Harry S. Truman photo

Annual Budget Message to the Congress: Fiscal Year 1948

January 10, 1947

[Released January 10, 1947. Dated January 3, 1947]

To the Congress of the United States:

I am transmitting the Budget for the fiscal year 1948. It includes recommendations for the entire Federal program.

Expenditures under existing and proposed legislation are estimated at 37.5 billion dollars and revenues under existing tax laws at 37.7 billion dollars, leaving a very slight margin of surplus.

I strongly recommend that the Congress take early action to continue throughout the fiscal year 1948 the war excise-tax rates, which, under the present law, will expire July 1, 1947. My declaration of the end of hostilities on December 31, 1946, was not issued in order to achieve tax reduction. I considered it essential that war excise-tax rates be retained, but I also considered it necessary to terminate the "state of hostilities" as soon as it became possible to do so.

I also recommend that the Congress increase postal rates sufficiently to wipe out the postal deficit.

These recommendations would reduce expenditures to 37.1 billion dollars and increase revenues to 38.9 billion dollars. We would then have a budget surplus of 1.8 billion dollars.

As long as business, employment, and national income continue high, we should maintain tax revenues at levels that will not only meet current expenditures but also leave a surplus for retirement of the public debt. There is no justification now for tax reduction. At today's level of economic activity, our present revenue system will not yield so much in 1948 as in the current year. We shall no longer collect large sums from the excess-profits tax, and sales of surplus property will decline.

Revenue estimates are, of course, to a very large extent determined by the level of business activity. In this Budget, it has been assumed that, with minor fluctuations, business activity will average slightly higher than in the calendar year 1946. A recession in business would cause tax yields to drop. In addition, the cost of supporting agricultural prices and payments to unemployed veterans would increase. Should such a recession occur, it would be a temporary slump growing out of transition period difficulties and would call for no revision in our budget policy.

For the fiscal year 1947, it now appears that receipts will amount to 40.2 billion dollars and expenditures to 42.5 billion dollars. The 1-billion-dollar increase in expenditures over the August estimate occurred largely in veterans' programs. For example, many more veterans than had been expected decided to go to college or enroll for job training. We cannot regret this demand for education, but it illustrates the kind of uncertainty that cannot be eliminated in preparing our estimates.

The deficit for the current fiscal year would have been larger if Executive action had not been taken to place expenditure ceilings on some activities and to hold them well below the amounts available under appropriations already made. The way the various departments and agencies of the Government, particularly the War and Navy Departments, have succeeded in cutting their expenditures is gratifying. Although public works could not be cut so deeply as anticipated in August without causing a wasteful stoppage of work already under way, we shall still show a substantial saving in this fiscal year for these programs.

This Budget meets our basic requirements for Federal programs at home and abroad for the fiscal year 1948. The Federal Government must not only fulfill its contractual obligations; it must also provide the services that are necessary for the welfare and the progress of the Nation. We have to carry our proper share of the expense of building world organization. We must make effective provision for national defense.

We have many other commitments, both international and domestic, that must be honored. In fact, a very large part of all our expenditures in the fiscal year 1948 will be required to meet commitments already made. The Budget is designed to meet these needs, and to execute every program with strict economy.

The reconversion of wartime military and civilian services was far advanced during the calendar year 1946. Of 26 emergency war agencies in operation shortly before VJ-day, only 5 remain, and 3 of these are winding up their work. Two others--the War Assets Administration and the Office of Temporary Controls--have been added to help close out the war program. The 1948 Budget assumes a reduction of civilian employment in the Government as a whole to less than three-fifths of the wartime peak number in addition to the heavy shrinkage of the armed forces.

The Government has been exerting every effort in the wake of the war demobilization to strengthen and make more efficient its internal organization and administrative methods. It is essential that citizens receive maximum service for their tax dollars, and the Administration plans further intensive measures to improve the administrative practices, organization, and efficiency of the departments and agencies.

But the cost of peacetime services has risen strikingly as compared to these costs before the war. Prewar figures can no longer be used as a yardstick. Although Government wages have not been raised so much as private wages, the cost of supplies has risen in line with the cost of goods in private markets. Further, the population to be served has grown since 1939 by 10 million people, adding proportionately to the demand for many public services. Many normal maintenance items had to be postponed on account of the war, and cannot be further neglected. Normal services which were cut during the war have to be restored.

Let me now review the expenditure side of the Budget, taking first the large items which practically determine the size of the total.

1. Interest on the national debt will be 5 billion dollars. This is an obligation that must be met.

2. Refunds due under the tax laws are estimated at 2.1 billion dollars. These are fixed obligations under present law.

These two items total 7.1 billion dollars.

3. National defense is estimated at more than 11.2 billion dollars, almost all for the operating expenses of the Army and Navy. Though we expect the United Nations to move successfully toward world security, any cut in our present estimate for 1948 would immediately weaken our international position. This large part of the Budget, in my judgment, represents a proper balance between security and economy.

The total so far is 18.3 billion dollars.

4. International affairs and finance will call for 3.5 billion dollars, a sharp reduction from the 6.4 billion dollars required in the fiscal year 1947. We still have contractual commitments to make good in connection with our loan agreement with the United Kingdom and under the reconstruction lending program of the Export-Import Bank. We must discharge our occupation responsibilities in Europe and the Far East. We must provide for war damage restoration in the Philippines and for the relief and resettlement of displaced people of Europe. We must continue to give relief to some other countries which are most urgently in need.

The work of the United Nations and the specialized organizations associated with it is of the highest importance. We must not fail in our support. The Department of State, for which increased appropriations are requested, must be prepared to carry an increasing load of work in the growing field of American foreign relations.

Our international affairs budget is important for peace, security, and our own prosperity. To reduce it would delay the restoration of a peaceful and prosperous world.

The total of these four items is 21.8 billion dollars.

5. Veterans' services and benefits will cost more than 7.3 billion dollars. This country has provided generously for the successful return of veterans to civilian life and for the care of the disabled. While the cost looms large in the Budget, much of it goes to provide education and rehabilitation which will add to our national strength and prosperity. The cost for veterans' education, pensions, and hospitals will increase in the fiscal year 1948; but if employment remains high, the unemployment payments should be smaller. Veterans' benefits under present law appear to be adequate.

These five items--interest, refunds, national defense, international affairs, and veterans--require expenditures of 29.2 billion dollars, or almost four-fifths of the total Budget.

6. Programs for regulation and improvement of the transportation and communications systems and for development of natural resources will amount to 2.6 billion dollars. The largest single item is 443 million dollars for the Atomic Energy Commission. Our major effort now must be to exploit to the full the peacetime uses of this great discovery.

About 1.2 billion dollars of the expenditures on these two programs is for public works construction, and much of the rest is for the promotion of our merchant marine and other aids to transportation.

The expenditure for the Federal-aid program for highways rests on the Federal Government's agreements with the States. Air transport will be seriously retarded unless new air-navigation facilities are promptly supplied. River basin development and harbor improvement cannot be neglected without impairing efficiency in private enterprise. Most of the public construction projects are already under way. A few additional projects, not yet started, have been provided for in 1947 appropriations.

Public construction in these and other fields contributes to the productive capacity and taxpaying ability of the country. The postponement of public works in good times and their expansion in hard times will make their contribution even greater. All postponable public works should be deferred at the present time. But the need to protect and improve our natural resources has become acute as a result of the war, and we must carry out the works included in this Budget if we are to avoid waste.

7. Our agricultural program will amount to 1.4 billion dollars. This includes the price supports guaranteed by law, the conservation of farm land, and our investments in rural electrification. In addition, the Department of Agriculture will continue its program to promote research in agriculture and better marketing methods.

This brings the total to 33.2 billion dollars.

8. The Budget programs for social welfare, health, and security, and for education and general research amount to 1.7 billion dollars. This total excludes unemployment compensation and old-age and survivors insurance, which are financed through trust account operations that do not appear in Budget expenditures. It does include 481 million dollars in payments to the railroad retirement trust fund. More than half of the remaining expenditures is for aid to the aged and other dependent persons. The rest is largely for protection of public health, for crime control, and for grants to States for vocational education.

9. The Federal housing program is estimated at 539 million dollars. The bulk of the housing expenditures is for purchase by the Reconstruction Finance Corporation of guaranteed home loans to veterans and for continued operation of revenue-producing war housing in overcrowded communities.

Our social-security program and our education and housing programs can hardly be considered adequate. Improvements in these fields are seriously needed. this Budget does not contemplate major tensions in the next fiscal year, I recommend that the Congress lay the legislative ground work now for the needed improvements, including general health insurance and a long-range housing program.

The costs of social welfare, education, and housing bring the cumulative total above 35.4 billion dollars.

The remainder of the Budget totals 2.1 billion dollars. Nearly one-third is for war liquidation, including the overhead cost of disposing of surplus property. The rest is for services to business and labor through the Commerce Department and Labor Department, for general functions of the Treasury, the General Accounting Office, the legislative branch, the judicial branch, and the Executive Office of the President, and for many other items. These services, with a total cost of less than 5 percent of the Budget, are an indispensable part of the machinery of the Government.

The Budget total of expenditures thus comes to 37.5 billion dollars.

It has always been the Government's duty to provide whatever assistance is required to afford private enterprise a chance to prosper. In the nineteenth century a principal economic service of the Federal Government was the opening of the West. The Government acquired the territory, granted lands to settlers, gave military protection, and subsidized railroads and highways--thereby opening opportunities for the private initiative of the American people.

Today, our great new frontiers are in river valley developments, in air transport, in new scientific discoveries, and in application of the new science and technology to human progress. These new frontiers can be developed only by the cooperation of Government and private enterprise.

Our expenditures on developmental projects are a good investment for the Government. They increase the productive power of the country and make for higher living standards. Directly or indirectly, the Government recovers the cost in the form of either service charges or increased revenue yields to the Treasury.

The Federal Government promotes improvements in agricultural methods. It provides many services to private enterprise that could not be organized except by Government. The Bureau of Standards, for example, furnishes basic scientific data. The Weather Bureau supplies information used by thousands of farmers and business concerns and has a rapidly developing field of work in aviation weather reporting. Maps and charts, as well as lighthouses, beacons, and other physical aids to navigation, are supplied by the Federal Government. Many kinds of statistical reports, required by American business, are also provided.

Since 1939, our complex system for the production of goods and services has grown so much that more services than ever are required from the Government. We cannot risk retarding our growth by lack of roads, electric power, air-navigation facilities, engineering data, maps, education, surveys of resources, weather reports, protection against disease, or any other necessary instrument of progress. There is a multitude of Government activities which the whole Nation takes for granted and on which our prosperity depends.

Let me now review briefly the appropriation side of the Budget.

This Budget recommends appropriations of 31.3 billion dollars for the fiscal year 1948 under existing and proposed legislation. It recommends that authority of 1.5 billion dollars be granted certain agencies to contract for services and supplies, such as aircraft and construction. Payments under such authority will be financed from appropriations to be made in subsequent years.

The expenditures for 1948 still reflect a portion of the cost of our tremendous war program for which appropriations were made in previous years. They also reflect certain large international commitments likewise previously authorized. These two factors in large measure explain why estimated expenditures for 1948 are so much more than the appropriations recommended for that year.

Existing appropriations available for obligation in 1948 and subsequent years are again under review. As these appropriations become unnecessary, their withdrawal will be recommended to the Congress.

The Federal Government, as shown by the size of its Budget, has far greater obligations than at any time before the war. Although the Budget reflects the urgent need for rigorous economy in the execution of every program, expenditures are inevitably large. The American people surely will not shirk their new responsibilities at home and abroad. They will supply the necessary funds to meet these responsibilities.


As previously indicated, I cannot recommend tax reduction. The responsibilities of the Federal Government cannot be fully met in the fiscal year 1948 at a lower cost than here indicated. Even if the cost were less it would be desirable in our present economic situation to maintain revenues in order to make a start toward the repayment of the national debt. At the present time, in my judgment, high taxes contribute to the welfare and security of the country.

Under the wartime tax system, millions of taxpayers with small incomes are called upon to pay high taxes. When the time comes for taxes to be reduced, these taxpayers will have a high priority among the claimants for tax relief.

I have recommended that the war excise. tax rates due to expire July 1, 1947, be continued. When the time comes for excise tax revision, the Congress should review the entire group of excise taxes rather than concentrate attention on those that were imposed or increased during the war.

Our long-run tax program must be designed to maintain purchasing power and provide incentives for a high level production.

In the corporation section of this Message, legislation is recommended which will require return to the Treasury as miscellaneous receipts of certain capital funds totaling 379 million dollars.

I also recommend that the Congress reconsider the extent to which fees should be charged for services rendered by the Federal Government. While it is not sound public policy to charge for all services of the Federal Government on a full cost basis, and many services should be provided free, the Government should receive adequate compensation for certain services primarily of direct benefit to limited groups. For example, I believe that a reasonable share of the cost to the Federal Government for providing specialized transportation facilities, such as airways, should be recovered.


[ Fiscal years. In millions ]

Actual, Estimate, Estimate,

Source 1946 1947 1948

Direct taxes on individuals $19,008 $18,637 $19,120

Direct taxes on corporations 12,906 9,227 8,270

Excise taxes 6,696 7,283 6,118

Employment taxes 1,714 1,955 2,694

Customs 435 496 517

Miscellaneous receipts:

Present law 3,480 3,987 2,620

Proposed legislation 379

Total receipts 44,239 41,585 39,717

Less net appropriation to old-age and survivors insurance trust fund 1,201 1,355 1,987

Budget receipts 43,038 40,230 37,730

Proposed continuation of war excise rates (not included in Budget

receipts) 37 1,130

Receipts from direct taxes on individuals are estimated to decrease from the fiscal year 1946 to 1947 because of the lower effective individual income tax rates in the Revenue Act of 1945, and to increase from the fiscal year 1947 to 1948 because of higher incomes. Direct taxes on corporations decline in the fiscal year 1947 and further in 1948 largely because of repeal of the excess profits tax.

The excise-tax estimates increase in 1947 because of increased consumer demand and increased production, and decline under present law in 1948 because of the expiration of the war tax rates of the Revenue Act of 1943. The employment-tax estimates show increases in both fiscal years, due in 1947 mostly to larger pay rolls, and in 1948 mostly to increases in rates as provided by law. Miscellaneous receipts increase in 1947 over 1946 largely because of increased receipts from disposition of surplus property and decline in 1948 largely because of a decline in surplus-property receipts.


The public debt reached a peak last February at 279 billion dollars. During the remainder of the calendar year, the debt was reduced by over 20 billion dollars and stood near 259 billion dollars at the end of December. Most of the securities retired were held by banks. This reduction was accomplished by drawing down the Treasury cash balance to a level more in line with peacetime requirements.

We propose to continue the sale of savings bonds. The proceeds will be available to redeem marketable securities--particularly those held by the banking system. It is important that every citizen in a position to do so help to maintain a sound economic situation by purchasing and holding United States savings bonds.

The annual interest charge of about 5 billion dollars is less than 3 percent of our current national income. It is well within our capacity to pay, particularly if we keep up a high volume of national production. The best method of keeping down the burden of the debt is to maintain prosperity. A single year of depression can lay more burdens on the people than many years of gradual debt reduction can relieve.

Our debt-management policy is designed to hold interest rates at the present low level and to prevent undue fluctuations in the bond market. This policy has eased the financial problems of reconversion for both business and Government. The stability of the Government bond market has been a major factor in the business confidence which has been of such value in achieving full production. Low interest rates have also relieved the burden on the taxpayer. The Treasury and the Federal Reserve System will continue their effective control of interest rates.


In this year's Budget, expenditures are grouped under a new functional classification in order to present to the Congress and the people a clearer picture of the purposes for which Federal funds are spent. To facilitate comparison, figures for previous years are also given on the new basis.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program 1946 1947 1948 tians, 1948

National defense $45,012 $14,726 $11,256 $9,493

International affairs and finance 1,464 6,394 3,510 1,169

Veterans' services and benefits 4,414 7,601 7,343 7,009

Social welfare, health, and security 1,113 1,570 1,654 1,877

Housing and community facilities -180 544 539 79

Education and general research 88 71 88 85

Agriculture and agricultural resources 752 1,117 1,381 824

Natural resources 257 728 1,101 779

Transportation and communication 824 905 1,530 1,196

Finance, commerce, and industry 30 83 426 116

Labor 104 124 118 118

General government 972 1,545 1,492 1,341

Interest on the public debt 4,748 4,950 5,000 5,000

Refunds of receipts 3,119 2,155 2,065 2,065

Reserve for contingencies 10 25 25

Adjustment to daily Treasury statement basis 997

....................................................................................... Total 63, 714 42,523 37, 528............................................................................. 31, 276


............................................................................. General and special accounts 65, 019 42, 698............................................................................. 36, 699 31, 276

............................................................................. Corporation accounts 1, 305 -175 829

....................................................................................... Total 63, 714 42,523 37, 528............................................................................. 31, 276

The Budget classifications and Budget totals reflect all transactions in the general and special accounts and the excess of expenditures over receipts of wholly owned Government corporations. For the first time, the net expenditures of wholly owned corporations are classified on a functional basis. The Budget totals do not include the operations of trust accounts. However, such transactions, when significant, are discussed in connection with the various Budget programs.


Expenditures for "National defense" remain by far the largest category in the Budget. The cost of maintaining the military, air, and naval forces necessary in the fiscal year 1948 will be high. The present defense establishment requires larger forces, more complex mechanized equipment, more intensive use of equipment, and more extensive developmental activity than before the war.

However, in the fiscal year 1948 these expenditures will be but one-eighth of the outlays in the peak wartime fiscal year, 1945. This drastic cut reflects a corresponding reduction in the size of the armed forces. Outlays for munitions have been reduced even more.

Despite these reductions, our defense establishment will not have fallen to its ultimate peacetime level by the end of the fiscal year 1948. We still have large responsibilities arising out of the war. Military occupation in Europe and the Far East must continue. The lines of communication and supporting installations for the occupation forces must be maintained. Recruits must be trained as replacements.

The high cost of our defense establishments requires that the program be operated with the utmost efficiency. In the estimates for 1948 emphasis has been placed on eliminating as much duplication and overlapping in activities as is possible under present conditions. In my State of the Union Message I have again urged establishment of a single department of national defense. This is an important step in the search for economy and efficiency in organization and administration of the armed services.

I recently appointed an advisory commission to study the need for a universal training program. We still have available from the war much of the equipment and installations which will be needed for such a program. The program, after it has been worked out and approved, will still require considerable time to get under way. Estimates for it have, therefore, not been included in this Budget. Since plans are not complete for the training program, a small amount has been included in the Budget to cover the cost of induction machinery whenever provision is made for it.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Military defense:

Military $24,846 $6,741 $6,658 $5,942

Atomic energy 430 179

Naval defense 16,763 5,588 4,423 3,540

Terminal leave for enlisted personnel 1,900 250

Activities supporting defense:

Lend-lease (excluding War and Navy Departments):

Treasury Department 672 333 34

Maritime Commission and War Shipping Admin-

istration 1,045 41

Agriculture Department 1,003 5

Other 45 35

Stock piling of strategic and critical materials:

Treasury Department 177 243

Reconstruction Finance Corporation - 87 - 210

Reconstruction Finance Corporation (other) -53 -337 -121

War Shipping Administration (other) 187 -250 -34

Other 74 30 13 10

....................................................................................... Total 45,012 a 14,726 11,256 9,493


............................................................................. General and special accounts 45,066 a 15,149............................................................................. 11,587 9,493

............................................................................. Corporation accounts -53 -424 -331

....................................................................................... Total 45, 012 a 14, 726 11, 256............................................................................. 9, 493

a Excludes disbursements of approximately 1,500 million dollars for the War Department and 250 million dollars for the Navy Department which have appeared as Budget expenditures in previous years.

Expenditures.--"National defense," as used in this Budget, is much less inclusive than the category used last year. For example, War Department expenditures of 645 million dollars in 1948 for supplies to and administration of occupied areas (other than Army pay, subsistence, and related items) are now in "International affairs and finance." Likewise, expenditures for the atomic energy activities of the Manhattan District project beginning January 1, 1947, when the Atomic Energy Commission took control, are shown in "Natural resources." for the fiscal year 1946 and the first 6 months of the fiscal year 1947 this program remains in "National defense."

The level of expenditures for "National defense" in 1947 would have been 1.7 billion dollars higher, and the reduction from 1947 to 1948 correspondingly greater, except for certain adjustments--1.5 billion dollars in War Department accounts and 250 million dollars in Navy accounts. Some funds withdrawn from the Treasury in 1946 and earlier years, and reported as expenditures at the time, were not used until 1947. Also some expenditures by the War Department in 1947 were offset by credits from funds which had accumulated in trust accounts during the war.

The expenditure estimate of 11.1 billion dollars in 1948 for the Army and Navy for military purposes reflects the reductions from the current fiscal year in the number of military personnel and in war-liquidation out, lays--such as mustering-out payments (reduced by 370 million dollars), contract termination (700 million dollars), and surplus property handling. On the other side, the estimate reflects greater procurement in the fiscal year 1948, as war inventories cease to be available to supply current needs.

The estimated expenditures of 6.7 billion dollars for the War Department in the fiscal year 1948 include 132 million dollars for public works under supplemental legislation. The Navy expenditures of 4.4 billion dollars also include 77 million dollars for ship construction and public works under supplemental legislation. In both instances the objective is to return to the peacetime procedure of obtaining specific legislative authority for these programs.

Taken together, the War and Navy Department expenditures estimated for the fiscal year 1948 provide for an average military strength of 1,641,000 men and officers. Of this, Army strength is projected at 1,070,000 throughout the year; Navy and Marine strength will begin the year at 598,000 and average 571,000. These figures compare with an average strength in the fiscal year 1947 of 2,108,000. Pay, subsistence, travel, welfare, training, clothing, and medical expenditures for military personnel are estimated at 5.2 billion dollars in the fiscal year 1948, as against 6.7 billion dollars in the current year. Average annual costs per man for these purposes--about 3,100 dollars in 1948--have increased markedly since VJ-day. Fully 45 percent of Army and Navy expenditures in 1948 are in this category.

Expenditures by the War and Navy Departments for all other military purposes are estimated at 5.9 billion dollars in the fiscal year 1948• This sum covers procurement, research and development, construction, operation and maintenance, and citizen-reserve activities. The estimates for 1948 contemplate proceeding with construction projects of highest priority at overseas bases and in the continental United States, and limiting procurement to those items essential for the current operation, maintenance, and training of the military forces, except for aircraft and limited quantities of newly developed items.

Effective defense under modern conditions requires us to push ahead in scientific and technological fields. Toward this end, expenditures for research and development by the Army and Navy are projected at 530 million dollars in the fiscal year 1948-slightly above their 1947 rate. Similarly, we must keep alive the knowledge of military skills among our citizens. To provide for an orderly expansion of citizen-reserve organizations, expenditures of 308 million dollars are projected in 1948--about two-thirds more than the outlays in the current fiscal year when these programs are getting under way. The reserve organizations of the Army will still be below planned strength at the end of 1948.

The bulk of the terminated Army and Navy contracts has already been settled, with creditable dispatch. For all agencies, total commitments canceled on 318,000 prime contracts exceed 65 billion dollars. After deducting credits due the Government, total payments to contractors under the entire program are estimated at about 6.5 billion dollars. Of this total, about three-fourths of a billion dollars remained for payment at the beginning of the fiscal year 1947. Most of this has now been paid in final settlements or in advances pending settlement.

Applications for terminal-leave payments to enlisted military personnel have been smaller than expected. It is now estimated that 1.9 billion dollars will be paid in 1947 and only 250 million dollars in 1948.

Lend-lease expenditures in the fiscal year 1947 from funds appropriated to the President are largely interappropriation adjustments and payments for articles procured and services rendered in previous years. In 1948 there will be very small expenditures-all for closing out the program.

Except for some military aid to China and minor items, lend-lease was terminated after VJ-day. Since then, lend-lease goods valued at over 1 billion dollars have been sold to foreign countries on a cash or credit basis. Much progress has been made in effecting settlements with the countries which received about 50 billion dollars of lend-lease aid and extended almost 8 billion dollars of reciprocal aid. Final settlements have now been negotiated with the United Kingdom, Australia, New Zealand, India, France, Belgium, and Turkey, and discussions with the Netherlands, Norway, and the Union of South Africa are nearing completion.

The military program for stock piling of strategic materials has been reviewed carefully to minimize interference with business requirements. New stock piling is estimated at 90 million dollars in the fiscal year 1947 and 33 million dollars in 1948. In addition, excess metals and materials, amounting to 87 million dollars this year and 210 million dollars in the fiscal year 1948, will be transferred from Reconstruction Finance Corporation stocks to the Treasury military stock pile. Apart from stock piles transferred to the Treasury, the receipts of the Reconstruction Finance Corporation in its war activities reflect largely the rental and disposal of excess war plants, together with the sale of metals, minerals, and other commodities to the public.

Appropriations.--To finance the expenditure program outlined above, appropriations of 9.5 billion dollars and new contract authorizations of 541 million dollars will be necessary in the fiscal year 1948. These totals include 262 million dollars of supplemental appropriations and 91 million dollars of contract authorizations under legislation shortly to be submitted. The new appropriations needed in 1948 are about 2 billion dollars lower than the estimated expenditures, which include provision for payment of substantial amounts of unliquidated obligations of prior years.


The budget for our international program is designed to contribute to a peaceful world and a stable world economy. We have definite responsibilities to our wartime allies and in occupied countries. Our international lending program is an essential part of our efforts to achieve a world economy in which private trade will flourish.

The period when large-scale general relief is required for our allies is almost over. With the termination of the United Nations Relief and Rehabilitation Administration, there will remain, however, the urgent question of refugees and displaced persons. I urge the Congress to provide adequate support for the International Refugee Organization, now in process of being formed under the United Nations. It is also necessary that we provide a modest relief program for a few countries which are still in desperate straits. I recommend that the Congress speedily enact legislation to authorize these expenditures for which I am making provision in this Budget. In addition, I recommend that the Congress authorize participation in the World Health Organization and the proposed International Trade Organization and have included the small amounts needed for their support.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Reconstruction and stabilization:

Subscriptions to International Fund and Bank $159 $1,426

Treasury loan to United Kingdom 1,500 $1,200

Reconstruction Finance Corporation loans to United

Kingdom -39 -39 -40

Export-Import Bank loans 464 1,025 730

Aid to China 120

U.S. Commercial Company - 118 20

Foreign relief:

United Nations Relief and Rehabilitation Adminis-

tration 743 1,515 305

War Department (occupied countries) 556 645 $725

Other 4 3

Philippine-aid program 28 105 137 144

Membership in international organizations 2 15 18 18

Foreign relations:

State Department 81 140 173 197

Other 20 12 15 9

Proposed legislation 116 326 76

Total 1,464 6,394 3,510 1,169


General and special accounts:

............................................................................. Purchase of capital stock in Export-Import Bank 674 325

............................................................................. philippine-aid program 28 30 137 144

............................................................................. Other 1,129 5,283 2,683 1,025

Corporation accounts:

............................................................................. Issuance of Export-Import Bank capital stock -674 -325

............................................................................. Export-Import Bank loans 464 1,025 730

............................................................................. Reconstruction Finance Corporation loan to Phil-

............................................................................. ippines 75

............................................................................. Other -157 -19 -40

Total....................................................................................... 1,464 6,394 3,510 1,169

Expenditures.--The sharp decline in total expenditures in the fiscal year 1948 is due chiefly to the fact that in 1947 we shall complete our payment to the International Monetary fund and our basic cash subscription to the International Bank for Reconstruction and Development. Further liabilities to the International Bank will arise only if we are called upon, within the limits of our total subscription, to join with other countries in making good any defaults by borrowers from the Bank.

More than half of our expenditures in the international field in the fiscal year 1948 will be loans for reconstruction or trade expansion. Disbursements will be predominantly under existing commitments. By the end of the fiscal year 1948 we shall have discharged about three-fourths of our commitments under our loan agreement with Britain. Since the International Bank is now ready for business, new authorizations for reconstruction loans by the Export-Import Bank are being sharply curtailed. In the future, the Export-Import Bank will be primarily concerned with loans to finance United States trade and small developmental loans in which we have a special interest. Outlays by the Export-Import Bank in the fiscal years 1946 and 1947 have been financed to a considerable extent by the sale of capital stock to the Treasury. Since the Treasury subscription is now complete, future net outlays will be financed entirely by sale of notes to the Treasury.

The existing appropriation for United Nations Relief and Rehabilitation Administration expires at the end of the current fiscal year. Estimated expenditures in 1948 are entirely to wind up the program.

During the fiscal year 1948, the War Department will incur expenditures for administration and relief in Germany, Japan, Korea, and the Ryukyus and for administration in Austria. We must continue to provide subsistence to prevent disease, hunger, and unrest, and to provide proper administration, if these lands are eventually to become democratic and self-supporting. Moreover, shipments of food and other supplies are required to maintain the working efficiency of the populations and to stimulate production. Resulting increases in exports from these areas will furnish a growing source of funds to pay for necessary imports and thus help eliminate the need for financial assistance.

The recent agreement for economic unification of the British and United States zones in Germany will increase exports from those zones and help to make them self-sufficient by the end of the calendar year 1949. All costs incurred for the support of the German economy are to be repaid out of future German exports as quickly as recovery permits.

An important contribution to the economic revival of the occupied areas is being made by Federal agencies such as the U.S. Commercial Company in temporarily financing exports from these areas. Net dollar proceeds are currently being used primarily to purchase raw materials and equipment needed for a further expansion of exports in order to hasten the time when the occupied areas will become fully self-supporting. To aid in this program, I urge that the Congress authorize the U.S. Commercial Company to continue operations beyond June 30, 1947, the present expiration date.

Aid for the Philippine Republic includes assistance in rebuilding its economy, payments to fulfill our pledge to compensate partially for war damage, and maintenance of training programs for Philippine citizens. The 1947 total includes a Reconstruction Finance Corporation loan of 75 million dollars for aid in financing the current budget of the Republic.

Estimated expenditures of 18 million dollars for our membership in international organizations consist primarily of our share of the administrative budgets of the United Nations and its affiliated specialized organizations. In view of the immense tasks we have entrusted to the international organizations, this is a modest sum. Our contribution to the International Refugee Organization and funds for additional relief are included under proposed legislation.

Expenditures by the State Department are expected to increase in the fiscal year 1948. It is of utmost importance that the Department be equipped with sufficient funds and an adequate staff to make its maximum contribution to international peace. In 1948 there will be an increase of expenditures to carry on the improved Foreign Service program authorized under the Foreign Service Act of 1946. The Budget estimate for the Foreign Service buildings fund provides for the purchase of real property obtained by the Office of the Foreign Liquidation Commissioner in lend-lease and surplus property settlement agreements with other nations. Payment for these properties by the State Department increases miscellaneous receipts of the Treasury by a corresponding amount.

Appropriations.--Appropriations for the fiscal year 1948 total 1,169 million dollars, mainly for the administration and relief of occupied countries and for various State Department programs. Funds for loans by the Export-Import Bank in the fiscal year 1948 will be obtained under its current borrowing authority. Advances to the United Kingdom will be made under the existing authorization. The appropriations total includes 11 million dollars of anticipated supplementals for the State Department and 76 million dollars for proposed legislation.


The Servicemen's Readjustment Act provides education and training benefits, unemployment and self-employment allowances, and loan guarantees. National service life insurance is an additional tangible benefit. For those who suffered disabilities, the best of medical care is provided. Pension rates for disabled veterans and for dependents of veterans were increased by the last Congress. In addition to the veterans' program, our servicemen have been assisted in resuming civilian life by mustering-out payments and terminal-leave payments.

Since the main purpose of our veterans' program is to reestablish former servicemen in civilian life, we must carefully avoid types of assistance which would encourage, or unnecessarily prolong, dependence upon Government subsidy. Any other policy would not only put an intolerable burden upon the taxpayer, but would be a great disservice to veterans themselves.

Although some amendments to veterans legislation may still be required, no major new programs of assistance appear necessary. The job is now primarily one of effective administration. The Veterans' Administration has made great progress in establishing machinery that will administer this comprehensive program with speed and equity.

Expenditures.--The readjustment benefits program as a whole will continue in 1948 at its present level, as reductions in unemployment ) allowances will be offset by increases in education and loan-guarantee expenditures. These estimates assume continuing prosperity and present legislation.


General and special accounts

[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Readjustment benefits, Veterans' Administration $1, 350 $3, 467 $3, 462 $3, 484

pensions, Veterans' Administration 1, 261 2,165 2,492 2, 492

Insurance, Veterans' Administration 1, 395 979 73 73

Hospitals, other services, and administrative costs:


Veterans' Administration 27 37 84 43

Federal Works Agency 40 50 25

War Department 37 290

Current expenses:

Veterans' Administration 377 870 890 892

Federal Works Agency 3 6 1

War Department 1 1

Total.................................................................................... 4, 414 7,601 7, 343 7,009

In the fiscal year 1947, almost 1,100,000 veterans, on the average, are drawing unemployment allowances and more than 200,000 are receiving self-employment allowances, at a time when total unemployment in the United States is less than 2,500,000. The turn-over on the allowance rolls has been rapid. Almost one-half of the 14,000,000 discharged from the services have already drawn unemployment or self-employment allowances. In recent months tightened administration and a more positive job-placement program by the employment service have contributed to a reduction in the numbers on the allowance rolls. In the fiscal year 1948 it is expected that about 900,000 veterans on the average will receive nearly one billion dollars in these allowances.

On the average 2,000,000 veterans are receiving education and training benefits in the fiscal year 1947. In 1948 possibly 2,100,000 will participate at a cost of over 2.3 billion dollars. We have had to meet an acute situation with respect to educational and housing facilities in universities, colleges, and schools throughout the country. In the fiscal year 1948 the Federal Works Agency will largely complete the conversion of war surplus facilities for educational purposes.

The number of trainees receiving on-the-job training has increased sharply to over 600,000. To guard against misuse of public funds, the Congress, in its last session, wisely provided limitations on subsistence allowances to veterans whose earnings exceed fixed monthly amounts and also clarified the standards to be used by the States in approving training establishments. Such limitations on subsistence allowances are essential to assure equity for veterans and taxpayers alike.

Amendments liberalizing the loan-guarantee program have brought a sharp increase in the number of loans guaranteed and in the average size of the guarantee. During the fiscal year 1947, new loans will be guaranteed for 750,000 veterans; in 1948, for possibly 1,000,000. Roughly, 90 percent of these loans are made to finance home purchases by veterans. Expenditures in 1948 will be somewhat higher than in 1947--just over 100 million dollars for payment of the first year's interest on the guaranteed portion of the loan and for losses which are still relatively small.

Pension payments to disabled veterans and to dependents of veterans rose sharply from 1946 to 1947, as claims arising in World War II were granted. The increase in 1947 expenditures also reflects the 20 percent rise in pension rates approved by the last session of the Congress. Estimated expenditures of 2.5 billion dollars for pensions in 1948 include about 150 million dollars for subsistence allowances to disabled trainees and students. An average of 3,150,000 individuals will receive pensions and compensation in 1948--50 percent more than in 1946. This program will continue to increase for years to come.

Expenditures for insurance, which are mostly transfers to the national service life insurance trust fund, will decline sharply in 1948 with a corresponding decline in the trust funds accumulations. The total cost to the Government for servicemen's insurance in World War II will approach 3.7 billion dollars by the end of 1948 with small additional costs to come later.

The most extensive hospital and domiciliary construction program in the history of this Nation is now under way. The construction of veterans' hospitals and domiciliary facilities now authorized and recommended for authorization aggregates 1 billion dollars. Such construction, chiefly under the direction of the Corps of Engineers, will continue to increase in the fiscal year 1948. Less than half of the total program, however, will be completed by the end of that year.

In the fiscal year 1948 the operating and general administration expenses for veterans' programs as a whole will be somewhat higher than in the present year, chiefly because of the expansion of hospital facilities and improvement of medical care.

General administrative expenses for programs other than hospital and medical care are estimated in 1948 at about the 1947 level. The number of veterans participating in the readjustment, pension, and insurance programs will be higher, but the work load will fall as the number of entrants drops off.

The Administrator of Veterans' Affairs is carrying out a decentralization program aimed at attaining more effective administration through more direct contact with veterans in their communities.

Appropiations.--For these veterans' programs, this Budget recommends appropriations of 7,009 million dollars and contract authorizations of 220 million dollars to cover obligations to be incurred in the fiscal year 1948.


Trust accounts

[ Fiscal years. In millions ]

................................................................................... Actual, Estimate, Estimate,

............................................................................. Item 1946 1947 1948


Transfers from general and special accounts $1, 382 $974 $53

Premiums, interest, and other 1, 085 641 653

Expenditures for benefits, refunds, and other (deduct) 340 298 371

Net accumulation 2, 127 1, 317 335


In spite of the achievements of the past 11 years in promoting the health, welfare, and social security of the American people, much remains to be done. Our present program affords but partial protection against the major causes of insecurity; large segments of the population are excluded from its benefits. We have not yet done enough to secure good health for the Nation.

The Federal Security Agency has recently been given broader jurisdiction over the social-welfare activities of the Government. As previously recommended, I favor creating a well integrated, yet flexible, Cabinet department of health, education, and social security to supersede this agency.

I hope that the studies already undertaken by congressional committees will result in the prompt expansion and integration of the present social-security system. There is, for example, serious need to correct inequalities between States in public assistance payments and to extend the scope of Federal aid to include general assistance programs. The temporary increase in Federal grants for public assistance enacted in the last session of Congress will expire December 31, 1947; the Congress should now consider permanent legislation in this field. The estimated expenditures for the fiscal year 1948 include provision for such legislation.

The old-age and survivors insurance system at present leaves out 40 percent of those who earn their living. Even greater numbers are outside the unemployment compensation program. It is unjust to deny these agricultural workers, public employees, and other excluded groups the protection of social insurance. The system should be extended to cover them. At the same time, retirement benefits for the aged should be liberalized to reduce the necessity for piecing out insurance benefits with public assistance payments.


General and special accounts

[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Unemployment and accident compensation:

Federal Security Agency $75 $74 $72 $72

Railroad Retirement Board 13 14 15 13

Retirement and dependency insurance:

Railroad Retirement Board 294 507 487 691

Federal Security Agency and other 24 4 4 4

Assistance to aged and other special groups 436 702 720 727

Promotion of public health:

Federal Security Agency 169 158 164 198

Federal Works Agency, Interior and War Depart-

ments 10 12 17 15

Crime control and correction 78 81 85 75

Other 13 18 16 8

Proposed legislation 74 74

Total ........................................ 1,113 1, 570 1, 654 1, 877

Recent legislation for hospital construction, for increased activities in mental health, and for expanded maternal and child-health services are substantial achievements toward improving the substandard health level of a large part of the population. But the major problem of financing health care still persists. Therefore, I again urge the Congress to enact a health-insurance program which will make adequate medical care available to everyone and provide protection against the economic hardships of sickness. Such a program should be almost entirely self-financing through pay-roll contributions.

Expenditures.--A large part of the social insurance program is financed through trust account operations which are not included in Budget expenditures. Pay-roll taxes collected by the States to finance unemployment compensation are deposited directly in a Federal trust account. The proceeds of Federal pay-roll taxes to cover old-age and survivors insurance are deducted from the receipts side of the Budget and do not appear as Budget expenditures. For the railroad retirement system, however, the payroll tax receipts are included in net Budget receipts and the amounts transferred to the trust account appear in Budget expenditures. Similarly, the Government contribution to the Federal employees' retirement funds is a transfer included in Budget expenditures.


Trust accounts

[ Fiscal years. In millions ]

Actual, Estimate, Estimate,

Fund and item 1946 1947 1948

Unemployment trust fund:


Deposits by States $1, 010 $977 $1,124

Railroad unemployment taxes 116 129 114

Transfers from general and special accounts 10 9 9

Withdrawals (deduct):

State benefit payments 1, 128 800 700

Railroad unemployment benefit payments 17 36 49

Net accumulation -9 279 498

Federal old-age and survivors insurance trust fund:

Net appropriation from general fund receipts 1,201 1, 355 1, 987

Benefit payments and administrative expenses (deduct) 321 436 543

Net accumulation 880 919 1, 444

Railroad retirement account:

Transfers from general and special accounts 292 502 481

Benefit payments (deduct) 152 198 270

Net accumulation 140 304 211

Federal employees' retirement funds:


Transfers from general and special accounts (from general govern-

ment) 247 223 246

Deductions from salaries and other income 280 228 182

Annuities and refunds paid (deduct) 266 244 168

Net accumulation 261 207 260

Trust fund withdrawals by the States to pay unemployment benefits depend not only on the number of unemployed in covered employment, but also on the rate of turnover. Budget expenditures for unemployment and accident compensation are mainly Federal grants to the States for administrative expenses of unemployment compensation. With high employment, accumulations in the trust fund will continue and administrative expenses will remain low.

Withdrawals from the trust fund for old age and survivors insurance will continue to increase over a long period. As the program matures, the number of beneficiaries and the average benefit will gradually rise. A large estimated increase in receipts of this fund in the fiscal year 1948 is based on the assumption that the employment tax will rise from the present 2 percent rate on employers and employees to 5 percent on January 1, 1948, in accordance with present law.

Estimates for Budget expenditures for retirement and dependency insurance reflect the action of the last Congress in broadening the Railroad Retirement Act by adding survivors insurance and liberalizing benefits. Employer and employee tax rates were increased, resulting in larger payments to the trust account. These payments, which vary according to the railroad-pay-roll level, are expected to continue high. The major part of administrative expenses for old-age and survivors insurance is now paid directly from the old-age and survivors insurance trust fund and is therefore not included in Budget expenditures after the fiscal year 1946; this change is responsible for a sharp drop in the Budget item for the Federal Security Agency for retirement and dependency insurance.

Federal payments for assistance to the aged and other special groups are expected to increase in the fiscal year 1948 because of a continuing long-term rise in benefit levels and case loads. A sharp rise in the expenditures in the fiscal year 1947 results from the higher public assistance benefits under temporary legislation and the inclusion of the school-lunch program in this category beginning this year.

Expenditures for promotion of public health are estimated slightly higher than in the current year. Although the total for the fiscal year 1948 includes expanded research and State-aid programs, including the Federal-State hospital program, these additions are largely offset by reductions of 24 million dollars owing to termination of the nurses' training program and of the maternity and infant-care program for families of servicemen.

Appropriations.--For the fiscal year 1948 the Budget includes appropriations of 1,877 million dollars, of which 74 million dollars are for proposed legislation. The recommended appropriation for the Railroad Retirement Board for the fiscal year 1948 exceeds the estimated expenditures to permit transfer to the trust account of taxes and income from 1947 and previous years; this transfer will take effect in the current fiscal year. The recommended appropriation for the hospital construction program is greater than the estimated expenditures because the program is just getting under way.


I have urged the Congress to enact the essential features of the general housing bill which was passed by the Senate last year. The most urgent immediate requirements are for incentives and aids to private lenders and builders to provide lower cost housing, especially rental housing, for assistance to local communities in their programs for urban redevelopment and low-rent housing, and for a permanent agency to supervise the major housing activities of the Federal Government.


[ Fiscal years. In millions ]

............................................................................. Expenditures

Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Aids to private housing:

Home Owners' Loan Corporation -$275 -$245 - $210

Mortgage purchases (Reconstruction Finance Cor-

poration) -45 233 443

Premium payments (Reconstruction Finance Corpo-

ration) 2 60

Federal Housing Administration and other -13 19 17

Public housing programs:

Veterans' re-use (Federal Public Housing Author-

ity) 29 369 30 $8

War housing (Federal Public Housing Authority and

other) 34 29 135 142

Low-rent and other (Federal Public Housing Au-

thority) 14 -10 18 8

Other housing services: Housing Expediter, and Ad-

ministrator, National Housing Agency 3 11 13 12

Provision of community facilities:

Federal Works Agency 68 53 35 4

Reconstruction Finance Corporation and other 3 25 44

Proposed legislation 14 5

Total -180 544 539 179


General and special accounts 158 526 225 179

Corporation accounts -337 18 314

Total -180 544 539 179

Expenditures.--In our housing program we shall continue to rely primarily upon private housing construction. During the past year, with the assistance of many public and private agencies, we have succeeded in securing a rapid expansion in the supply of building materials available for construction of veterans' housing. With the increased materials flow now evident, emphasis in the coming year will be focused on a few key materials, on acceleration of programs for recruitment and training of labor, and on provision of ample financing facilities for builders and prefabricators, as well as veterans and other purchasers. Particular attention will be given to measures to expand construction of rental housing. Many of these operations to aid private housing construction are reflected in expenditures of the Office of Temporary Controls, the Department of Labor, the Veterans' Administration, and the Reconstruction Finance Corporation, as part of programs classified elsewhere.

The programs of the Federal Housing Administration and the Federal Home Loan Bank Administration involve relatively small net expenditures, but are of major importance in stimulating private construction. In the fiscal year 1948 the Federal Housing Administration expects to guarantee loans on 325,000 homes and apartments, most of them for new construction. During the same period savings and loan associations which are members of the Federal Home Loan Bank System will make an estimated 300,000 loans for financing new homes.

From an expenditure standpoint, the chief aids to private housing in the fiscal year 1948 will be provided by Reconstruction Finance Corporation purchases of mortgages guaranteed by the Veterans' Administration and the Federal Housing Administration. In the fiscal year 1948, purchases of veterans' home loans are expected to account for the great bulk of all mortgages purchased by the Reconstruction Finance Corporation. With the rapid rise in guaranteed loans to veterans (see "Veterans' services and benefits"), the Federal Government has recognized that its responsibility to the veterans can be realized only by assuring private financial institutions the same ready market for these obligations that they already possess for mortgages insured by the Federal Housing Administration. The lending institutions in turn have a responsibility to make sure that their loans will benefit the veterans and will not burden them with impossible future obligations.

Reconstruction Finance Corporation funds have also been employed to make premium Payments to increase the supply of critically scarce building materials. In view of the rapid expansion in output and the decontrol of prices, it appears that these programs can be terminated before the close of the current fiscal year.

The repayment of Home Owners' Loan Corporation loans will taper off in 1948 as its outstanding loans shrink. With its profits in recent years, we can now safely predict that this Corporation--which refinanced the loans of more than a million distressed borrowers during the depression--will liquidate without any loss to the Federal Government.

Expenditures on public housing programs are now concentrated almost entirely on liquidation of war housing activities and provision of emergency housing units for war veterans. Conversion of barracks and other types of temporary war structures-the largest expenditure item in 1947--will be substantially completed in the current year. Under this program an estimated 255,000 units are being provided for veterans and their families--more than half for veterans in educational institutions.

The continued housing shortage in many industrial areas has made it necessary for the Government to continue operating many temporary war housing units longer than previously expected. More than half of these units are occupied by veterans and servicemen. Expenditures in the fiscal year 1948 for management and disposition of war housing show an apparent increase primarily because receipts from the program are now deposited in miscellaneous receipts, rather than credited against expenditures. Payments of 85 million dollars also are forecast to transfer previous net receipts from rentals and sales into the general receipts of the Treasury. If allowance is made for these transfers and nonrecurring net receipts of 64 million dollars in 1947 from liquidation of the Defense Homes Corporation, program expenditures for war housing will decline substantially in 1948 from 1947 levels.

Receipts from the low-rent housing program will temporarily exceed expenditures in the current fiscal year because of anticipated repayments of loans by local housing authorities. Annual contributions to local housing authorities required by previous contracts will rise gradually as wartime tenants are replaced by low-income occupants.

Expenditures of the Federal Works Agency for defense public works will be virtually completed in the fiscal year 1948. Disbursements to localities for detailed planning of local public works will be limited to previous commitments under existing legislation.

On the other hand, disbursements on Reconstruction Finance Corporation loans to local agencies for construction of self-liquidating projects will be increased as materials become available to resume urgently needed work. To make sure that funds are adequate for these disbursements, I request that the present 100-million-dollar limitation on Reconstruction Finance Corporation loans for these purposes be increased to 125 million dollars.

Appropriations.--Of the total of 179 million dollars in appropriations estimated for the fiscal year 1948, an estimated 150 million dollars will be from current rental and disposition receipts of the veterans' re-use and war housing programs. Most of the 1948 expenditures will be made from Corporation funds or from unexpended balances of previous appropriations.


Our generous provision for education under the veterans' program should not obscure the fact that the Federal Government has large responsibilities for the general improvement of educational opportunities throughout the country. Although the expenditure estimates for the coming fiscal year are limited to present programs, I have long been on record for basic legislation under which the Federal Government will supplement the resources of the States to assist them to equalize educational opportunities and achieve satisfactory educational standards.

The relationship of the Federal Government to higher education also demands serious consideration. The veterans' readjustment program, which compelled a rapid emergency expansion of facilities to meet immediate needs, has focused attention on this fundamental problem. A Presidential commission on higher education is studying the matter because of its great importance to the future of the Nation.

Many agencies of the Federal Government carry on research as a part of their regular programs. But we need a central agency to correlate and encourage the research activities of the country. While freedom of inquiry must be preserved, the Federal Government should accept responsibility for fostering the flow of scientific knowledge and developing scientific talent in our youth. To accomplish this, I recommend again that a National Science Foundation or its equivalent be established. The Scientific Research Board appointed in October 1946 is now making a study of the research program of the entire Federal Government in its relation to all other research activities planned or in progress. Its report will undoubtedly be of service in establishing a proper program for the new agency. It is assumed that no additional expenditures will be required during the fiscal year 1948.

Expenditures.--Federal expenditures for promotion of education, apart from the veterans' education program, now consist almost entirely of vocational grants to States, support of land-grant colleges, and general administration of the Office of Education. The Federal Works Agency will complete during the fiscal year 1948 its expenditures for the maintenance and operation of schools in war-affected communities. Corresponding expenditures prior to the current fiscal year are classified in "Housing and community facilities."


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Promotion of education:

Office of Education, Federal Security Agency $27 $28 $35 $35

Federal Works Agency 4 3

Educational aid to special groups (except veterans):

Bureau of Indian Affairs (Interior) 11 12 12 12

Other agencies 2 3 6 6

Library and museum services 6 8 17 18

General-purpose research:

Office of Scientific Research and Development 34 4

Commerce Department 8 11 14 14

Other agencies 1 1

Total 88 71 88 85

In August 1946, the Congress increased the authorization for vocational education by 15 million dollars. It is not possible at this time, however, for the State and local governments to make firm commitments on the availability of matching funds for the development of new programs of vocational education or the expansion of existing programs. Therefore, although the estimates of appropriations and expenditures for the fiscal year 1948 include an anticipated supplemental appropriation under this authorization, it may be necessary to increase the amount on the basis of later information from State and local governments. Money for this purpose has been included in the reserve for contingencies.

Expenditures for educational aid to special groups include funds for education of Indians through the Department of the Interior and smaller amounts for assistance to the blind and the deaf and to Howard University through the Federal Security Agency. The major part of the estimated increase in expenditures is for construction of four buildings at Howard University, for which Congress has already appropriated money for drawing plans. Their construction is made urgent by the pressure of enrollment upon all existing facilities.

The increase in expenditures for library and museum services is due chiefly to the general expansion of activities of the Library of Congress.

Research is inherent in many Federal programs and consequently the bulk of such expenditures is included in the specific programs to which the research relates. The principal items of continuing expenditure for those research programs which serve several purposes or are general in character are in the Bureau of the Census, the Bureau of Standards, and the Coast and Geodetic Survey-all within the Department of Commerce. Some expansion of these activities is contemplated in the estimates for the fiscal year 1948. The Office of Scientific Research and Development, which was devoted to research in support of the war effort, will be almost completely liquidated in the fiscal year 1947.

Appropriations. The total of appropriations for education and general research is 85 million dollars for the fiscal year 1948--3 million dollars less than the estimated expenditures. This total includes a tentative estimate of the amount which will be required under the new authorization for vocational education.


Because of high consumer incomes in the United States and the continuing world shortage of many foods, the demand for farm products will doubtless remain strong throughout the fiscal year 1948. Agricultural production goals for the 1947 crop year, with a few exceptions, will call for another year of maximum output.

The demand for American farm products, however, cannot be counted upon to continue indefinitely at the present high level. Under present legislation the Department of Agriculture is required to support prices of most agricultural commodities until December 31, 1948.

We must design our agricultural policies to work toward a better balance of supply with demand and so avoid excessive expenditures for price support. We should facilitate the transfer of unnecessary farm labor and resources from agriculture to industrial and other pursuits. We shall need also to devise ways of supporting farm income which will retain export markets for wheat, cotton, and tobacco, and at the same time give the American consumer the benefit of increasing efficiency in farm production.

The authority of the Commodity Credit Corporation expires on June 30, 1947. Since the Corporation now has a State charter, I am recommending that it be rechartered by act of Congress and that its present borrowing authority of 4,750 million dollars be renewed.

Expenditures.--By the fiscal year 1948 the program of the Commodity Credit Corporation will be limited almost entirely to price support for agricultural commodities. Reimbursements from lend-lease, United Nations Relief and Rehabilitation Administration, and foreign governments will be largely completed in the next 6 months. Liquidation of inventories is tapering off. For the present, the high level of farm prices has made price-support outlays unnecessary except for a few commodities such as potatoes and eggs.

In 1948, however, even with continued general prosperity, an estimated 330 million dollars will be spent to support agricultural prices. Larger outlays will be required should markets weaken seriously. In addition, loans by commercial banks guaranteed by the Commodity Credit Corporation will probably be substantial. The present borrowing authority, if renewed, will be ample to support agricultural prices during the fiscal year 1948.

Receipts from other corporate transactions in the Department of Agriculture are expected to be lower in 1947 and 1948 than in 1946. In 1946 there were unusually large repayments to the farm credit agencies and large receipts in revolving funds of the Treasury from return of capital of mixed ownership corporations. In view of the large repayments and refinancing of the loans of the Federal Farm Mortgage Corporation, this Budget recommends that the Corporation's borrowing authority of 2 billion dollars be reduced to an amount more nearly commensurate with foreseeable needs. This recommendation should be considered when the Farm Credit Administration submits its report on the mortgage-loan programs of the Corporation and the Federal land banks.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Loan and investment programs:

Department of Agriculture:

Price support, supply, and purchase programs

(Commodity Credit Corporation) -$1, 319 -$79 $330

Other corporate transactions -261 -73 -50 $23

Farmers' Home Administration 30 40 154 172

Rural Electrification Administration 11 12 25 31

Reconstruction Finance Corporation:

Loans to Rural Electrification Administration 74 200 300

Other loans -24 10 -17

Other financial aids:

Department of Agriculture:

Conservation and use 311 352 311 202

Exportation and domestic consumption 75 80 66 148

Sugar Act 54 52 53 55

Other 3 5 7 9

Food subsidies (Commodity Credit Corporation and

Reconstruction Finance Corporation) 1, 634 325 6

Agricultural land and water resources 39 52 53 49

Development and improvement 134 139 142 135

Total 752 1,117 1, 381 824


General and special accounts:

Postwar price support 500

Cancellation of notes of Commodity Credit

Corporation 921 830

Other 535 661 773 824

Corporation accounts:

Postwar price support -500

Cancellation of notes of Commodity Credit

Corporation -921 -830

Other 217 456 608 ...........

Total 752 1, 117 1, 381 824

The rural rehabilitation and farm tenant programs, formerly under the Farm Security Administration, and the Crop and Feed Loan Division of the Farm Credit Administration have been merged to form the new Farmers' Home Administration. This program shows an apparent increase in 1948, solely because of the changed method of financing required in the Farmers' Home Administration Act of 1946.

The increased estimates for Rural Electrification Administration loans will permit expansion of a program that is urgently needed by farmers but has been held back during the war years.

Commitments for payments to farmers under the Agricultural Adjustment Administration conservation and use program for the 1947 crop year have already been made as provided by the 1947 appropriation act. Expenditures for this program, including administrative expenses, are estimated at 311 million dollars in the fiscal year 1948.

A year ago the Budget Message recommended gradual reduction of these payments, and that recommendation is now renewed. More than 60 percent of the total payments go to about one-eighth of the Nation's farmers. Most of this money thus is being paid to farmers who, because of their strong position in American agriculture, would undoubtedly continue the best farm management practices without the persuasion of a bonus from the Treasury.

We should shift our effort from this kind of subsidy to providing technical guidance to all farmers for soil conservation and management, along the lines of the Soil Conservation Service and the Extension Service. I therefore propose that the appropriation act limit the conservation and use program for the crop year 1948 to 200 million dollars instead of the 300-million-dollar program to which we are committed for the crop year 1947. This will not affect expenditures materially until the fiscal year 1949.

Expenditures to encourage exportation and domestic consumption of farm products are financed under section 32 of the act of August 24, 1935, by a permanent appropriation equal to 30 percent of customs receipts. In the fiscal year 1946 expenditures for the school-lunch program were financed by this appropriation. These have been transferred to "Social welfare, health, and security" in later years. The remaining expenditures in 1947 and 1948 are for export subsidies, diversion of surplus commodities to new uses, and purchase and distribution of surplus agricultural commodities to State welfare agencies. Addition of the cotton export subsidy program previously financed by the Commodity Credit Corporation and other increases offset the transfer of the school lunch program.

Almost all wartime food subsidy programs of the Commodity Credit Corporation and the Reconstruction Finance Corporation have now been discontinued. Subsidy payments from corporate funds in the fiscal year 1948 will be limited to sugar, which is expected to remain in short supply. In addition, payments to sugar growers in the United States under the Sugar Act program will remain at approximately the present level.

Expenditures for agricultural land and water resources, which include the Soil Conservation Service, upstream erosion and flood control, water conservation and utilization, and the submarginal land program, are estimated to increase slightly in 1948.

Expansion of agricultural research under the Research and Marketing Act of 1946 will cost an additional 18 million dollars in the fiscal year 1948. The farm labor supply program will decrease by about 16 million dollars. Other general programs for the development and improvement of agriculture, such as the Extension Service, the scientific research agencies, and the staff agencies of the Department of Agriculture, will remain at about the present level. Thus, the programs in this category as a whole will increase by 3 million dollars.

Appropriations.--To carry out our agricultural programs, I recommend that the Congress appropriate 824 million dollars for the fiscal year 1948. In addition, since not all of the permanent appropriation of section 32 funds will be required to subsidize exportation and domestic consumption of surplus agricultural commodities, the transfer of 100 million dollars to the Agricultural Adjustment Administration program for conservation and use of agricultural land resources is recommended. In 1947, 42.5 million dollars of section 32 funds were so transferred. In view of the probable need for these funds after 1948 for surplus disposal programs, however, we cannot look forward to their continued annual use for the conservation and use program.

The operations of the various agricultural corporations and the agricultural programs of the Reconstruction Finance Corporation will be financed out of corporate funds borrowed from the Treasury. It is estimated that 830 million dollars of notes owed the Treasury by the Commodity Credit Corporation will be canceled in 1948 pursuant to the appraisal of the assets of the Corporation as of June 30, 1946. This cancellation of notes will be an expenditure under general and special accounts and a receipt under corporation accounts, and thus will have no net effect on Budget expenditures or on the appropriations recommended for 1948.


The natural resources program has been increasing to fill some of the gaps arising from wartime deferments and depletions. The estimated expenditures for the fiscal year 1948 represent a further expansion over the current year. They do not contemplate initiation of large new projects.

The harnessing of atomic energy was a war achievement, and it remains of major military significance. With the appointment of the Atomic Energy Commission last fall we have entered on a new phase of development. This Commission has assumed direction of the Manhattan Engineer District project. Our aim is to bring the benefits of atomic research to industry and medicine and to enrich standards of well-being.

In line with the shift in emphasis, the atomic energy program, since December 31, 1946, is classified in "Natural resources." This transfer in the middle of the current fiscal year and the inclusion on a full-year basis in 1948 are major reasons for the increases in expenditures for resource development in both years.

Expenditures.--In order to push forward basic research in development and use of atomic energy, I am recommending a program which will involve expenditures of 444 million dollars in the fiscal year 1948. This compares with total outlays of 385 million dollars in the current fiscal year, of which 179 million dollars are shown in "National defense."

Much of the productive future of this Nation lies in the effective development of our river basins. Under the Bureau of Reclamation and the Corps of Engineers, this work will go forward in 1948 at a somewhat increased expenditure rate. The estimates provide for continuation of projects under way and starting those projects for which 1947 appropriations were made, but which have been temporarily deferred.

The only appropriations now recommended are for projects partly provided for in previous appropriation acts. A substantial portion of the expenditures is for multiple-purpose projects which, in addition to flood control, navigation, and irrigation benefits, will supply needed power for industry and agriculture.

Some expansion of transmission facilities is needed by the Bonneville Power Administration to market the hydroelectric power generated at certain of the Government's multiple-purpose dams. Receipts of 25 million dollars from the sale of power by this agency and the Southwestern Power Administration will be paid into miscellaneous receipts of the Treasury in the fiscal year 1948.


[Fiscal years. In millions]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Atomic energy:

Atomic Energy Commission $201 $443 $250

Other agencies 5 1

Land and water resources:

Corps of Engineers (War) $89 192 255 189

Bureau of Reclamation (Interior) 62 145 176 151

Bonneville and Southwestern Power Administrations

(Interior) 9 20 27 23

Tennessee Valley Authority 5 36 47 27

International Boundary and Water Commission

(State) 1 4 10 9

Other (Interior) 10 12 15 15

Forest resources:

Forest Service (Agriculture) 40 53 53 54

Department of the Interior 3 3 3 3

Mineral resources:

Department of the Interior 18 21 23 20

Navy Department 3 6 4

Recreational use of resources (Interior) 5 15 19 13

Other resources (Interior) 12 17 24 26

Total 257 728 1, 101 779


General and special accounts:

Tennessee Valley Authority 21 33 45 27

Other 254 694 1, 054 752

Corporation accounts:

Tennessee Valley Authority -16 3 2

Reconstruction Finance Corporation - 2 - 2

Total 257 728 1, 101 779

Expenditures of the Tennessee Valley Authority will increase in the fiscal year 1948 as work progresses on the two large dams provided for in the 1947 appropriations. By the end of 1948 construction of the major dams will be almost complete; thereafter, the principal activity will be directed toward the effective utilization of local resources for industrial and agricultural improvement within the valley. The Tennessee Valley Authority finances its power operations and transmission facilities from its own revenues. The Authority will continue the practice started in the last fiscal year of making payments to the Treasury.

Expenditures by the International Boundary and Water Commission for the United States share of the construction of dams and other water improvements on the Rio Grande, in cooperation with the Mexican Government, will be expanded in 1948, pursuant to the 1944 treaty.

Among the other expenditures by the Department of the Interior for land and water resources in 1948, the major portion is for the use, protection, and improvement of the public lands which it manages. The estimated expenditures for 1948 for grazing activities contemplate restoration of the program to approximately the 1946 level. Appropriations for the fiscal year 1947 were cut to a level that does not permit adequate protection and conservation of these grazing resources. The Department of the Interior is investigating the feasibility of raising grazing fees to cover the operating costs of the Grazing Service and also service charges on the cost of capital improvements.

Because of critical needs for lumber, our forests, both public and private, must be administered to yield the maximum immediate supply without unduly impairing future timber resources. Expenditures for the Forest Service for the fiscal year 1948 provide for increased timber-sale administration and forest-fire control. These increases are offset by decreases in other phases of the work.

Our mineral resources have been seriously depleted during the war. Substitutes or new sources of supply must now be found. As part of our military program we are accumulating a strategic stock pile of critical materials from both domestic and foreign sources. To plan this program successfully and to assure adequate supplies for industrial and consumer use, it is essential that we have full information on our domestic resources. Consequently, the Bureau of Mines and the Geological Survey will make small expansions in their mineral resource programs in 1948.

During the war the national park system has been maintained on virtually a custodial basis only. Increased expenditures are required in 1948 to provide the most needed improvements in roads, parkways, buildings and utilities, and for general administration and protection.

Other resource programs of the Department of the Interior will increase by 7 million dollars in 1948. General surveys and topographical mapping activities by the Geological Survey must be accelerated to provide basic data needed for natural resources programs and industrial development. Expenditures for conservation and development of fish and wildlife resources reflect a small increase in operating costs.

Some progress has been made in the development of Alaska, but only a beginning. Included in several of these programs are expenditures for the investigation and development of the natural resources of this vast area.

Appropriations.--Appropriations of 779 million dollars for resource development in the fiscal year 1948 include an estimated supplemental of 4 million dollars for the Forest Service. The total is substantially below estimated expenditures for that year. Postponement of some of the public works projects for flood control and reclamation in the current year will leave available in 1948 substantial balances from earlier-year appropriations. Similarly, the curtailment of other resource development activities has resulted in some carry-over of appropriations for these programs. A smaller amount from 1948 appropriations will be available to finance expenditures in later years.

In the case of the Atomic Energy Commission, the Budget recommendation includes contract authority in the amount of 250 million dollars in addition to the 250 million dollars of recommended appropriations. The appropriations to discharge obligations under this contract authority will be made in future years when the payments become due.


Six years of deferred maintenance and improvement must be made up before the basic postwar needs of motor and water transportation are met. The highway system, particularly, has fallen far behind the standards which should prevail under conditions of rapidly growing use. Urban congestion is again becoming a serious problem. Likewise, the enormous expansion of civil aviation since VJ-day has thrown an increasing burden upon inadequate airway and airport facilities. An expanded program is essential if undue hazards in the air are to be avoided and if the development of aviation is to continue without serious technical impediment. At the same time it is hoped to restore prewar service standards in the postal service. The enforcement of regulatory standards, particularly those designed for accident prevention in all types of transport, should be restored, at least to prewar levels.

It is the policy of the Government to withdraw from ship operation as rapidly as possible and to dispose of vessels in a manner that will promote a large and effective merchant fleet under our flag. But, since private operators see little prospect of profit in the coastwise trade and much of the overseas traffic is regarded as temporary, Government operations have continued. The Maritime Commission reconversion program, the lay-up of vessels in the reserve fleet, and the preparation of war-built vessels for sale are under way.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Promotion of the merchant marine (Maritime

Commission) $374 -$117 $204 $6

Provision of navigation aids and facilities:

War Department 93 124 152 120

Coast Guard 168 157 149

Provision of highways:

Federal Works Agency 77 268 393 300

Other 13 33 35 33

Promotion of aviation:

National Advisory Committee for Aeronautics 32 38 44 36

Commerce (Civil Aeronautics Administration) 62 92 149 152

Other 5 2

Regulation of transportation 22 25 15 15

Other services to transportation:

Reconstruction Finance Corporation (railroad loans). -43 -31 -3

Other 17 19 21 22

Postal service (Post Office Department) 161 276 352 353

Regulation of communications (Federal Communi-

cations Commission), and other services to communi-

cations. 11 7 9 9

Total 824 905 1,530 1,196


General and special accounts 866 936 1, 533 1, 196

Corporation accounts -43 -31 -3

Total 824 905 1, 530 1, 196

Expenditures.--The Maritime Commission, by its petition before the Interstate Commerce Commission, is attempting to obtain revision of the railroad rate structure in order to permit resumption of domestic shipping under private auspices. We must look to the domestic trade to provide the active core of our merchant fleet reserve, since we cannot hope to maintain in the foreign trade alone a merchant fleet adequate for the Nation's security. Because the long-run needs of foreign trade are not yet clear, the expenditure estimates contemplate only a moderate expansion in operating subsidies. Construction of new vessels is limited to those for which private purchasers are available and those essential to meet specialized needs for which war-built vessels cannot be adapted. I hope that the rate of ship disposition and liquidation of Government operations can be expedited.

Under the War Department are two major functions relating to transportation--the Panama Canal and the rivers and harbors work of the Corps of Engineers. To make up deferred maintenance, to continue at a minimum rate river and harbor construction projects already under way, and to make a slow beginning on projects authorized under the 1947 appropriation it is necessary to expand the expenditures during the fiscal year 1948.

Other aids to navigation are those maintained and operated by the Coast Guard (in the Treasury Department). The large decrease in the fiscal year 1948 reflects the return to a normal program, the completion of previously deferred work during 1947 and early 1948, and some reduction in Coast Guard aviation. In the interest of reducing expenditures, the installation of the Loran system of radio navigation aid will be spread over a number of years.

Most Federal expenditures for highways are concentrated in the Federal-aid program under the Federal Works Agency. This is a matching program in which Federal expenditures depend upon the level of State activity within the authorized annual rate of 500 million dollars established for each of the first three postwar years by the Federal-Aid Highway Act of 1944. Materials shortages, contracting difficulties, and high costs have delayed this program, but the situation should ease by next year. Sums apportioned to the States, however, are available only for a year after the close of the fiscal year for which they are authorized, and the rate of expenditure has thus far been well below congressional authorizations. States are, therefore, under pressure to obligate these funds at once. As has been urged by many of the States, it is recommended that the Congress extend for one additional year the period during which these funds may be expended. Moderate increases for the Agriculture and Interior Departments are included to begin to overcome the long deferment of work on the forest roads and trails and Indian roads.

The sharp upward trend in expenditures by the Department of Commerce for civil aviation results from the rapid expansion of the industry. Inadequate facilities and services have caused serious congestion and a threat to air safety. The expansion and modernization of the airways system provided in these estimates is essential for the continued progress of the industry and could not be reduced without great risk.

As the rapid growth of aviation continues, I believe it is unwise to place the entire burden of expanding, improving, and maintaining the airways upon the general tax-payer. Instead, civil aviation should bear a reasonable share. The Department of Commerce is considering the feasibility of various methods to recover part of the expenses from the users.

Substantial expenditures for grants-in-aid to airports under the 1946 legislation are anticipated for the first time, increasing from 7 million dollars in the fiscal year 1947 to 50 million dollars in 1948. This will be channeled as far as possible into urgent work designed to relieve bottlenecks in air transport, but the apportionment formula will limit the discretion of the Civil Aeronautics Administration in scheduling first the most needed projects.

Unless legislative action is taken to revise postal rates, the Post Office deficit threatens to be the largest in history. Mail volume has expanded enormously, but current operating costs have increased even more rapidly. This is the chief cause of the deficit. Further temporary additions to expenditures result from the need to take up deferred maintenance and replace equipment. The Post Office Department is studying its operations with a view to introducing economies. I am instructing the Postmaster General to institute all operating economies consistent with reasonable service and to prepare a comprehensive recommendation for rate revision sufficient to wipe out the deficit.

Appropriations.--Appropriations of 1,196 million dollars are included in the Budget for the fiscal year 1948 for "Transportation and communication," compared with estimated expenditures of 1,530 million dollars. Unobligated balances in Maritime Commission revolving funds are adequate for all expenditures with the exception of an appropriation of 6 million dollars recommended for the maritime training fund and aid to State marine schools. War Department and Federal Works Agency appropriations fall below expenditure estimates because of the deferral to 1948 of work for which appropriations were already made in 1947. The appropriations total includes 50 million dollars for the Civil Aeronautics Administration as an estimate of the appropriation request that will be made for the airport program as soon as the plans of the Agency are sufficiently matured. Contract authorizations of 500 million dollars are included for the Federal-aid postwar highway construction program.


By the end of the current fiscal year, almost all wartime controls of business will have ended. I recommend that the Congress extend the authority for rent control; price control on sugar and sirups, and rice; sugar rationing; export and import controls; priority and allocation controls on a few commodities still in extremely short supply; and a few other minimum controls which are indispensable for the time being.

Now that we are returning to a peacetime economy that depends for its success on private enterprise, the Government should resume and expand its services to business, including both financial and nonfinancial aids. In addition, free enterprise depends on positive Government action to preserve competition and control monopolies--proper functions that a democratic government must not neglect.

Expenditures.--During the rest of this fiscal year, the Office of Temporary Controls will discontinue as rapidly as possible direct controls over business operations previously administered by the Civilian Production Administration and the Office of Price Administration. Although a few essential controls should be retained a little longer, these, too, will be terminated as soon as conditions permit. Among the other regulatory agencies, Foreign Funds Control (Treasury) and Solid Fuels Administration (Interior) will also cease operations this year.


[Fiscal years. In millions]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Promotion or regulation of business:

Office of Temporary Controls $184 $133 $55 $52

Commerce Department 11 22 28 31

Others (Federal Trade Commission, Federal Power

Commission, etc.) 15 15 13 13

Business loans and guarantees:

Reconstruction Finance Corporation loans to

business - 111 -21 57

Retirement of Smaller War Plants Corporation capital

stock 100

War damage insurance (War Damage Corporation) -2 1 211

Aids to private financial institutions (Reconstruction

Finance Corporation) -72 -73 -55

Control of private finance (Securities and Exchange

Commission) 5 5 6 6

Proposed legislation 10 14

Total 30 83 426 116


General and special accounts 216 176 112 116

Corporation accounts -185 -93 314

Total 30 83 426 116

The peacetime regulatory agencies, however, must be strengthened from low levels justified during the war by the existence of other direct controls. This Budget, therefore, provides for the necessary increases in such essential agencies as the Federal Trade Commission, the Federal Power Commission, the Antitrust Division (Justice), and the Tariff Commission.

The Antitrust Division will concentrate its efforts on major violations of the antitrust laws. The Federal Trade Commission will increase its effectiveness by operating on an industry-wide basis, rather than through the slower procedure of individual complaints. It will also sponsor a larger number of industry conferences designed to locate and eliminate unfair trade practices through cooperative action.

In the past year, we have made a fine start in building up the business service programs of the Department of Commerce from their low wartime levels. To provide necessary information for business, provision of funds is recommended for a census of manufactures (already authorized by law) and likewise for a census of business to be authorized by proposed legislation. No census has been taken in either area since 1939 and present information is badly out of date. A small but necessary increase in the business service activities of the Bureau of Foreign and Domestic Commerce is also recommended. The Patent Office urgently needs increases in personnel to cope with the growing backlog of patent applications and to handle registrations under recent trade-mark legislation.

The Reconstruction Finance Corporation estimates assume that repayment of outstanding wartime loans to business enterprises will continue in the fiscal year 1948, but at a slower rate. In its peacetime business loan program, the Corporation has been authorizing about 1,000 loans a month, chiefly to small business. Ninety percent of them are in amounts of 100,000 dollars or less. The new program also emphasizes guarantees of private credit rather than direct Government loans. These guarantees will not require disbursements in any large amount unless there should be an economic recession. In this event the Reconstruction Finance Corporation stands ready to purchase the loans offered by participating banks.

Since January 1946, the Reconstruction Finance Corporation has been administering the loan and lease program of the Smaller War Plants Corporation. Disbursements on previously authorized Smaller War Plants Corporation loans are nearly finished and outstanding loans are gradually being repaid. In the fiscal year 1948 the Reconstruction Finance Corporation plans to retire an estimated 100 million dollars in Smaller War Plants Corporation capital stock.

The War Damage Corporation, a Reconstruction Finance Corporation subsidiary, which at its peak had a total of 140 billion dollars of war damage insurance in force, is also terminating its operations. By 1948 it will be in full liquidation. The Reconstruction Finance Corporation has been directed to return to the Treasury the 210 million dollars of net profits from this operation.

The expenditures of 310 million dollars for retirement of Smaller War Plants Corporation capital and return of War Damage Corporation profits will be paid into miscellaneous receipts and thus have no net effect on the total Budget. With these transfer items eliminated, the net increase of expenditures under this function in 1948 is 33 million dollars.

Federal and State bank supervisory authorities are making special efforts to encourage banks and insurance companies to complete repayment of their prewar obligations to the Reconstruction Finance Corporation. By June 30, 1948, the outstanding volume of such loans and investments will be down to 100 million dollars out of a total of about 3.5 billion dollars disbursed since 1932.

With stock market activity and new security issues far above wartime levels, the Securities and Exchange Commission requires additional funds to rebuild its depleted staff and thus provide more adequate protection for the millions of investors.

Appropriations.--To finance the expenditures for these programs, estimated appropriations in the fiscal year 1948 of 116 million dollars include anticipated additional appropriations of 53 million dollars required by proposed extension of the existing authority of the Office of Temporary Controls and the authority of the Department of Commerce to control exports. They also include 14 million dollars for new censuses under proposed new legislation.


The facilities of the Federal Government for dealing with the welfare of labor and with labor-management disputes provide for the encouragement of collective bargaining, administration of laws and regulations to protect the working force, assistance to States in promoting employment opportunities, and gathering of basic labor information.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Mediation and regulation:

Labor Department $14 $11 $9 $9

National Labor Relations Board 4 5 8 8

Other 6 3 4 4

Training and placement:

Public employment offices 7 190 78 78

Other 1 3 3 3

Labor information and statistics and general admin-

istration 8 12 14 14

Proposed legislation 3 3

Total 104 124 118 118

In my message on the State of the Union, I have asked that the machinery in the Department of Labor for facilitating collective bargaining and expediting the settlement of labor-management disputes be amplified and strengthened. I have included administrative funds for this purpose under proposed legislation.

I recommend also that the Congress authorize grants to States through the Department of Labor for programs fostering safe working conditions. The toll resulting from industrial hazards reduces the productive capacity of the labor force. The new program should be administered by State departments of labor under Federal standards. Funds for this purpose have likewise been included under proposed legislation.

Expenditures.--The National Labor Relations Board has an accumulation of unresolved cases awaiting action owing to the increased incidence of representation cases and unfair labor practice cases and to the reduced appropriations available for the Board's work this year. Delay in settling such cases is in itself a cause of labor disturbance. Apart from the backlog of unsettled cases, the number of cases brought before the Board for settlement has increased. The program submitted in this Budget is designed to reduce the backlog and keep the Board more nearly current in handling cases. This should diminish the incidence of strike action by labor organizations which is encouraged by tardy handling of cases.

The public employment service system, although now composed of the coordinated employment office facilities of the several States, is still financed in full by the Federal Government. Expenditures for these offices for the fiscal year 1947 are estimated at 90 million dollars. This includes the increased cost of State operation and 11 million dollars of nonrecurring terminal-leave pay for Federal employees upon the return of the employment service to the States. It is my hope that the public employment service system will maintain the high standard of operations and the efficient procedures which have proved essential for facilitating the flow of workers to areas where they are needed.

I propose also increased expenditures for labor information and statistics to facilitate collective bargaining and meet the more important needs of labor, business, Government, and the general public for current data concerning employment, wages, prices, and the like.

Appropriations.--For 1948, I recommend appropriations of 118 million dollars, including the amount for proposed legislation.


The principal types of expenditures in "General government" are for (1) legislative and judicial activities, and executive management and control; (2) the Government payment toward civilian employees' retirement; (3) other services covered by appropriations which relate to more than one function; and (4) a few special programs necessitated by the war, such as disposal of surplus property, which do not logically belong in any other category.

Expenditures for these functions in the fiscal year 1948 are expected to decline only moderately from the comparable total for 1947, because they will still include a substantial amount for war liquidation. Such activities will account for more than one-third of all the expenditures in this category.


Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropria-

Program or agency concerned 1946 1947 1948 tions, 1948

Legislative functions $23 $29 $29 $25

Judicial functions 13 17 17 18

Executive direction and management 8 7 7 7

Federal financial management:

Treasury Department 350 357 361 365

General Accounting Office 38 41 37 37

Other 9 5 5 1

Government payment toward civilian employees'

general retirement system 245 220 244 244

Other general government:

Reconstruction Finance Corporation -17 62 66

War Assets Administration 98 494 393 328

Federal Works Agency 61 79 81 70

Commerce Department 25 30 34 38

Justice Department 35 39 39 39

Interior Department 48 22 25 21

War Department civil functions (cemeteries) 2 78 60 58

Other 33 66 94 91

Total 972 1, 545 1, 492 1, 341


General and special accounts 989 1, 483 1, 427 1, 341

Corporation accounts -17 62 66

Total 972 1, 545 1, 492 1, 341

Expenditures.--The work load of the Treasury Department remains at a high level. For example, in the Bureau of Internal Revenue tax returns for previous years remain to be audited, pending excess profits-tax cases must be investigated and settled, special efforts are continuing to reduce tax evasion, and the number of tax returns to be reviewed is increasing as war veterans revert to civilian status. Further, with the resumption of foreign trade and passenger travel and the designation of new air fields in the United States and Alaska as ports of entry, the staff requirements of the Bureau of Customs are above the level of 1946.

The Government payment toward the Federal civilian employees' general retirement system will be larger in the fiscal year 1948 than in the current year. About half of the increase reflects the advance in salary rates which took effect July 1, 1946, and was not covered in the appropriation for 1947. The remainder of the increase applies against previous liabilities of the Government to the retirement system.

The surplus property disposal program, under the War Assets Administration, is at its peak during the current fiscal year. Henceforth, it will be tapering off, but disposal will be relatively more difficult as Government stocks of scarce items are reduced and as civilian production increases. The statutory provisions governing the sale of surplus property which give preference to certain groups of purchasers have greatly complicated the disposal program, slowing down sales and augmenting administrative costs to such an extent that Congress might well reconsider these provisions. The expenditures of the War Assets Administration cover only part of the handling of surplus property; many other Federal agencies participate in this program. The proceeds from sales of surplus property are included in miscellaneous receipts of the Treasury.

The return of war dead from overseas is a civil function of the War Department which is just getting under way. The total cost of this program is estimated at 234 million dollars. Efforts will be made to complete this work in the next 2 years.

Public buildings construction programs of the Federal Works Agency will remain at a low level, but certain expenditures for repair and maintenance of buildings cannot be delayed. Together with expenses for current operation of the buildings, these constitute a sizable portion of "General government" expenditures.

Appropriations.--The appropriation total of 1,341 million dollars for the fiscal year 1948 includes 75 million dollars for anticipated supplemental appropriations. The total is well below the estimated expenditures, mainly because the War Assets Administration will be paying obligations incurred against earlier appropriations.


The volume of interest payments on the public debt reflects the magnitude and composition of the debt, as well as the level of interest rates. As long as prosperity permits, our objective should be a steady retirement in the outstanding debt. Interest rates will be kept at present low levels through continued cooperation between the Treasury Department and the Federal Reserve System.

The estimated increase of 50 million dollars in interest payments in 1948 over 1947 is due principally to (1) increased interest payments on the larger volume of special issues held by trust funds which pay relatively high rates; (2) increased accruals on savings bonds, owing to a large volume of bonds reaching higher accrual brackets; and (3) the change from semiannual to annual payment of interest on certificates of indebtedness, effective September 1, 1946. The net effect of these factors has been to increase interest costs in 1948, even though the debt has been declining since its peak on February 28, 1946.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropri-

Agency 1946 1947 1948 tions, 1948

Treasury Department $4, 748 $4, 950 $5, 000 $5, 000

Interest payments are made on the basis of a permanent appropriation. The amount shown under recommended appropriations is equal to the estimated expenditures.


Tax refunds will be a large item in the Budget for some years to come, largely because of overpayment of individual income tax under the current payment system and settlement of the wartime income- and profits-tax liabilities of corporations. The overpayments made each year under the current payment system are in the main refunded during each immediately succeeding year. The refunds to corporations, attributable to wartime tax liabilities, will be spread over the next several years because of the time required to effect final settlement in many cases where the various carry-back and other relief provisions are applicable. If the war excise-tax rates are continued, refunds in 1948 will be 123 million dollars lower.


In the Budget, construction projects are listed in the programs which they serve. In total the expenditures for civil public works are estimated at 2.1 billion dollars in 1948 compared with 1.7 billion dollars in 1947.

Federal public works provide capital assets from which the Nation derives benefits over a long period of time. During the past decade the responsibility of the Federal Government, both directly and through grants to the States, has increased. Public construction is essential to our veterans, natural resources, transportation, social welfare, and housing.

Construction programs have to be scheduled over a number of years. The work done in any one year is largely controlled by legislation and appropriations in prior years. For these reasons the program for 1948 is larger than that for 1947. While curtailment orders in August 1946 slowed down the program, they could not alter the trends already established by legislation.

The recommendations for the fiscal year 1948 for grant and loan programs allow those programs to continue at rates consistent with authorizing legislation


[ Fiscal years. In millions]


Actual, Estimate, Estimate, Appropria-

Agency 1946 1947 1948 tions, 1948

Treasury Department $3, 119 $2, 155 $2,065 $2, 065

Direct Federal construction of long-term projects will be confined to those for which appropriations have already been made. Short-term projects such as provision of national park facilities, forest roads and trails, and institutional facilities will be limited to those of an urgent character.

The Budget contemplates the construction at a conservative rate of all projects for flood control, navigation, and reclamation for which initial appropriations were made in prior years. It does not provide initial appropriations for any new projects under these three programs. Even so, expenditures will be greater in the fiscal year 1949 than in 1948.

This upward trend in public construction deserves careful consideration by the Congress.


This Budget reflects the continuing decline in Federal civilian employment. Federal agencies have reduced their civilian personnel to 2,300,000--including those in the Territories and possessions and in foreign countries-from a wartime peak of 3,770,000 in June 1945. The Budget estimates contemplate further reductions.

Total civilian personnel of the War and Navy Departments is far below the wartime peak. Personnel in the emergency war agencies has been cut drastically except in the War Assets Administration, which is at the height of its work.

Three agencies--the Veterans' Administration, the Post Office, and the Treasury-together have almost as many employees as the 1939 total of 900,000 for the whole Federal Government. Personnel requirements of the Veterans' Administration are large because it must administer a great variety of programs for millions of veterans. The rise in the number of postal employees reflects the growth of the population and the even larger increase of business and industry. Increased employment in the Treasury results mainly from the greater complexity and coverage of the tax system and the wide distribution of public-debt ownership.

Total employment in all the other Government departments and agencies combined is lower than in June 1945 even though certain functions of emergency war agencies have been returned to the peacetime agencies from which they were transferred and other permanent functions have been added.

The personnel reductions were facilitated by the statutory limitations on personnel and provisions for detailed personnel ceiling determinations enacted by the Seventy-ninth Congress. When we began to convert to a peacetime basis and appropriations greatly exceeded expenditures, this legislation served a useful purpose. By the Legislative Reorganization Act the Congress has in effect decided that the extent of Federal activities, and hence personnel, should be determined by the usual appropriations process. The statutory limitations and personnel ceilings constitute a separate and possibly conflicting method of controlling the number of employees. The appropriations process, to my mind, is far preferable to the personnel ceilings and limitations, since these place undue emphasis upon the number of employees and put a premium on contractual arrangements and other measures to get the necessary work done without exceeding numerical limitations.

I therefore recommend the repeal of the statutory limitations on personnel and provisions for personnel ceiling determinations.


With the termination of wartime programs, net expenditures of corporations in the fiscal year 1948 will be focused in a few major areas--chiefly purchase of veterans' housing mortgages, loans to finance rural electrification, price-support outlays for farm commodities, and disbursements on Export-Import Bank loans to foreign borrowers. These programs represent, in the main, capital items recoverable over a period of years. As long as high levels of business activity continue, disbursements in all other major areas will be held to low levels and will be partly or wholly offset by receipts.

In the fiscal year 1948 net expenditures from corporation accounts alone will amount to 829 million dollars, compared with net receipts of 175 million dollars in 1947. But if we take into account reduced payments by the Treasury to the corporations and increased repayment of capital funds to the Treasury by the corporations, net withdrawals from the Treasury for these programs will remain almost unchanged, despite the sharp shift in the methods of financing them.

At present certain wholly owned Government corporations have authority to issue obligations whose principal and interest are guaranteed by the Federal Government. During the war the Treasury, because of its tremendous public debt operations, requested the corporations to obtain their funds directly from it rather than issue obligations on the market. I now recommend that the authority of Government corporations to issue guaranteed obligations to the public be repealed and that such agencies be authorized to obtain their funds solely by borrowing from the Secretary of the Treasury.

During the war, the Treasury has been advancing funds to the corporations at an interest rate of 1 percent. This low rate was based in part on the general level of interest rates in the market and in part on the fact that a large proportion of corporation activities-like subsidies and preclusive buying-was non-income-producing.

From now on most corporation programs will be revenue-producing. Accordingly, I recommend that corporations be required to reimburse the Treasury for the full cost to it of money advanced to the corporations. Interest paid on borrowings from the Treasury should be based upon the current average rate on outstanding marketable obligations of the United States--now about 1.8 percent. Dividends should be paid on capital stock, if earned. While these changes in the amount of intragovernmental transactions will not affect the Budget deficit or surplus, they will cause the corporations' records to reflect more nearly the true costs of their operations.

I recommend that the statutory authority of the Reconstruction Finance Corporation be extended beyond the present expiration date of June 30, 1947. Such extension is assumed in the expenditure estimates in this Budget. The new charter to be submitted will provide for the repeal of all powers not required for peacetime activities. It will also provide for a reduction of 2.5 billion dollars in the Corporation's borrowing authority. With the receipts anticipated from liquidation of war activities the reduced authority should prove adequate.

I have already recommended extension of the authority of the U.S. Commercial Company and reduction in the borrowing authority of the Federal Farm Mortgage Corporation.

In this Budget, I am also recommending return of capital to the Treasury by certain mixed-ownership corporations. The Federal land banks will complete retirement of Government-owned capital stock during the fiscal year 1947. In the fiscal year 1948, it appears that they can repay the outstanding paid-in surplus of 37 million dollars. These transactions will return the land banks to the status of cooperative institutions owned by the farmers they serve. In addition, I recommend a further small retirement of the capital stock of the Federal home loan banks.

The Corporation Supplement to the 1947 Budget indicated that the Federal Deposit Insurance Corporation could soon begin to retire its capital stock. The continuing rapid growth in the Corporation's resources and the exceptionally strong position of the insured banks now make it possible to propose a substantial amount of capital redemption in the fiscal year 1948. Accordingly, I recommend that the Congress authorize the Corporation to repay all of the 139 million dollars of capital furnished by the Federal Reserve System. Since the Reserve banks have already replaced these funds from earnings in recent years, the Board of Governors of the Federal Reserve System has proposed that the Congress at the same time authorize the payment to the Treasury of the 139 million dollars. I also recommend that the Congress authorize the Corporation to repay 100 million dollars of the 150 million dollars furnished by the Treasury Department.

By the close of the fiscal year 1948, after these repayments, the Corporation will still have capital surplus and reserves of about 1 billion dollars--the objective set several years ago.

The Board of Governors has made a further recommendation, in which I also concur, that the Congress repeal the existing, largely dormant, authority of the Federal Reserve banks to make direct loans to industry, releasing to the Treasury the funds reserved for this purpose. The gold increment fund now includes 112 million dollars reserved for such loans, and an added 28 million dollars has been advanced to the Federal Reserve banks. These sums will be transferred to miscellaneous receipts.

These transfers from the Federal Deposit Insurance Corporation, the Federal Reserve banks, and the gold increment fund will add a total of 379 million dollars in miscellaneous receipts in the fiscal year 1948.

The Government Corporation Control Act requires that no wholly owned Government corporation not now possessing a Federal charter shall continue after June 30, 1948, unless reincorporated before that time by act of Congress. Of the 16 such corporations in operation when the act was approved, the following six are already in process of liquidation: Defense Homes Corporation, Federal Surplus Commodities Corporation, Inter-American Navigation Corporation, Institute of Inter-American Transportation, Prencinradio, and the U.S. Spruce Production Corporation.

This Budget recommends the liquidation of five other State-chartered corporations: Inter-American Educational Foundation, The RFC Mortgage Company, Rubber Development Corporation, Tennessee Valley Associated Cooperatives, and the Warrior River Terminal Company. The residual functions of the Rubber Development Corporation and the program of The RFC Mortgage Company will be assumed by their parent corporation, the Reconstruction Finance Corporation. The Warrior River Terminal Company will be absorbed by the Inland Waterways Corporation, of which it is now a subsidiary.

This Budget also recommends that three nonfederally chartered corporations be reincorporated by act of Congress: Commodity Credit Corporation, Export-Import Bank of Washington, and the Virgin Islands Company. The act establishing the Commodity Credit Corporation as an agency of the United States expires in June. It, therefore, needs early consideration.

Recommendations on the Panama Railroad Company and the Institute of Inter-American Affairs have necessarily been postponed. The Department of State is reviewing the program of the Institute and a recommendation regarding its future status will be forthcoming soon.

Activities of the Panama Railroad Company have become closely interwoven with those of The Panama Canal in the 42 years since the Government purchased this Company. While its major functions obviously must be continued, a careful reexamination and reappraisal of the respective roles of the Company and The Panama Canal are required. As soon as studies are completed, my recommendations will be transmitted to the Congress.

In addition to examination of the nonfederally chartered corporations, studies are under way, in accordance with the provisions of section 107 of the Government Corporation Control Act, regarding those corporations whose fiscal affairs could be handled more appropriately in the same manner as those of regular Federal agencies. These and future studies will be useful, not only in developing recommendations concerning specific corporations, but also in establishing a consistent pattern for use of Government corporations.

While the general role of the Government corporation has been accepted in the laws of this country for more than 30 years, the standards for use of this instrument are not fully developed and will be subject to many refinements. Experience indicates that the corporate form of organization is peculiarly adapted to the administration of governmental programs which are predominantly of a commercial character--those which are revenue producing, are at least potentially self-sustaining, and involve a large number of business-type transactions with the public.

In their business operations such programs require greater flexibility than the customary type of appropriation budget ordinarily permits. As a rule the usefulness of a corporation lies in its ability to deal with the public in the manner employed by private business for similar work. Necessary controls are or can be provided under the Government Corporation Control Act. Further study may well indicate not only that some existing corporations ought to be converted into agencies, but also that some existing agencies might administer their programs more effectively if they had some or all of the attributes of corporations.


The new legislation and the extension of existing legislation, proposed in this Message,

for which funds are required in the fiscal year 1948 are as follows:


International affairs and finance:penditures, 1948

Contributions to the support of new international organizations $75,718,000

Relief program for foreign countries 250,000,000

Social welfare, health, and security:

Increase in public assistance benefits 73,500,000

Antibiotics control 242,000

Housing and community facilities:

Long-range housing program 14, 000, 000


Transportation and communication:

Upward revision in postal rates to meet the Post Office Department's operating deficit. $352,000,000

Finance, commerce, and industry:

Census of business 10,150,000

Census of mineral industries 218,000


Grants to the States for programs fostering safe working conditions 1, 300, 000

Strengthened machinery for facilitating the settlement of industrial disputes 1, 295,000


National defense:

Interim universal training operation............................................................................................................... 10, 250,000

Social welfare, health, and security:

Continued benefits for United States civilians injured by enemy action........................................................ 138, 000

Finance, commerce, and industry:

Extension of rent control, price control on sugar and sirups, and rice, sugar rationing,

export and import controls, priority and allocation controls on a few commodities,

and a few other minimum controls.................................................................................................. 47,610,700


................................................................................................................................... United States Commercial Company:................................................................................................................................... Reconstruction Finance Corporation:

................................................................................................................................... Extension beyond June 30, 1947. Extension beyond June 30, 1947.

................................................................................................................................... Commodity &edit Corporation: Reduction of borrowing authority.

................................................................................................................................... Extension beyond June 30, 1947. ................................................................................................................................... Increase in the present limit on loans to States

................................................................................................................................... Federal Farm Mortgage Corporation: ................................................................................................................................... or local public authorities for construction

................................................................................................................................... Reduction of borrowing authority.................................................................................................................................... purposes.

In this Message every effort has been made to present the Federal Budget Program with as much clarity as its complexities permit. All citizens have an interest in the Budget. Both sides of the Budget touch their everyday lives. I consider it my duty to give them full information on what their Government proposes to do.


Note: The message was transmitted to the Senate and to the House of Representatives on January 10.

As printed above, references to special analyses appearing in the budget document have been omitted

Harry S Truman, Annual Budget Message to the Congress: Fiscal Year 1948 Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/232869

Filed Under



Simple Search of Our Archives