Special Message to the Congress on Federal Government Spending.

To the Congress of the United States:

This is an urgent appeal for the Congress to join with me to avoid higher taxes, higher prices and a cut in purchasing power for everyone in the Nation.

Just when we have succeeded in cutting the rate of inflation in half, and just when we have succeeded in making it possible for America's workers to score their largest real spendable income gains in eight years, this tangible, pocketbook progress may be wiped out by proposed excessive spending.

Specifically, Federal spending for the fiscal year 1973 (which began on July 1, 1972) already is estimated to be almost $7 billion higher than was planned in my budget.

That figure by itself is bad enough. But even more spending beyond the budget--and beyond emergency flood relief funds--appears to be on the way.

The inevitable result would be higher taxes and more income-eating inflation in the form of higher prices.

I am convinced the American people do not want their family budgets wrecked by higher taxes and higher prices, and I will not stand by and permit such irresponsible action to undermine the clear progress we have made in getting America's workers off the inflation treadmill of the 1960's.

While specific Federal programs are important to many people and constituent groups, none is more important to all the American taxpayers than a concerted program to hold down the rate of taxes and the cost of living.

In view of this serious threat I again urge the Congress--in the economic interest of all American citizens--to enact a spending ceiling of $250 billion. I urgently recommended a spending ceiling when I submitted the fiscal 1973 budget earlier this year.

Our concern with sustaining the increasing purchasing power of all the people requires and demands such responsible action. Our concern with the cost of living requires and demands such responsible action. Our determination to avoid higher taxes requires and demands such action. The basic fiscal integrity of the Nation requires and demands such action.

At fault is the hoary and traditional procedure of the Congress, which now permits action on the various spending programs as if they were unrelated and independent actions. What we should have--and what I again seek today--is that an annual spending ceiling be set first, and that individual program allocations then be tailored to that ceiling. This is the anti-inflationary method I use in designing the Federal budget.

The present Congressional system of independent, unrelated actions on various spending programs means that the Congress arrives at total Federal spending in an accidental, haphazard manner. That is no longer good enough procedure for the American people, who now realize that their hard-won economic gains against inflation are threatened by every deficit spending bill--no matter how attractive the subject matter of that bill might be. And there are impressive gains which I am committed to help guard:

--We have achieved a substantial sue. cess in our battle against the inflation we inherited in 1969. Instead of the more than 6 percent of 1969, we are now down to a rate of 2.9 percent per year. Inflation has been cut in haft.

--We have cut the personal income tax so that a family of [our with an income of $5,000 has had its individual income taxes reduced by 66 percent since 1969, and a family of four with an income of $10,000 has had its income tax reduced by 26 percent since that date.

--We have thus brought about conditions in which real, spendable weekly earnings have risen four percent in the last year, the largest such gain since 1964.

If we permit unbridled increases in Federal spending to go on month after month, however, we are in real danger of losing the advantages of the tax cuts and our victories in the battle against inflation.

These are the compelling reasons which require me to ask again in the most urgent and explicit language I can frame that the Congress enact at the earliest possible opportunity a spending ceiling--without loopholes or exceptions--to force Government spending back to the $250 billion level in fiscal year 1973.

I again remind the Congress of the situation I cited last January, when I submitted the fiscal year 1973 budget:

"It will be a job-creating budget and a non-inflationary budget only if spending is limited to the amount the tax system would produce if the economy were operating at full employment."

"Those who increase spending beyond that amount will be responsible for causing more inflation."

Since that time, various Congressional actions and inactions have heavily underscored all of the reasons I then made for speedy passage of a spending ceiling.

Such a ceiling cannot be completely effective unless the Congress enacts it as I have requested--without exceptions and without loopholes. But if the Congress fails to do this, I do not propose to sit by and silently watch individual family budgets destroyed by rising prices and rising taxes--the inevitable end to spending of this magnitude.

With or without the cooperation of the Congress, I am going to do everything within my power to prevent such a fiscal crisis for millions of our people.

Let there be no misunderstanding: If bills come to my desk calling for excessive spending which threatens the Federal budget, I will veto them.

It is now generally recognized that the national economy is in a period of vigorous expansion. The Gross National Product soared at an annual growth rate of 8.9 percent in the second quarter of the year--the best such increase since 1965. About 2 1/2 million additional civilian jobs have been added in the last year.

We do not plan to reduce or restrict the very substantial fiscal stimulation we have already provided. But further massive Federal stimulation of the economy at this time---whatever its superficial political attractiveness is certain to lead to the kind of inflation that even wage-price control machinery would find impossible to restrain.

In other words, the American people will have to pay, and pay quickly, for excessive Federal spending--either by higher taxes or by higher consumer prices, or both. Such an intolerable burden would shortly cause an end to the period of economic growth on which we are embarked.

There are desirable features in some of the individual bills now pending in the Congress, but to them have been attached some very excessive spending proposals. The Federal Government cannot do everything that might be desirable. Hard choices must be made by the Congress in the national interest, just as a family must decide what it will buy with the money it has. Moreover, the experience of the past decade proved that merely throwing money at problems does not automatically or necessarily solve the problems.

I have every confidence that the American people, in this era of wide public awareness of inflation and wide public opposition to its clear causes, understand these realities about Federal spending.

I believe that all of us, the President and the Congress, have a clear duty to protect the national interest in general prosperity--and therefore to resist temptations to overspend for desirable special programs, or to spend for partisan political advantage.

I favor and have submitted to the Congress responsible and effective programs designed to cleanse the air, to purify the water, to develop and preserve rural America, to improve education, and for many other worthy purposes. No individual and no political party has a monopoly on its concern for the people, individually and in groups. But I am required always to ask:

What is best for all the people? What are the hard choices that must be made so that the general welfare is secured? Of what use is it for us to pass these measures, and more, if they are going to destroy the family budget by higher prices and more taxes?

No matter what the political pressures, no matter how frequently I may be told that in an election year a President cannot veto a spending measure, I will simply not let reckless spending of this kind destroy the tax reductions we have secured and the hard-won successes we have earned in the battle against inflation. I intend to continue to do my utmost to preserve the American family budget and to protect it from the ravages of higher taxes and inflation.

The time for fiscal discipline has long since come. The threat demands bold and difficult decisions. Let the Congress make them now.

RICHARD NIXON

THE WHITE HOUSE,

July 26, 1972.