armed services, cooperative, and other especially urgent housing programs which I have specifically designated. Sales of mortgages together with repayments and other receipts, however, are expected to be 255 million dollars greater than expenditures.

In addition, purchases of mortgages by the Association under its secondary market program are expected to increase in 1957 to 290 million dollars. Except for temporary Treasury loans, the funds required will be obtained from sale of debentures and stock to private investors, and the purchases are shown as trust expenditures, rather than budget expenditures. By the end of the fiscal year 1957, private purchases of stock will have made an excellent start toward the goal of replacing a Government activity with a private company.

One of the most successful measures authorized by the Housing Act of 1954 is the Voluntary Home Mortgage Credit Program. Under this program, applications to the Veterans Administration for direct loans and to the Federal National Mortgage Association for mortgage purchases are referred to private lenders. This program has already made conspicuous achievements in encouraging private financing of housing for members of minority groups and other borrowers in credit-short areas. Moreover, the rapidly increasing volume of veterans housing mortgages placed privately has made it unnecessary to use a large part of the additional authority provided for direct housing loans. Net expenditures for the veterans loan program, consequently, are expected to show only a minor increase to 71 million dollars in the fiscal year 1957.

College housing.--The Housing Amendments of 1955, which broadened and increased the authority for college housing loans, also reduced the maximum interest rate to 2 3/4 percent and required use of private financing only if it were available at the same low interest rate. As a result, the Government is required to make long-term loans at a lower interest rate than the rate at which it can borrow for comparable maturities.

These amendments have eliminated all possibility of private financing, which cannot compete with these interest rates, save for the earliest maturities of tax-exempt issues. Many larger institutions, which previously obtained private funds at reasonable rates, have now filed applications for Government loans. Net reservations of funds are estimated to increase from 21 million dollars in 1955 to 211 million dollars in 1956 and 120 million dollars in 1957, exhausting the available lending authority. Most of the impact on expenditures will not be felt until 1958.

The Federal Government should help colleges and universities meet the urgent housing problems which rapid growth in enrollment will produce over the next decade. The program, as revised in 1955, however, does not serve the best interests of either the colleges or the taxpayers. For the sake of a modest saving in interest costs, it would destroy the promising private market for these obligations. This private market will be sorely needed, for the Government cannot be expected to supply the full or even the greater part of the estimated 2 to 4 billion dollars needed for dormitories over the next decade. The administration is accordingly recommending legislation which will increase the total authorization by 100 million dollars for 1957, but allow interest rates adequate to cover costs to the Government. I hope that this will encourage private lenders to reenter this expanding market.

Other aids to business--present programs.--In addition to other appropriations required to finance the broad range of existing aids to business, I am recommending increased appropriations for the Patent Office in the Department of Commerce to begin a systematic 8-year program that would reduce the backlog of patent applications to a more reasonable level. I believe that the Congress should also enact legislation increasing patent fees so that the Patent Office can be more nearly self-supporting.

Through the Small Business Administration, we shall continue to help small business concerns 'obtain access to adequate financing, to a fair share of Government procurement, and to competent counsel on management, production, and marketing problems.

I also recommend improvements in construction statistics so that more accurate data can be supplied to business, labor, and government on major changes in this vital industry.

Area redevelopment.--All of us are greatly concerned because certain chronic labor surplus areas are not sharing in our general prosperity. The primary responsibility for promoting the economic redevelopment of these areas rests with the local community and the States. However, I believe that the Federal Government should give much broader assistance than is possible under present law. Accordingly, the administration is recommending new legislation authorizing Federal loans and grants, in cooperation with the States, to assist communities suffering from substantial and persistent unemployment. Under this program the Secretary of Commerce would take the lead for the Federal Government, utilizing also the facilities of the Department of Labor, the Housing and Home Finance Agency, and other interested agencies.

Regulation of commerce and finance.--As our economy grows and becomes more complex, the responsibilities of Federal agencies regulating business also increase. While the amount of money required to finance these agencies is relatively small, their influence on economic growth is very significant. In this budget I am recommending increased appropriations to strengthen every major regulatory program, including specific increases to (1) triple the staff of the Federal Trade Commission charged with enforcing controls over corporate mergers; (2) assure effective review by the Department of Justice of possible antitrust aspects of the newly authorized interstate compacts for the conservation of oil and gas; (3) provide for more adequate review by the Securities and Exchange Commission of the vast new capital offerings and the increased trading in securities; and (4) improve enforcement by the Interstate Commerce Commission of motor carrier regulations and assure better compliance with safety regulations.

To continue the export controls necessary for our national security, the existing legislation should be extended.

Disaster insurance, loans, and relief.--The flood disasters during the past year in the Northeastern States, the Far West, and other areas have shown the urgent need for increased assistance to the victims of floods. Since private insurance is not generally available, legislation should be enacted authorizing, on an experimental basis, an indemnity and reinsurance program, under which the financial burden resulting from flood damage would be carried jointly by the individuals protected, the States, and the Federal Government. The budget includes an estimate of 100 million dollars of new authority to incur obligations to initiate such a program.

I am requesting a supplemental appropriation of 25 million dollars in the current fiscal year to replenish the disaster relief fund which was depleted as a result of the recent flood disasters. It will also be necessary to amend the Small Business Act to increase the authority for disaster loans.

Civil defense.--Expenditures for civil defense are grouped with those for peacetime disasters for budget classification purposes, but the program is discussed in connection with continental defense in the major national security section of this message.

GENERAL GOVERNMENT

General government programs include many of the traditional domestic, civil activities of government, as well as certain government-wide activities, such as personnel and property management, which cannot readily be allocated to any single category. Our primary objective is to perform these central activities efficiently and thus reduce the cost of all the services provided to our citizens for their tax dollars.

Net expenditures for general government programs are expected to increase by 146 million dollars to 1.8 billion dollars, largely because of (1) increased outlays to replace or improve inadequate Government buildings and (2) a larger payment to the retirement fund for civilian employees.

Legislative [unctions.--During the fiscal year 1957 construction of the new Senate Office Building will be almost completed and a substantial start will be made on both the new House Office Building and the extension of the Capitol authorized by the Congress at its last session. These new facilities account for the increase in estimated expenditures for legislative activities from 87 million dollars in 1956 to 111 million dollars in 1957.

Federal financial management.--The reorganization of the Internal Revenue Service and the adoption of improved methods and procedures have led to a more equitable and effective enforcement of the revenue laws. The audit of tax returns has been improved and more delinquent taxes have been collected. It is expected that in the fiscal year 1957 the efficiency of tax collection will be improved even further, without a significant increase in expenditures for this purpose.

I urge that the Congress enact pending legislation to reduce the frequency of information returns submitted by employers withholding income and social security taxes. This legislation will simplify tax procedures for both the Government and the employers, and will also provide a basis for stronger enforcement of the tax laws.

General property and records management.--In the fiscal year 1957, major increases are planned in expenditures for construction and improvement of Government buildings to increase the efficiency of Government operations. To this end I am recommending appropriations to enlarge and remodel certain buildings and to begin the long-needed air conditioning of buildings in areas where temperature and humidity conditions are most adverse to economic operation. Additional appropriations are also recommended for the new building previously authorized for the Central Intelligence Agency, and, as noted in other sections of this message, for extension of the Department of State building and for new buildings for the National Bureau of Standards.

While these recommendations involve substantial appropriations of Federal funds, most of the Federal building improvement program will be financed with private funds under the leasepurchase authority of the General Services Administration and the Post Office Department. Already 53 projects involving private financing of construction costing 105 million dollars have been approved, and additional projects involving about 250 million dollars are under consideration. Additional appropriations of 5 million dollars are requested to purchase sites and prepare plans for future projects.

This program as a whole will make a substantial start toward nationwide improvement in working conditions of Federal employees. In the Washington area alone, buildings already approved or under consideration for approval will permit relocation of about one-third of the 60,000 employees now working in temporary and other substandard buildings.

Central personnel management and employment costs.--The Government's payments to the retirement funds for civilian employees are estimated at 297 million dollars in 1957, of which 295 million dollars will be for the civil service retirement trust fund and 2 million dollars for special annuitants. The proposed contribution to the retirement fund will be equivalent to the Government's share of benefit payments to be made from the fund during the fiscal year 1957. This contribution constitutes 35 percent of the sum estimated to be required to fund (1) the Government's part of the normal cost for current service of Federal employees, and (2) annual interest on the existing accrued liability of the Government to the fund.

Unemployment compensation payments to individuals who become eligible through Federal employment are estimated at 33 million dollars, about the same amount as in the fiscal year 1956. As the current 1956 appropriation provides only 20 million dollars, a supplemental appropriation will be requested.

Accident compensation payments to Federal employees and the related administrative expenses of the Department of Labor are estimated to continue at 50 million dollars in both 1956 and 1957. To encourage precautionary safety measures, the administration will propose legislation which will provide, in conformity with the best business practices, that employing agencies shall bear the cost of benefits paid for their employees.

Civilian weather services.--I am recommending for the fiscal year 1957 additional appropriations for the Weather Bureau to strengthen further its hurricane and tornado research program and to provide more storm detection radar. The budget also provides for additional equipment to measure visibility on airport runways and for needed improvements in housing at remote weather stations.

Protective services and alien control. --Increased appropriations are recommended to strengthen the border patrol operations of the Immigration and Naturalization Service, primarily on our southern border. The Federal Bureau of Investigation will continue at its present employment level.

I shall recommend a supplemental appropriation for the Commission on Government Security which has recently been established to study the entire Government security program.

Territories and possessions and District of Columbia.--I am recommending legislation to authorize an increase of 2 million dollars in the Federal payment to the District of Columbia. This represents a reasonable Federal share of the increased cost of operating the government of our Capital City.

Legislation will also be proposed to carry out a treaty and agreement recently negotiated with the Republic of Panama. Following its enactment, the Canal Zone Government will make expenditures to replace schools and other civic improvements being transferred to Panama under the legislation.

Other general government.--Again I recommend legislation by which wider appreciation of the arts and encouragement of creative artistic endeavors may be promoted and national recognition for distinguished civilian contributions to the advancement of the arts and the welfare of mankind may be given.

INTEREST

Interest payments now account for about 11 percent of net budget expenditures. They are determined by the size of the public debt and by interest rates on that debt. They are included in budget expenditures as they accrue. Interest is paid from permanent appropriations.

Interest on the public debt.--Interest payments on the public debt in the fiscal year 1957 are estimated at 7 billion dollars. This is an increase of 200 million dollars over estimated expenditures for the current fiscal year and 630 million dollars above actual expenditures in 1955.

The high level of prosperity has created a heavy demand for credit by private enterprises. As a result the average rate payable on the interest-bearing public debt has risen during the last 12 months from 2.29 percent to 2.49 percent at present, and maturing obligations are being refinanced at the higher rates prevailing in the money market.

The administration is recommending legislation so that the interest paid to the Federal old-age and survivors insurance trust fund will reflect more closely the long-term character of investments by that fund.

CONCLUSION

This is the third budget I have transmitted to the Congress.

As a result of the substantial reductions in Government expenditures made by the administration subsequent to assuming office, I noted in the first of these three budgets--for the fiscal year 1955--that a budget surplus was actually in sight. However, so that part of our savings through economies during that transitional period could be passed along to the taxpayers of the Nation as a whole, with beneficial effects for the growth of our economy, I stated that I believed it best "to adopt a course leading toward the twin goals of a balanced budget and tax reductions."

Tax reduction was thus achieved with the administration's first budget, which made possible a 7.4-billion-dollar tax reduction program, enabling us to make progress of historic dimensions in reducing tax burdens and improving the tax structure.

A balanced budget is now being achieved in the administration's second and third budgets, both of which we now estimate will be brought into balance.

This course of Government policy has helped to lay a sound basis for the greatest volume of business, the highest employment, and the highest national income in the history of this country. As an essential clement in this prosperity, private spending has more than replaced reductions in Federal spending. Federal expenditures have declined from 20.6 percent of total national production in the fiscal year 1953 to 17.3 percent in 1955. This budget is designed to continue that trend.

We have freed the economy from needless controls and from inflationary deficits, and have reduced the tax burdens which threatened to destroy the incentives to work and save and invest. State and local governments are now in an excellent position to obtain revenues and meet their responsibilities.

This budget carries forward the policies this administration has been following in the interest of all our 167 million Americans. The success of our country depends not upon centralized Government control, but upon the efforts of all our people to do more for themselves, to better themselves, their families, and communities. The role of Government is to encourage these efforts.

Some parts of our society, however, have not shared fully in the present prosperity of America. This budget provides for new steps to help create the conditions under which all Americans may share in the abundance we as a nation are enjoying.

There has also been developed an armed strength more efficient and better organized than ever before, and we shall continue building our defenses. We have started a worldwide, cooperative effort for peaceful uses of atomic energy which is already beginning to show results. We have worked with other free countries on a mutual basis to increase their economic and military strength and will continue to work with them. Our future prosperity, perhaps our very survival, will be linked with the strength of our allies and in the development of good will rather than fear and distrust among the nations.

This Nation has reached a new high of material prosperity. The rest of the free world has come to expect our leadership in cooperative efforts for peace and in defense of our common liberties. We should be very thankful for the resources of this country, for the efforts and accomplishments of our forebears. We should also be very humble. America must continue to be the land of faith, of promise, and of unbounded opportunity. There is much yet to do. With God's help, we will all go forward.

DWIGHT D. EISENHOWER