Harry S. Truman photo

Annual Budget Message to the Congress, Fiscal Year 1949

January 12, 1948

[Released January 12, 1948. Dated January 6, 1948]

To the Congress of the United States:

I am transmitting my recommendations for the Budget of the United States for the fiscal year ending June 30, 1949, together with revised estimates for the fiscal year 1948. This Budget includes estimates to carry out both existing laws and proposed legislation.

The realities of our existing international and domestic requirements account for the size of this Budget. It affords essential support to the foreign policy of the United States by encouraging widespread international economic cooperation while maintaining our armed strength. It affords essential support to our domestic policies by advancing the development of human and material resources within a fiscal plan designed to help combat inflation.

The expenditures of the Federal Government are still inescapably dominated by the war and its aftermath. In the fiscal year 1949, 79 percent of our expenditures directly reflect the costs of war, the effects of war, and our efforts to prevent a future war: National Defense--International Affairs-Veterans' Benefits--Interest on the Public Debt Tax Refunds. This should be a sobering thought to all of us as we strive for the creation of lasting peace among the nations of the world. Only 21 percent of our expenditures finance the Government's programs in the broad areas of: Social Welfare--Housing--Education-- Research-Agriculture--National Resources--Transportation--Finance--Commerce-- Industry--Labor--General Administration.

In the 2 years since the surrender of the Axis Powers, expenditures of the Federal Government have decreased sharply from 63.7 billion dollars in the fiscal year 1946, to 42.5 billion dollars in the fiscal year 1947, and an estimated 37.7 billion dollars in the current fiscal year. Were the Budget for the fiscal year 1949 to be confined solely to carrying out existing laws, there would be a further decrease to slightly below 34 billion dollars.

It would be gratifying if I could say to the American people and to their Senators and Representatives in the Congress that our existing programs fulfill our national requirements. But this is not the case. Our national and international responsibilities demand that we undertake new activities and expand some activities in which we are already engaged.

Expenditures of 5.7 billion dollars will therefore be required for the fiscal year 1949 to finance programs under proposed legislation. Of this, 4.4 billion dollars is needed for our aid to the European recovery program and for aid to other countries, including China. Most of the remainder is for the development of our human and material resources through universal training, aid to education, expansion of social security, health insurance, housing, and scientific research.

Thus the Budget for the fiscal year 1949 calls for total expenditures of 39.7 billion dollars. Receipts during this period are estimated under existing tax laws at 44.5 billion dollars. This will balance the Budget and provide 4.8 billion dollars which should be used to reduce the public debt.

For the current fiscal year, 1948, the revised estimates included in this Budget indicate expenditures of 37.7 billion dollars and receipts of 45.2 billion dollars. This indicates a surplus of 7.5 billion dollars which should be used to reduce the public debt.

Our 1949 Budget reflects a number of important decisions involving Government policies which deserve special attention.

National defense, amounting to 11 billion dollars, accounts for 28 percent of the 1949 Budget, as it will in 1948. The net increase over 1948 is 279 million dollars, which is less than the amount needed to inaugurate the program of universal training. The total for all other defense activities has been held below the 1948 level. Increases in the most essential activities, such as aircraft procurement and civilian reserves, will be offset by economies and reductions elsewhere. This Budget emphasizes progress toward a modern and balanced armed force.

International affairs and finance, amounting to 7 billion dollars, accounts for 18 percent of Budget expenditures in 1949 as compared with 15 percent in 1948. The cost of the new aid programs will be largely counterbalanced by completion or sharp reduction of expenditures for the British loan, UNRRA, post-UNRRA relief, and certain other programs. There will therefore be a net increase in this category of less than 1.5 billion dollars. The new international program is our answer to an unprecedented challenge. We are undertaking it under conditions basically different from any which we have experienced before. I have repeatedly stressed the critical importance of our aid to European recovery, which represents the bulk of this expenditure. The sums requested are vital to the success of this program.

The budgetary implications of failure to achieve recovery in Europe and other crucial areas deserve additional emphasis. Should failure of these programs result in a further extension of totalitarian rule, we would have to reexamine our security position and take whatever steps might be necessary under the circumstances. The costs of added military strength, if Europe should succumb to totalitarian rule, would far exceed the costs of the program of economic aid now before the Congress.

Expenditures for national defense and international activities constitute 46 percent of the total Budget for the fiscal year 1949. The increases in national defense and international aid programs total almost 1.8 billion dollars, which is close to the increase of the entire Budget over 1948.

All other expenditures of the Government in the fiscal year 1949 are estimated at 21.6 billion dollars, about the same as the 1948 expenditures in these categories. Within this total, which includes 6.1 billion dollars for veterans, over 5.2 billion dollars for interest, and nearly 2 billion dollars for refunds, there are a number of reductions resulting from declining programs and a number of increases to finance activities which should not be deferred.

During the fiscal year 1949, fewer veterans will be requesting educational aid and needing unemployment compensation benefits than in 1948, but expenditures for hospital construction will increase, leaving a net reduction of 530 million dollars for veterans' activities. This reduction contemplates continuation of existing veterans' programs with the same types of benefits as have been available this year. The surplus property disposal program is nearing completion, and under revised legislation should cost about 200 million dollars less than in the current year.

New legislative proposals, together with expansions in present programs necessary to carry out the intent of existing laws, account for the increases in expenditures.

Failure to improve our educational system or to expand flood-control work would mean risking the loss of precious resources-human and material. Failure to adopt a program of health insurance would mean that many families will continue to go without adequate medical care. Failure to broaden the coverage of present social insurance and to increase benefits on a permanent basis would mean too much reliance upon relief, whereas more reliance on insurance is our national objective. Failure to adopt a long-range housing program would mean further delay in achieving decent housing standards. Failure to devote needed sums to our atomic plant would mean that we would be derelict in the use of one of our most valuable resources. Each of these proposed new and expanded programs has been most carefully weighed. All these programs directly support the twofold objective of building economic and individual strength and health in this Nation, and of better preparing this Nation to discharge its increased responsibilities in the family of nations.

We are all aware of the imperative necessity for preventing further inflation. Both the expenditure and revenue proposals of this Budget are designed to avoid inflationary effects wherever possible.

To this end, Government purchases of materials in short supply are being deferred where feasible. The expansion of Government credit and of Government guarantees of private credit is being restricted. Further, I am not recommending at this time cost-of-living increases in pay for military and civilian Government personnel, nor cost-of-living increases in benefits for our veterans, social insurance beneficiaries, retired Federal employees, and other similar groups.

The rapid increase in living costs during the last 18 months has placed a serious burden on these groups. Yet, to offset the cost-of-living increase since the last time pay or benefit rates were advanced for each group would add at least 2.4 billion dollars to Budget expenditures in 1949--apart from increases that would be paid from the trust funds. This large expenditure would add greatly to the inflationary pressures in our economy.

The wiser approach, which I have proposed to the Congress, is to enact a comprehensive program to hold living costs down. Enactment of that program will give relief not only to Federal personnel and annuitants, but to our citizens generally. In the event that the Congress does not provide controls adequate for this purpose, I may have to recommend further adjustments in pay and benefit rates.

The question of taxation must be considered in the framework of the budgetary program and the danger of further inflation. One of our most effective weapons in fighting inflation is a substantial Budget surplus for reduction of the national debt. If we make this protection less effective, we shall have to rely much more heavily on direct price, wage, and rationing controls, which we all agree should be held to a minimum.

Some readjustment is required to afford relief to many families who are suffering great hardship from the present tax structure. But total receipts should not be reduced and the surpluses for 1948 and 1949 should be used to decrease the national debt.

This Budget reveals the magnitude of the problems with which the Federal Government must deal. It demonstrates alike the heavy responsibilities of our international position and our concern for the maintenance of a sound domestic economy. The plain fact is that our Budget must remain high until we have met our international responsibilities and can see the way clear to a peaceful and prosperous world. Prudence demands that we plan our national finances in full recognition of this fact.


[ Fiscal years. In millions ]

Actual, Estimate, Estimate,

Source 1947 1948 1949

Direct taxes on individuals:

Individual income tax $19,629 $21,951 $22,506

Estate and gift taxes 779 842 816

Direct taxes on corporations:

Corporation income tax 6, 055 9,222 10,000

Excess profits tax and other 3, 621 326 158

Excise taxes 7,270 7,320 7,476

Employment taxes:

Existing legislation 2,039 2,409 2,493

Proposed legislation 350

Customs 494 394 378

Deduct (appropriations to trust funds):

Existing legislation 1,459 1,627 1,672

Proposed legislation 350

Subtotal, net tax revenues 8,428 40,837 42,155

Miscellaneous receipts 4,831 4,373 2,322

Budget receipts 43,259 45,210 44,477


Net tax revenues for the fiscal year 1949 are estimated at 1.3 billion dollars higher than the present estimate for 1948, and 3.7 billion dollars higher than in 1947. The estimates assume continuation of the present high levels of business activity and incomes, continued full employment, and stable prices close to the present level. These assumptions presuppose an effective anti-inflation program.

Budget receipts, however, will decline from 1948 to 1949, because of an estimated reduction of 2 billion dollars in miscellaneous receipts, most of which is due to a decline in receipts from sales of surplus property.

The tax adjustment I am proposing will mean a reduction in personal income taxes and a corresponding increase in corporation taxes. The estimates in the Budget for these taxes are based on existing legislation.

Between 1947 and 1948, revenues from corporation and individual income taxes combined increased by 5.5 billion dollars, more than offsetting the decline of 3.2 billion dollars in excess profits tax revenues. Between 1948 and 1949, revenues from the two types of income taxes will increase by an added 1.3 billion dollars. These increases are largely the result of inflation during the past 18 months, which has swelled corporation profits and aggregate personal incomes. Because the increase in tax collections lags behind the rise in profits and incomes, the 1948 increase in tax collections will be followed by a further rise in 1949.

Excise tax and employment tax receipts are expected to increase slightly in the fiscal year 1949 as a result of continued high levels of production and income. Receipts from customs, however, have been declining in recent months. The international trade agreements which recently became effective may cause a further slight drop in these receipts in 1949.

The expansion of existing social insurance programs and introduction of a health insurance program, under proposed legislation, will add an estimated 350 million dollars of employment taxes to gross Budget receipts, but this will all be transferred directly to the trust accounts without reflection in Budget totals.


The public debt on June 30, 1947, was 258 billion dollars. Budget surpluses of over

7 billion dollars in the current fiscal year and nearly 5 billion dollars next year should permit further reduction to 246 billion dollars by June 30, 1949. As long as employment and income continue at record levels-and especially while inflationary dangers threaten--we must make the most of our opportunity for debt retirement.

The retirement of public debt held by banks, other private institutions, and individuals will be considerably greater than the 12-billion-dollar reduction in the total, since trust accounts and other Government agencies will accumulate about 6 billion dollars during the two fiscal years. The investment of these accumulations in Federal securities will permit the Treasury to retire securities in the possession of other holders.

In management of the public debt, the major goal will be the achievement of the maximum anti-inflationary effect. This has been our policy since the debt reached its peak in February 1946.

Debt held by the commercial banks and the Federal Reserve banks has been repaid out of excess Treasury balances, the Budget surplus, trust fund accumulations, and the sale of savings and investment bonds to the public. The whole process reduces the volume of private bank deposits and so combats inflationary pressure.

At the same time, we shall do our utmost to increase voluntary savings in all forms, particularly the purchase of savings bonds.

To curtail bank credit expansion, the Federal Reserve System and the Treasury have progressively tightened the money market. This has been reflected in an adjustment in interest rates and a better balance between short- and long-term rates. However, by refunding long-term securities into short-term securities we have minimized the increase in the average interest rate paid by the Government on market debt.


The Budget total includes expenditures from the general and special accounts of the Treasury and also the net expenditures from checking accounts of Government corporations and enterprises. It does not include trust account expenditures.

Expenditures in relation to authorizations.--Expenditures in the fiscal year 1949 will exceed appropriations for that year by 6.7 billion dollars. Of the 1949 expenditures, 28.4 billion dollars will be made from appropriations recommended in this Budget, including 5.4 billion dollars under permanent appropriations. Expenditures of more than 10.5 billion dollars, including 5 billion dollars for international programs, will be financed by appropriations for 1948 or earlier years. The remaining expenditures of about 700 million dollars, principally net expenditures of Government corporations and credit agencies, will be made under other types of congressional authorizations.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program 1947 1948 1949 1949

National defense $14,281 $10,746 $11,025 $10,295

International affairs and finance 6,540 5,533 7,009 2,104

Veterans' services and benefits 7,370 6,032 6,102 5,154

Social welfare, health, and security 1,379 1,960 2,028 2,077

Housing and community facilities 403 113 38 292

Education and general research 76 77 387 407

Agriculture and agricultural

resources 1,248 614 906 655

Natural resources 628 1,179 1,626 1,581

Transportation and

communication 587 1,563 1,646 1,549

Finance, commerce, and industry 238 372 190 171

Labor 120 97 116 117

General government 1,318 1,473 1,157 1,065

Interest on the public debt 4,958 5,200 5,200 5,250

Refunds of receipts 2,897 2,049 1,990 1,990

Reserve for contingencies 120 200 225

Adjustment to daily Treasury

statement basis +464

Total 42,505 37,728 39, 669 32, 930

The Budget also includes recommended new authority for Government agencies to make contracts amounting to 1.9 billion dollars. Before expenditures are made in payment of these contracts, the funds must be provided by appropriations, but this will not be necessary until later years. Within the 32.9 billion dollars of appropriations recommended for the fiscal year 1949, nearly 1.7 billion dollars are for the liquidation of prior contract authorizations.

Changes in expenditures.--The major reasons for the changes in the national defense, international, and veterans' programs have already been summarized.

The 1949 Budget expenditures for social welfare, health, and security involve increases for the public health and public assistance programs, and initial administrative costs of the proposed health insurance program. Trust account expenditures for benefit payments will also increase.

Expenditures for housing and community facilities decrease. Completion of veterans' re-use housing and curtailment of mortgage purchases more than offset the first-year costs of the proposed long-range housing program.

The increases for education and general research result mainly from the proposed grants by the Federal Government to the States to aid elementary and secondary education, and from the proposed establishment of the National Science Foundation.

The increase in expenditures for agriculture is accounted for mainly by decreased net receipts of the Commodity Credit Corporation. Proposed revisions in price support will bring some savings in 1949. More adequate provision for the conservation and use program is recommended for the 1949 crop year.

Natural resources expenditures will increase chiefly because of higher expenditures for atomic energy, flood control, and reclamation.

Major increases in expenditures for transportation are in grants for highway and airport construction, and direct improvement of rivers and harbors. These are offset in part by lower Maritime Commission expenditures.

While the anti-inflation program will require higher expenditures, the total for finance, commerce, and industry will fall sharply because the current year total includes the nonrecurring payment of war damage insurance profits to the Treasury.

The increase for labor is required to carry out the provisions of the Labor Management Relations Act of 1947, to restore essential services in the Department of Labor, and to cover increased costs of the public employment offices.

General government expenditures will decrease, chiefly because of lower expenditures for the disposal of surplus property.

Although the public debt will be lower, interest payments will increase somewhat, chiefly as a result of higher accruals on savings bonds as they approach maturity.

Tax refunds will decrease mainly because of lower refunds arising from adjustment of wartime corporate tax liabilities.

In the preparation of this Budget I directed all departments and agencies to plan to continue their programs for the fiscal year 1949 at or below their operating levels in 1948. Exceptions were made only where activities could no longer be deferred. Many departmental requests to perform desirable services have been refused. Throughout the Federal Government changes in activities will be made to achieve the rigid standards of operating economy which have governed the preparation of this Budget.



Since the close of hostilities, we have reduced our armed services to a small fraction of their wartime strength. Nevertheless, national defense remains the largest single Government program. The defense of the United States and the task of administering the affairs of 140 million people in the occupied areas require heavy expenditures.

The enactment of the National Security Act of 1947 will enable us to move more rapidly toward an integrated and balanced national defense program. The amounts we can afford to spend for national defense, as for any other program, are necessarily limited. The Secretary of Defense and the coordinating agencies provided by this act are now engaged in reviewing the missions and programs of the services in order to attain the most effective defense possible within these limits.

In this Budget, we provide only for the minimum requirements of the National Military Establishment. For the Air Force, the Budget will permit a higher level of maintenance and operation, with a considerable increase in aircraft procurement. For the Army, it will provide for improved equipment for small, highly mobile tactical ground forces, as well as for occupation troops and their support. For the Navy, it will provide for maintaining the fleet and naval aviation at the 1948 strength, but with increased aircraft procurement.

One basic element of a balanced national security program which I have repeatedly urged--universal training--is still lacking. A national program of broad training for all young men is necessary to provide a firm base for small standing forces to be augmented, when necessary, by trained reserve components. Such training should make possible an ultimate reduction in our standing forces. In anticipation of early approval by the Congress of a program of universal training along the lines recommended by the Advisory Commission on Universal Training, I have included 400 million dollars in the expenditure estimate for the fiscal year 1949. This is the first-year cost of a program which in full operation will cost about 2 billion dollars annually.

Expenditures.--A net increase of 279 million dollars in total national defense outlays is estimated in fiscal year 1949. Apart from readjustments in the expenditures of the Air Force, Army, and Navy, the most substantial increases are for universal training and stockpiling, and the largest decreases are in terminal-leave payments and other war liquidation expenses.

This Budget is the first to provide for a full year's operation of the facilities established by the National Security Act of 1947 for coordination and direction of our defense, both within the National Military Establishment and by the National Security Council and the National Security Resources Board.

Expenditures for Air, Army, and Naval defense are estimated at more than 10.3 billion dollars for the fiscal year 1949--slightly less than in the present year. These expenditures cover pay and maintenance of military personnel, civilian-reserve components, research and development, aircraft procurement, naval ship construction, and military and naval public works, as well as other equipment and general operating expenses. Each of these is discussed in the following paragraphs.

Pay and maintenance of military personnel, excluding civilian reserves, in the fiscal year 1949 will require an estimated 4.7 billion dollars, or 45 percent of the 10.3 billion dollars. This estimate will provide for an average military strength of 1,423,000 officers and enlisted personnel in the Air Force, Army, and Navy for the fiscal year 1949, about the same as the current strength of the armed forces. Existing recruitment inducements appear to be adequate to maintain these forces. Pay, subsistence, travel, welfare, training, clothing, and medical expenditures will average about 3,300 dollars a man in the armed forces--nearly two and one-half times the cost a decade ago.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Direction and coordination of

defense $2 $11 $11

Air and Army defense:

Pay and maintenance of military

personnel $4,326 3,325 3,128 3,100

All other (present programs) 1,968 2,879 2,904 2,752

Reserve components

(proposed legislation) 13 16

Public works (proposed legislation) 30 140 20

Naval defense (including naval air arm):

Pay and maintenance of

military personnel 2,374 1,659 1,581 1,569

All other (present programs) 3,184 2,458 2,535 1,938

Public works (proposed legislation) 9 26 25

Activities supporting defense:

Terminal-leave pay for enlisted

personnel 1,998 283 5

Lend-lease liquidation (excluding

National Military Establishment) 340 83

Military stockpiling (Treasury) 11 110 305 360

Reconstruction Finance

Corporation 49 --102 --28

Other 31 9 4 4

Universal training (proposed

legislation) 400 500

Total 14,281 10,746 11,025 10,295

For the civilian-reserve components, estimated expenditures for the fiscal year 1949 are nearly 600 million dollars, an increase of about one-half from the present year. This includes 13 million dollars under proposed legislation, mainly for additional drill pay. These organizations are also being provided with equipment, facilities, and supplies procured and paid for during the war.

Expenditures for military research and development--exclusive of those for atomic weapons, construction of facilities, and pay of military personnel engaged on research projects--will remain at about 550 million dollars in the coming year. A large proportion of these expenditures will be in aviation and related fields.

Increased replacement of aircraft is essential in the fiscal year 1949 to support our air arms at the planned levels. Wartime reserves of planes and parts are becoming depleted or obsolete. Expenditures for procurement of complete aircraft in fiscal year 1949 are estimated at 900 million dollars-an increase of about 150 million dollars over the current year. Expenditures in 1950 for this purpose will rise again as a result of the proposed increase of over 30 percent in 1949 authorizations. The plans for the Air Force contemplate operation of 55 combat groups and 17 separate squadrons.

Estimated expenditures for naval ship construction will amount to 312 million dollars in the fiscal year 1949, an increase of 34 million dollars over 1948. At present the Navy is required by law to complete certain ships authorized and started during the war. To assist in modernizing the fleet, I recommend that this provision be repealed. The partially completed ships would then be held in reserve. I also recommend that 230 million dollars of the money that would have been spent to complete these ships and convert them to advanced design be used for the construction, during the next few years, of improved types of vessels. This substitution will mean a more efficient fleet.

For construction of military and naval public works, expenditures for fiscal year 1949 are estimated at 334 million dollars, as compared with 409 million dollars in the current year. Both estimates include anticipated expenditures under legislation now pending before the Congress to provide essential housing for troops in the United States and overseas and other construction of high priority, such as research facilities.

The remaining expenditures of about 2.9 billion dollars for the defense activities of the National Military Establishment are for equipment, supplies, and civilian payroll for maintenance and operation. In the fiscal year 1949 the bulk of this expenditure will be to pay civilian workers engaged in industrial, supply, maintenance, and administrative activities, overseas and in the United States, on defense programs. About 40 percent of all Federal civilian employees will be engaged in defense activities. Procurement of equipment and supplies other than aircraft will be limited chiefly to developmental and test items and some new equipment for ground force units. Limited provision is made for the maintenance of stand-by plants and facilities and for industrial mobilization planning.

Aside from the National Military Establishment, the most important expenditures for defense activities in 1949 will be for military stockpiling, particularly to build up reserves of those raw materials and supplies which must be obtained from overseas sources that might be cut off in time of war. Although procurement of materials for the strategic stockpile is behind schedule, the estimated expenditures for procurement in the fiscal year 1949 are held to 285 million dollars because of the urgent need for such materials to promote world recovery, and the prevailing shortages with attendant high prices. In addition to the new procurement, transfers from Government-owned stocks to the stockpile which began in 1947 will continue, with expenditures of 20 million dollars for processing in fiscal year 1949. The value of these transferred materials will amount to an estimated 400 million dollars in all by the end of the fiscal year 1949.

Appropriations and other authorizations.--Appropriations of 10.3 billion dollars will be necessary for national defense in the fiscal year 1949. This amount includes estimates of 500 million dollars in appropriations for universal training and 61 million dollars for other proposed legislation, largely for military construction.

Excluding 565 million dollars in appropriations to liquidate obligations under prior contract authorizations, the new appropriations recommended for the fiscal year 1949 amount to 9.7 billion dollars. In addition, new contract authorizations of about billion dollars are required--923 million dollars for aircraft procurement, 65 million dollars for public works, and 230 million dollars for naval ship construction.

Thus, I am recommending new authority to obligate totaling 10.9 billion dollars in the fiscal year 1949, which will permit expenditures both in 1949 and later years. Of this amount nearly 50 percent will be devoted to defense aviation. For 1948, the corresponding total authority to obligate is 10.4 billion dollars. The increase is mainly for the proposed universal training program and for strategic stockpiling.

I am also requesting authority to continue available for expenditure an estimated 380 million dollars of appropriations obligated in the fiscal year 1946 and earlier years, largely for aircraft procurement contracts and for military construction. This extension will permit liquidation of outstanding contracts on which deliveries have been delayed.

Appropriations for major activities of the Air Force and the Army have not yet been separated. In addition to obligations under direct appropriations to the Department of the Air Force, about half of those by the Department of the Army in the fiscal year 1949 will be for the Air Force. The complete recasting of the appropriations structure necessary to separate the accounts of these two Departments is now in process, but could not be completed in the short time since the passage of the National Security Act.


Our new international programs for European aid have been fully presented to the Congress in recent messages. The appropriation already enacted will provide "stopgap" assistance through next March to the European countries in most urgent need--France, Italy, and Austria--as well as aid to China. It is essential that we move as soon as possible to a positive program for promotion of European recovery.

In addition to the European recovery program, other international-aid programs for several countries, including China, are provided for under proposed legislation. Definite recommendations on these programs will be transmitted shortly. Also, I urge again enactment of the inter-American military cooperation bill proposed last May. Estimates of appropriations and expenditures for this group of programs have been included in the Budget.

Expenditures.--By far the largest international expenditures in the fiscal year 1949 will be under the European recovery program-4 billion dollars, in addition to 500 million dollars in the fiscal year 1948. Expenditures under other proposed legislation for aid are estimated at 60 million dollars in the fiscal year 1948 and 440 million dollars in the fiscal year 1949.

The Export-Import Bank will continue in the fiscal year 1949 to make loans to expand international trade and promote economic development, particularly in the Western Hemisphere. The need for such loans will decline, however, when the dollar problem of Western Hemisphere countries is eased as a result of purchases in these countries under the European recovery program. Disbursements of the Bank's funds will also decline because its large loan authorizations to several European countries are rapidly being exhausted during the current fiscal year. Plans for the European recovery program call for use of the Bank's facilities to administer loans made under the new program.

The largest expenditures for foreign relief now fall under the occupied-areas program. These expenditures are handled by the Army and are chiefly for shipments of goods to prevent disease and unrest. They will increase in both the 1948 and 1949 fiscal years. The increase in 1948 will be caused largely by sharply higher prices, a severe German crop failure, extensive storm damage to Japanese crops, and the British dollar shortage. Since the United Kingdom is no longer able to meet dollar costs for essential supplies for the bizonal area of Germany the United States is now assuming this expense. The British will continue to finance purchases from sterling areas. Expenditures under this program will increase still further in the fiscal year 1949 because all dollar costs of imports for relief in the bizonal area must be paid by the United States for the entire fiscal year.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Reconstruction and stabilization:

European recovery program

(proposed legislation) $500 $4,000 (1)

Other proposed aid legislation 60 440 2 $450

Export-Import Bank loans $937 736 500

Treasury loan to United Kingdom 2,050 1,700

Subscriptions to International

Bank and Fund 1,426

Reconstruction Finance Corporation

loans to United Kingdom --38 --40 --40

U.S. Commercial Company --47 63

Greek-Turkish aid (act of 1947) 275 119

Foreign relief:

Foreign (interim) aid

(Foreign Aid Act of 1947) 375 165

Army (occupied countries) 514 998 1,250 1,250

Relief assistance to war-devastated

areas (post-UNRRA) 272 60

UNRRA 1,489 201 1

International Refugee

Organization 71 71 71

Other 3 (3)

Philippine war damage and


Present programs 73 95 180 116

Proposed legislation for

veterans' benefits 16 16

Membership in international


Present programs 17 25 24 24

Proposed legislation 15 34 4

Foreign relations:

Department of State:

Present programs 111 160 164 151

Proposed legislation 20 16 20

Other 6 7 7 1

Total 6,540 5,533 7,009 2,104

1 A 1948 supplemental appropriation of 6.8 billion dollars is anticipated for the period from April 1, 1948, to June 30, 1949.

2 A 1948 supplemental appropriation of 300 million dollars is also included in this Budget.

3 Less than one-half million dollars.

Expenditures under the interim-aid and post-UNRRA programs will be completed in the fiscal year 1949. Most of the ship ments under these programs will be made in the current fiscal year, but expenditures lag behind shipments.

Payments to the Philippine Republic to make partial compensation for war damage and to aid in its rehabilitation are now increasing. I renew the recommendation that the Congress enact legislation to carry out our pledge to provide certain benefits to philippine veterans.

Estimates for the fiscal years 1948 and 1949 for membership in international organizations include disbursement of part of a proposed loan to the United Nations for construction of permanent headquarters.

The budget for the Department of State includes amounts needed under proposed legislation to carry out an effective foreign informational and cultural program. This program is essential in order to present to the world an accurate picture of United States policies and to counter misleading propaganda. An adequate information program will greatly increase the effectiveness of our international political and economic policies, especially in Europe.

Appropriations.--A supplemental 1948 appropriation of 6.8 billion dollars is included in this Budget for the first 15 months of the European recovery program. This appropriation would be available for obligation through the fiscal year 1949, and would be used mainly in that year. Experience with programs involving similar procurement problems indicates that the margin between the recommended appropriation and the 4.5 billion-dollar expenditure estimate during the same period is reasonable. To permit systematic and economical placement of orders for later delivery, appropriations must be substantially greater than expenditures in the initial phase of the program. In addition, bills for a portion of the goods shipped in one fiscal year are not paid until the following year, and this lag of expenditures is particularly significant in a large new program.

Other recommended 1948 supplemental appropriations, to be spent mainly in 1949 and later years, include 300 million dollars for other foreign-aid programs, 65 million dollars for the loan to the United Nations for headquarters construction, and smaller amounts for Department of State programs.

Because of the large supplemental appropriations for international activities recommended for the fiscal year 1948, appropriations for 1949 total only 2.1 billion dollars. The two main items are 1,250 million dollars for the Army programs in occupied areas and an estimate of 450 million dollars for aid programs tinder proposed legislation. Recommended appropriations totaling 133 million dollars for Philippine programs are below estimated expenditures because a portion of the appropriations for the current year will remain available for expenditure next year.


During the past year about 900,000 World War II servicemen returned to civilian life, increasing the number of World War II veterans to 14.7 million and the total veteran population to 18.6 million. Within a decade, veterans and their immediate dependents will constitute more than two-fifths of our entire population. Many of our veterans have rights under more than one provision of Federal law and, although the readjustment program has now passed its peak, veterans' benefits will remain a large part of the Federal Budget for many years to come.

While the veterans' program has largely accomplished its original purposes, certain aspects of the Servicemen's Readjustment Act need modification. The law is being used in some cases to provide training for avocational or leisure-time activity at high cost to the Government and without commensurate benefit to veterans. The Veterans' Administration does not have adequate authority to limit the expenditure of funds under this act to constructive educational and vocational programs. A reexamination of the basic purposes of the law and suitable modification of its provisions should result in substantial savings. These savings should more than offset such limited increases of other benefits as may be justified.


(Excluding trust accounts)

[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Readjustment benefits

(Veterans' Administration): $1,971

Education and training $2,122 $2,532 $2,029

Unemployment and self-

employment allowances 1,444 669 412

Loan guarantee 75 79 87

Other 71 67

Pensions (Veterans'

Administration) 1,929 2,055 2,105 1,948

Insurance (Veterans'

Administration) 840 154 60 58

Hospitals, other services, and

administrative costs:


Veterans' Administration 19 50 112 230

Corps of Engineers (Army) 9 77 300

Federal Works Agency 26 52 6

Current expenses:

Veterans' Administration:

Hospital and medical care 425 520 615 639

Other activities 472 368 308 306

All other agencies 9 4 2 2

Total 7,370 6,632 6,102 5,154

Expenditures.--Expenditures for readjustment benefits in the fiscal year 1949 will amount to an estimated 2.6 billion dollars-a decline of 756 million dollars from expenditures in the current year.

College, school, and job training is now expected to reach its peak in the fiscal year 1948, with an average of 2,250,000 veterans enrolled. For the fiscal year 1949, average enrollment is expected to fall to 1,730,000 students and trainees. The number will decline in all programs except institutional on-the-farm training.

In recent months the number of veterans drawing unemployment and self-employment allowances has been substantially smaller than previously expected. The 1948 appropriations approved by the Congress provided for an average of 925,000 on the rolls. The present estimates provide for an average of 625,000 in the fiscal year 1948, with a further reduction to 390,000, on the average, in the fiscal year 1949.

Under the loan-guarantee provisions of the Servicemen's Readjustment Act, veterans obtained about 635,000 loans amounting to 3.6 billion dollars in the fiscal year 1947. About 90 percent of the loans are on residential property and the remainder are for business or farm purposes. The Government's obligation under the guarantee and insurance provisions runs to nearly one-half of the face value of these loans. In addition, the Government makes on behalf of the veterans a principal payment equal to 4 percent of the guaranteed portions of the loans. The estimates provide for continuation of the 1947 rate for the loan-guarantee program in both the fiscal years 1948 and 1949. However, in both years higher expenditures will be required to meet losses and to permit property acquisitions under loan defaults.

Compensation and pension payments to veterans and their dependents are estimated on the basis of an average of 2,923,000 claimants in fiscal year 1948 and 3,010,000 claimants in fiscal year 1949. The expenditure estimate of 2.1 billion dollars for 1949 includes 242 million dollars for subsistence allowances for disabled trainees and students.

New hospitals and domiciliary facilities are necessary to provide for the increasing number of veterans who apply for care. The construction and improvement of facilities to cost over 1.1 billion dollars has already been authorized by the Congress, but has been delayed by unduly high bids and by shortages of materials. The present expenditure estimates assume that one-half of the work on the total authorized program will be completed by the end of the fiscal year 1949.

The operating expenses of the medical, hospital, and domiciliary-care program of the Veterans' Administration will increase substantially again in the fiscal year 1949, largely because of the steady rise in patient load, which will average 148,000 in fiscal year 1949. The out-patient care program will cost slightly less in the fiscal year 1949 than in the current year, but will provide treatment for over 6 million veterans.

Declining work loads and improvements in administrative procedures will reduce operating and administrative expenditures for other programs.

Expenditures for insurance, mostly transfers to the national service life insurance trust fund, will continue to decline in 1949. The cumulative cost to the Government of insurance due to war hazards in World War II will exceed 3.6 billion dollars by the end of the fiscal year 1949.

Trust accounts.--Premiums from veteran policyholders, supplemented by Government payments to cover war hazards, have resulted in substantial accumulations in the national service life insurance and Government life insurance trust funds. The assets of the national service life insurance trust fund will reach an estimated 7.3 billion dollars by June 30, 1949.

A dividend estimated at between 1 and 2 billion dollars will probably become payable to the servicemen who hold or have held national service life insurance. This dividend cannot be paid, however, until the financial liabilities of the fund and its legal status are determined. Because of these uncertainties, the payment of the dividend is not now included in estimated trust account expenditures. The Veterans' Administration is gradually catching up on the processing of the basic insurance records. The general contingency reserve includes expenditures to administer payment of the dividend if the exact status of the fund is clarified during the fiscal year 1949.


(Trust accounts)

[ Fiscal years. In millions ]

Actual, Estimate, Estimate,

Item 1947 1948 1949


Transfers from general and special

accounts $822 $147 $46

Premiums, interest and other 816 659 698

Total 1,638 806 744

Expenditures for benefits, refunds,

and other (deduct) 349 372 376

Net accumulation 1,289 434 368

Appropriations and other authorizations.--To cover the expenditures necessary for veterans' programs, appropriations of 5.2 billion dollars are recommended for the fiscal year 1949. The difference of about 950 million dollars between estimated expenditures and appropriations will be covered by unexpended balances from fiscal year 1948 and prior appropriations.

The appropriations estimated for the fiscal year 1949 include 230 million dollars to liquidate obligations incurred under contract authorizations for the hospital and domiciliary construction program. New contract authorizations of 43 million dollars are also requested, in part for modernization of hospital facilities and in part to cover the increased construction cost of previously authorized hospitals.


In the existing social security programs we have a tried and successful framework within which to construct an integrated, comprehensive system providing for all citizens some protection against the major economic hazards of our society. We have made real progress toward our objective, but it is still far from realized.

From time to time I have proposed measures which, taken together, would complete our present system to a substantial degree, and would provide protection increasingly on a social insurance basis. I intend shortly to discuss this legislative program in a special message to the Congress. Some of the proposals would have immediate fiscal effects, and I have accordingly included estimates for the following items:

Old-age and survivors insurance.--Extension of coverage to all gainful workers, including agricultural and domestic employees, farmers, and other self-employed persons.

Increases in individual benefit amounts and in the maximum amount of earnings taxable.

Health program.--Provision of a national system of health insurance and improved services and facilities for public health and medical care.

Unemployment compensation.--Extension of coverage to employees of small businesses and as many other groups as feasible.

Public assistance.--Broadening of Federal aid to include general assistance, and allotment of Federal grants for public assistance so as to relate them to the financial resources and needs of each State.

Other proposals, such as temporary and permanent disability insurance benefits, would not affect estimates for the fiscal year 1949.

Expenditures.--My recommendations for legislation involve Budget expenditures estimated at 116 million dollars in the fiscal year 1949, mainly for revisions of public assistance and initial administrative costs of the medical-care program. The other proposals would be self-financed through trust accounts.

Federal grants to States for the administration of unemployment compensation--the only Budget expenditure for this Federal-State program--are projected for fiscal year 1949 at slightly above the level for the current year. This rise reflects higher State salaries and operating costs.

Railroad retirement expenditures for retirement and dependency insurance, which consist almost entirely of transfers to the railroad retirement trust account, are determined by railroad pay-roll tax receipts. These are expected to remain at their present high level throughout the fiscal year 1949. The estimate for the current year is unusually usually high because it includes approximately 200 million dollars properly allocable to previous years' operations which could not be transferred until the necessary appropriation was enacted early in the fiscal year 1948.


(Excluding trust accounts)

[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Unemployment and accident


Federal Security Agency $78 $82 $88 $88

Railroad Retirement Board 14 15 14 15

Retirement and dependency insurance:

Railroad Retirement Board 303 764 579 642

Federal Security Agency

and other 3 3 6 6

Assistance to the aged and

other special groups:

Federal Security Agency:

Present programs 662 758 828 822

Proposed legislation 100 100

School lunch (Agriculture) 76 62 66 65

promotion of public health:

Federal Security Agency:

Present programs 140 163 211 222

Health program (proposed

legislation) 15 15

Stream pollution abatement

(proposed legislation) 1 1

Federal Works Agency and other 13 15 24 15

Crime control and correction 79 87 84 82

Other 12 11 13 4

Total 1,379 1,960 2,028 2,077

An increase in expenditures for assistance to the aged and other special groups in the fiscal year 1949 is occasioned by higher anticipated public assistance payments. Recently the Congress extended until 1950 the temporary increase in the Federal share of these payments. In view of the upward trend in both benefit levels and case loads, the Federal expenditures for this purpose under existing legislation are expected to continue to rise. An additional 100 million dollars for public assistance has been included as an estimate of expenditures under the proposed legislation for improving this program.

An increase in Federal Security Agency expenditures for public health work in 1949 results primarily from progress in the Federal-aid hospital construction program, and from some expansion in other grants-in-aid and in research activities. The expenditure estimates include 1.4 million dollars for surveys under the stream pollution abatement program now under consideration by the Congress. The rise in Federal Works Agency expenditures for health purposes is in items for construction of hospital and research facilities in and near the District of Columbia.

Trust accounts.--All social insurance benefit payments are made directly from trust funds. The handling of contributions varies. Thus, the pay-roll taxes collected by the States to finance unemployment compensation are deposited directly in a Federal trust account, as are nearly all the taxes collected for railroad unemployment insurance. For the railroad retirement system, pay-roll tax collections are included in Budget receipts and the transfers to the trust account appear as Budget expenditures. The proceeds of Federal pay-roll taxes which finance old-age and survivors insurance are transferred to the trust account without affecting expenditures; the transfer is made through a deduction from receipts and an equal credit to the trust account.


(Major trust accounts)

[ Fiscal years. In millions ]

Actual, Estimate, Estimate,

Fund and item 1947 1948 1949

Unemployment trust fund:


Deposits by States and railroad

unemployment taxes $1,143 $1,238 $1,231

Interest 147 166 186

Extension of coverage (proposed

legislation) 20

Payments: State and railroad

unemployment withdrawals 869 814 906

Net accumulation (including

proposed legislation) 420 590 531

Federal old-age and survivors

insurance trust fund:


Appropriation from general receipts 1,459 l,627 1,672

Interest and other 163 193 222

Extension of coverage and raising

of tax base (proposed legislation) 200

Payments of benefits and

administrative expenses:

Existing legislation 466 556 649

Proposed legislation 175

Net accumulation (including

proposed legislation) 1,157 1,264 1,270

Railroad retirement account:


Transfers from Budget accounts 298 758 575

Interest 24 40 55

Payments of benefits 173 229 232

Net accumulation 149 570 398

Federal employees' retirement funds:


Salary deductions and transfers

from Budget accounts 483 470 465

Interest 95 105 115

Payments of annuities and refunds 323 241 250

Net accumulation 255 333 330

Health insurance trust fund (proposed legislation):

Receipts from pay-roll contributions 150

Payments of benefits

Net accumulation 150

All major social welfare trust funds will continue to accumulate assets in the fiscal year 1949. Excepting the unemployment trust fund, they are retirement funds which will, for some time, accumulate reserves against future benefit payments. By the end of the next fiscal year, these assets should reach 16 billion dollars.

The unemployment insurance system is related more immediately than the others to the level of economic activity. With continuing full employment, its assets should continue to accumulate, bringing the total up to approximately 9 billion dollars by the end of fiscal year 1949.

Broader coverage under old-age and survivors insurance would be financed by extending the pay-roll tax at the rates provided by present law to the newly insured persons and their employers. These old-age pay-roll tax collections would suffice for several years to finance more liberal benefits for both present and prospective beneficiaries.

The estimates for the health insurance program assume a total initial pay-roll tax of one-half of 1 percent of individual salaries up to 4,800 dollars a year, effective January 1, 1949, to furnish a basis for establishing eligibility for benefits and to build up an operating reserve. After a year or two of accumulation at this low rate, the permanent contribution rate would go into effect and the system would begin to provide benefits on a basis which is mainly self-financing.

The recommended broadening of social insurance would increase both the receipts and expenditures of the trust accounts over what they otherwise would have been. For the immediate future, however, these increases would be greater in pay-roll contributions than in benefits. This net accumulation is useful at this time as an anti-inflation measure.

Appropriations and other authorizations.--Appropriations recommended for social welfare, health, and security exceed estimated expenditures for the fiscal year 1949 principally because the appropriation requested for the Railroad Retirement Board includes authorization to transfer to the trust account during the current fiscal year part of the taxes to be collected in this year. Wage increases in the railroad industry have resulted in higher pay-roll tax collections than were estimated when the appropriation for the current year was enacted.

Besides the appropriations, contract authorizations of 119 million dollars are recommended for public health programs. This total includes 75 million dollars for the Federal-aid hospital construction program, 26 million dollars for research and hospital facilities for the Public Health Service, and 18 million dollars for the District of Columbia hospital center. Included in the recommendations for 1949 is an appropriation of 60 million dollars to liquidate the prior year's contract authorization for Federal-aid hospital construction.


Since last fall the number of dwelling units built has been greater than in any comparable period in our history. But many families most in need of housing, particularly veterans, cannot afford to pay present high prices.

The Federal housing program, under present legislation, places primary emphasis upon assuring adequate credit through guarantees of mortgage loans for builders and veterans--including guarantees by the Veterans' Administration, classified under veterans' pensions and benefits. These credit aids have accelerated construction and increased the proportion of old and new homes going to veterans. These emergency aids have temporarily replaced most of the activity under the permanent mortgage insurance program.

In recent months, however, available credit has tended to outrun available production, and thus has helped to keep construction costs and housing prices at unreasonably high levels. The Housing and Home Finance Administrator, with the assistance of the National Housing Council, is tightening standards employed in administration of existing loan-guarantee programs--including guarantees of loans both on new construction and on existing homes. He is also preparing legislative proposals designed to strengthen the permanent programs and to taper off the special credit aids necessary during the war and reconversion periods. As long as inflation persists, such emergency aids should be limited to the types of construction most urgently needed, particularly rental housing and lower-cost housing.

Both private enterprise and local public agencies need a broader long-range program of assistance from the Federal Government. I again recommend enactment of comprehensive housing legislation. Besides establishing a better basis for Government assistance to private enterprise, such legislation is necessary to provide Government assistance through local public agencies for the sizable minority of our people whose incomes are insufficient to pay the full cost of decent housing. The Budget includes estimated first-year expenditures under such proposed legislation. These expenditures would largely prepare the way for later expansion in loans and grants for low-rent housing, urban redevelopment, and farm housing; for insurance of direct investments in large-scale rental housing; and for basic technical and economic research.

Fundamental to all progress in raising the housing standards of our people is a substantial reduction in the current excessive level of housing costs. While cost reductions are primarily the responsibility of private industry and labor, the Federal Government should provide assistance wherever possible. The Housing and Home Finance Administrator is organizing a series of conferences with representatives of local government, industry, and labor, designed to speed the removal of existing obstacles to lower costs.

The greatest promise of additional cost reduction lies in development and use of improved materials and methods, and in revision of obsolete building codes to permit their use. With the assistance of the Bureau of Standards and other Federal agencies, the Housing and Home Finance Administrator is working out a program of technical research to supplement industry programs. The Administrator will make the results of these studies available in usable form to builders, local public agencies, and others who can translate them into actual cost savings or quality improvements.

I also urge the Congress to authorize the Federal Works Agency to make additional commitments for repayable advances to States and localities for planning community facilities and other nonhousing public works. This would revive the authority which expired on June 30, 1947. Detailed public works plans are indispensable if State and local governments are to apply public funds efficiently in construction work. Only through such advance planning can useful public works be ready to initiate when needed, and when conditions are favorable for their construction.

Expenditures.--All Federal programs to furnish financial aids to private housing will show net receipts in the fiscal year 1949. With continuing high prosperity, liquidation of previous loans will remain high, and disbursements to cover losses on guarantees of private loans will be low.

The 1949 budget of the Federal Housing Administration assumes that new insurance commitments will be limited to mortgages which do not exceed a reasonable percentage of long-run value. The emergency program permitting insurance of mortgages on the basis of current costs expires on March 31, 1948. It is my hope that, if further extension proves necessary, it will be for a very limited period and that the emergency program can be progressively curtailed. Even with more conservative operations, the Federal Housing Administration expects to aid in financing almost a quarter of the houses built in the fiscal year 1949. As long as employment and income continue high, foreclosures will be few, and receipts from insurance premiums and other sources will continue to exceed expenditures (excluding investments). Thus, further substantial additions can he made to reserves available to meet future losses.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Aids to private housing:

Housing and Home Finance Agency:

Federal Housing Administration --$1 --$9 --$6

Home Loan Bank Board:

Home Owners' Loan Corporation --200 --159 --127

Transfer of Federal Home

Loan Bank stock 123

Other 1 (1) (1)

Recoustruction Finance Corporation:

Mortgage purchases (net) 59 70 --8

Premium payments and other aids 24 10 (1)

Transfer of Federal Home

Loan Bank stock --123

Public housing programs:

Public Housing Administration:

War housing 108 58 47 $213

Veterans' re-use housing 365 69 7 14

Low-rent housing (1) 10 27 6

Defense Homes Corporation:

Return of capital 12

Other --1 --11

Other --5 1 (1) (1)

Other housing services:

Housing and Home

Finance Agency 8 1 1 1

Housing Expediter (excluding

rent control) 5 4

Provision of community facilities:

Federal Works Agency:

Present programs 31 21 15 1

Proposed legislation 10 20

Reconstruction Finance

Corporation 8 37 32

Long-range housing program

(proposed legislation) 40 37

Total 403 113 38 292

1 Less than one-half million dollars.

The Federal Savings and Loan Insurance Corporation, under the supervision of the Home Loan Bank Board, now insures over 7 billion dollars in share accounts of savings and loan associations. The Federal home loan banks, also under the supervision of the Home Loan Bank Board, supervise the operations of member savings and loan associations and provide a reservoir of credit to meet the needs of such associations. To minimize demands upon the Corporation and the banks in future years, extension of excessive or unsound mortgage credit must be avoided. As part of the anti-inflation program, I have requested the Housing and Home Finance Administrator to review existing regulations and policies with the Home Loan Bank Board and to propose any legislation that may be necessary to strengthen this important part of our financial structure.

Repayments are continuing on the depression loans made by the Home Owners' Loan Corporation, but at a diminishing rate as the outstanding loans decrease. By the close of the fiscal year 1949, borrowers will have repaid all but 309 million dollars of the 3.5 billion dollars advanced by the Corporation.

The new charter of the Reconstruction Finance Corporation drastically curtails the Corporation's authority to purchase mortgages. The authority to make premium payments to stimulate building-materials production has expired.

Management and disposition of war housing accounts for most of the expenditures estimated for public housing programs in the fiscal year 1949. Almost all of the 18 million

-dollar increase of expenditures for low-rent housing represents net purchase of local housing authority obligations in order to refinance war-built projects on a permanent basis. Annual contributions to local authorities will increase moderately as projects are returned to low-income occupancy.

Federal expenditures for construction of public housing in the fiscal year 1949 will be limited to small amounts for resumption of a few low-rent projects authorized before the war. Construction of temporary re-use housing for veterans will be virtually completed in the current fiscal year.

Liquidation of the Defense Homes Corporation will be completed by the end of the current fiscal year. The Corporation will return to the Treasury the entire capital investment of 10 million dollars and also an estimated earned surplus of more than 2 million dollars.

This Budget provides for a small staff under the Housing and Home Finance Administrator to coordinate Government housing activities and to make technical information and assistance generally available to the housing industry and State and local officials. Except for proposed extension of rent control, classified under finance, commerce, and industry, the functions of the Housing Expediter terminate in the current fiscal year.

Repayable advances under the original authorization by the Federal Works Agency to State and local governments for planning nonhousing public works projects will amount to 16 million dollars in 1948 and 12 million dollars in 1949. The Budget provides for an additional 10-million-dollar expenditure under the proposed renewal of this authority. Other community facility programs of the Agency are relatively small.

The Reconstruction Finance Corporation, in the fiscal year 1949, will disburse an estimated 32 million dollars in excess of repayment on loans to local public agencies public works construction.

Appropriations.--Of the 292 million dollars in appropriations required to finance existing and proposed programs in 1949, an estimated 57 million dollars will be necessary to inaugurate the proposed long-range housing program and to make advances for State and local public works planning under proposed legislation. Annual appropriations of 8 million dollars are recommended under existing legislation mainly to provide for annual contributions for low-rent housing projects.

Five permanent indefinite appropriations account for the remaining 227 million dollars. Of this total, 54 million dollars covers current expenses for management and disposition of war housing and veterans' re-use housing. The remaining 173 million dollars in the permanent indefinite appropriations is the estimated excess of current receipts from rental and sales of war housing and veterans' re-use housing over current expenses, to be deposited in miscellaneous receipts in the fiscal year 1950 without being reflected in expenditures.


The American people have long recognized that provision of an adequate education for everyone is essential in a democratic system of government. It has become evident in recent years that the financial resources of many States and their subdivisions are not sufficient to meet minimum educational standards. Therefore, I urge the Congress to take prompt action to provide grants from the Federal Government to the States for elementary and secondary education. The Budget estimates provide for beginning this program in the fiscal year 1949.

The Budget estimates also assume the creation of a National Science Foundation. In the Budget Message last year, I recommended the establishment of an agency to encourage fundamental scientific research. The Congress passed a bill to create a National Science Foundation, but the bill included unacceptable administrative provisions and I was obliged to disapprove it. I hope that the Congress in this session will pass a bill for this purpose in keeping with the principles of responsible and efficient administration.

Expenditures.--Apart from the proposed grant program, nearly all the estimated increase in 1949 in expenditures for the general promotion of education is due to the increase in vocational education grants authorized by the Congress in 1946. Expenditures of the Federal Works Agency for the maintenance and operation of schools in war-affected communities will be practically completed during the current fiscal year.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Promotion of education:

Office of Education (Federal

Security Agency):

Aid for education

(proposed legislation) $290 $300

Present programs $28 $34 42 44

Federal Works Agency and other 5 4 (1) (1)

Educational aid to special groups:

Bureau of Indian

Affairs (Interior) 11 12 12 12

Howard University (Federal

Security Agency) and other 3 4 7 4

Library and museum services 8 9 10 10

General-purpose research:

Department of Commerce:

Radio propagation building

(proposed legislation) 1 1

Other 15 15 19 20

Office of Scientific Research and

Development (Office for

Emergency Management) 5 (1)

National Science Foundation

(proposed legislation) 5 15

Other agencies (1) (1) 1 1

Total 76 77 387 407

1 Less than one-half million dollars.

The increase in expenditures for library and museum services is due to a slight expansion in activities in the Library of Congress and the Smithsonian Institution.

For general-purpose research, the principal expenditures are by the Bureau of the Census and the Bureau of Standards, both in the Department of Commerce. The increase for the fiscal year 1949 arises chiefly from preparatory work in the Bureau of the Census for the seventeenth decennial census in 1950 and from expenditures for the research and standards work of the radio propagation laboratories of the Bureau of Standards.

In addition to the expenditures for general and multipurpose programs included in this function, many agencies of the Federal Government carry on education or research activities which are a part of their specialized activities and which are, therefore, included as expenditures for other functions. For example, there are the education benefits of the Veterans' Administration, the scholarship programs of the State and Navy Departments, the Agricultural Extension Service, the fellowship program of the Public Health Service, and the research activities of the National Military Establishment, the Atomic Energy Commission, and the Departments of Agriculture and Interior.

Appropriations.--For the fiscal year 1949, the total of appropriations for education and general research is 407 million dollars, of which 316 million dollars is an estimate of supplemental appropriations which will be required under proposed legislation and 91 million dollars is for programs under present law. The estimated appropriation for the National Science Foundation is 10 million dollars above the estimated expenditure because contracts to be made in the first year of operation will require expenditures in later years. Only 3 million dollars of appropriations is required for Howard University, since expenditures for construction will financed in part from earlier-year appropriations.


At the present time, American agriculture is in the best financial condition in history. Agricultural prices in recent months have been at an all-time high--nearly three times the level of 1940. Net farm income in 1947 was approximately 18 billion dollars--three and one-half times the average net farm income in the years 1935-39. Farm debts were reduced greatly during the war years and have remained at low levels.

The Government's present commitment to support the prices of most agricultural commodities at not less than 90 percent of parity will continue until December 31, 1948. At present, however, the world-wide shortage of food has raised the prices of all but a few agricultural commodities well above support levels.

Price support will be needed in the future, but the parity formula should be revised to reflect basic changes in price relationships and improvements in agricultural technology. Price supports should be regarded chiefly as devices to safeguard farmers against forced selling under unfavorable conditions and economic depression. However, they should be revised so as not to be so high as to encourage overproduction of particular commodities, which sometimes can occur even under conditions of full employment.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Loan and investment programs:

Department of Agriculture:

Commodity Credit Corporation:

Present programs $264 --$247 $12

Proposed legislation --50

Farmers' Home Administration

(including Reconstruction Finance

Corporation funds) 7 75 113 $115

Rural Electrification Administration

(including Reconstruction

Finance Corporation funds) 185 305 325 5

Return of capital to miscellaneous

receipts 3 31 68

Other corporate transactions --93 --78 --30 7

Other --3 --1 --2 1

Other financial aids:

Department of Agriculture:

Conservation and use 339 227 176 150

Exportation and domestic

consumption 77 57 47 1 135

Sugar Act 55 55 69 72

Food subsidies (Commodity Credit

Corporation and Reconstruction

Finance Corporation) 222 8

Agricultural land and

water resources 49 50 51 50

Development and improvement 142 131 125 121

Total 1,248 614 906 655

1 Rescission of 91 million dollars of this permanent appropriation is proposed.

The authority of the Commodity Credit Corporation, which is the principal agency for carrying out our price support programs, was temporarily extended to June 30, 1948. I recommended a year ago, and I recommend again, that the Corporation be recharted by act of Congress with a Federal charter in place of its present State charter, and that its present capital and borrowing authority be renewed.

Expenditures.--The largest factor in the fluctuation of total agricultural expenditures is the change in the various price support, supply, and purchase programs of the Commodity Credit Corporation. Advances under the contract to purchase Cuban sugar in June 1947, for example, largely account for net expenditures of 264 million dollars in the fiscal year 1947, and likewise, the subsequent sale is largely responsible for the net receipts now expected for 1948.

By 1949, net cash outlays for price support and supply programs will be small because agricultural prices on the whole are expected to be above support levels, and reimbursements from other agencies and cash-paying foreign governments should offset expenditures for procurement of agricultural commodities. However, price support will probably be required for commodities such as potatoes, eggs, wool, and tobacco.

Under proposed legislation, a saving of 50 million dollars has been included as an estimate of the possible effects of revision of the parity formula and the level of price support.

The programs of the Farmers' Home Administration were greatly curtailed during the war period. I am asking for a small increase in administrative funds and a 15 million-dollar increase in funds for production and subsistence loans in order to meet a small part of the need for essential production credit for low-income farmers. The increase in expenditures of the Farmers' Home Administration does not reflect changes in its program, but is due primarily to changes in the method of accounting for loan repayments by farmers. In 1949 such repayments, made directly to the Treasury, will amount to an estimated 111 million dollars.

Electrification of rural areas, held back during the war years, has greatly accelerated since 1945, and will continue to expand in the fiscal year 1949 as rapidly as materials become available. Except for administrative expenses, the entire expenditure figure represents loan disbursements to local cooperatives and other borrowers.

Other corporate transactions reflect the high level of farm prosperity, which has enabled farmers in recent years to make large repayments on their mortgage indebtedness. Repayments will continue in 1949, though at a reduced rate.

In accordance with the 1948 Agriculture Appropriation Act, commitments for payments to farmers under the conservation and land-use program will be reduced for the crop-year 1948, causing a decline in expenditures in the fiscal year 1949. It is necessary, however, that this program be restored in order to prevent a serious reduction in the fertility of our soil as a result of the high production induced by heavy foreign and domestic demands for agricultural products. I therefore ask the Congress to make more adequate provision for the conservation and use program by authorizing a 300-million dollar program for the 1949 crop year. Expenditures under this program will occur largely in the fiscal year 1950.

With the present high agricultural prices, expenditures for various surplus disposal programs under the permanent appropriation for exportation and domestic consumption of agricultural commodities can be reduced in the fiscal year 1949. On the other hand, expenditures under the Sugar Act of 1948 will be increased to make payments to sugar growers at the rates specified in the act and to cover payments owed to sugar producers in Puerto Rico--payments which were not made because of the appropriation limitation of 55 million dollars previously in effect.

The programs of the Federal Government to encourage research, education, and demonstration work, which are carried on by the Extension Service, the Soil Conservation Service, and the scientific research agencies of the Department of Agriculture, are included in "agricultural land and water resources" and "development and improvement." Expenditures for these two categories show a small net decline in 1949.

Appropriations and other authorizations.--To carry out our agricultural programs, I recommend that the Congress appropriate 655 million dollars for the fiscal year 1949. This includes 150 million dollars for conservation and use to carry out the commitment authorized by the Congress for the 1948 crop year. In addition, I recommend new borrowing authority of 300 million dollars to finance Rural Electrification Administration loans--an increase of 75 million dollars over the amount authorized for 1948. On the other hand, since not all of the permanent appropriation of 135 million dollars for exportation and domestic consumption of surplus agricultural commodities will be required, I recommend the return to the Treasury of 91 million dollars of this permanent appropriation.

The recommended appropriation of 121 million dollars for the various programs included in development and improvement of agriculture reflects several changes. It contemplates an increase of 10 million dollars for grants to States, marketing research, and other research under the Research and Marketing Act of 1946. This increase will be offset by a decline of 10 million dollars in the appropriation for the Bureau of Animal Industry. Other increases and decreases will be small.


The key objectives of the natural resources program in the fiscal year 1949 are to find new reserves, to reduce destruction and waste, to discover new applications of resources, to promote greater reliance on resources known to be abundant, and particularly to develop the use of atomic energy.

Heavy demands on our natural resources during and since the war have made it necessary for us to take action aimed at more careful husbandry of these resources. In achieving new high levels of industrial production we have depleted our storehouse at a faster rate than ever before. In addition, our soils, water supplies, minerals, and forests available for constructive use are being diminished by avoidable wastage.

Our heritage is not so great that we can afford to overlook the growing deficiencies. Although some of our resources are practically inexhaustible, others are rapidly being depleted. Still other resources we possess only in insignificant quantity or lack completely.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Atomic energy:

Atomic Energy Commission 1$170 $456 $660 $625

Other agencies 4 20 14

Land and water resources:

Corps of Engineers (Army,

civil functions) 180 314 449 472

Bureau of Reclamation (Interior) 121 183 268 269

Bonneville Power Administration

and southwestern power

transmission system (Interior) 16 20 32 27

Tennessee Valley Authority 18 46 35 35

International Boundary and

Water Commission, United States

and Mexico (State) 2 4 9 3

Bureau of Land Management

and other (Interior) 8 10 13 14

Other --2 (2) (2) (2)

Forest resources:

Forest Service and

other (Agriculture) 50 55 55 55

Department of the Interior 3 4 4 3

Mineral resources:

Bureau of Mines and

other (Interior) 19 24 25 25

Department of the Navy

and other 5 5 5 (2)

General resource surveys

(Geological Survey, Interior) 10 10 15 16

Fish and wildlife resources

(Interior and other ) 11 12 19 21

Recreational use of resources

(Interior) 11 17 23 16

Total 628 1,179 1,626 1,581

1 Includes expenditures only after Dec. 31, 1946, when program was shifted to Atomic Energy Commission.

2 Less than one-half million dollars.

The expenditures included in the Budget for 1949 are not sufficient to provide all the conservation and new development necessary to prevent a further decline in our available resources. They will, however, enable us to make moderate progress toward a more nearly sustaining basis.

Expenditures.--Our responsibilities for safeguarding the national defense and developing peacetime applications of atomic energy require new laboratories, new production plants, and training of an increasing number of scientists and technicians. Increased expenditures in the fiscal year 1949 are required.

Last July the Congress provided for acceleration of our program for flood control and stream-flow regulation. This action was based in large part on the recommendations which I submitted at that time. The increases estimated for the Corps of Engineers in the fiscal year 1949 are needed for the orderly execution of this program. Almost all of the expenditures will be required to carry forward projects under way in the fiscal year 1948.

The reclamation program brings new resources into use. The base has already been set for this program. Even without the addition of any new major projects, expenditures of the Bureau of Reclamation will increase by 85 million dollars in the fiscal year 1949 if construction is to proceed at a rate which will yield irrigation and power benefits without undue delay.

In order to distribute hydroelectric power as it becomes available from Government dams, expansion of transmission facilities is needed by the Bonneville Power Administration and certain extensions should be made in the southwestern area, also by the Department of the Interior. These facilities, for which increased expenditures of 12 million dollars are estimated for 1949, are essential to deliver power to areas of shortage.

Net expenditures for the Tennessee Valley Authority program in 1949 will decrease from the 1948 level. Estimated net proceeds of 750,000 dollars from power operations will be paid into miscellaneous receipts in 1949, as compared with 8 million dollars in 1948. This reduced payment is recommended in order to permit the Tennessee Valley Authority to retain corporate funds urgently needed to finance facilities required to avoid power shortages.

Construction will go forward more rapidly on the Rio Grande dams provided for in the 1944 treaty with Mexico. This will mean increased expenditures by the International Boundary and Water Commission in 1949.

Ownership of large public-domain and acquired-land holdings places on the Federal Government a direct responsibility for land conservation and management. Most of the lands administered by the Department of the Interior are unforested range lands. Expenditures On these lands in the fiscal year 1948 are inadequate for proper conservation and protection. Outlays for the land-management activities of the Department of the Interior increase from 10 million dollars in the fiscal year 1948 to 13 million dollars in the fiscal year 1949.

Our national forests, which are mostly under the jurisdiction of the Department of Agriculture, must be protected from fire, disease, and other losses, and administered so as to yield an assured timber supply for the future. Expenditures for these resources are continued at the 1948 level.

Depletion of our petroleum reserves is one of our most serious and far-reaching problems. Although discoveries of new oil pools are being made each year, reserves are becoming inadequate to match our rapidly growing requirements. Fortunately we have large supplies of coal and oil shale and moderate supplies of natural gas, which can be converted into liquid fuel. The Budget contemplates appropriation to the Bureau of Mines in 1949 of all the remaining funds authorized for the present 5-year synthetic liquid fuels program which expires in the fiscal year 1949. I recommend extension of this program for a period of 3 years and an additional authorization of 30 million dollars.

Knowledge of our natural resources is still far from complete, and cannot be made complete in a single year or even several years. The 1949 Budget provides for basic mapping and investigations only as part of a long-term program. An increase from 10 million dollars in 1948 to 15 million dollars in 1949 is needed for the basic surveys and mapping of the Geological Survey. Expenditures of the Bureau of Mines and Geological Survey for limited exploration and development, mostly for strategic and critical mineral supplies, will continue in 1949 at a slightly increased level. Since these efforts cannot result in the discovery of resources for all foreseeable requirements, we must supplement them by stockpiling materials likely to become deficient, as I have already stated in reviewing the national defense program.

Development and upkeep of our national parks, fish hatcheries, and wildlife reservations have been deferred because of the requirements of war and postwar adjustments. Increased expenditures are needed for administration and maintenance of the national parks as well as for improvement of roads, trails, parkways, and other facilities for public use and safety. The additional outlays for fish and wildlife are needed for the preservation and development of these valuable resources, including the salmon and fur-seal resources of Alaska.

The expenditure estimates for 1949 include increased allowances for development of the strategically important Alaskan area, where proved and probable resources may help to compensate for shortages in the United States.

Appropriations and other authorizations.--Of the total 1.6 billion dollars of appropriations recommended for 1949, 338 million dollars will be required to liquidate prior-year contract authorizations, largely by the Atomic Energy Commission. New contract authorizations recommended for 1949 include 400 million dollars for the Atomic Energy Commission, 13 million dollars for the Bonneville Power Administration, and 4 million dollars for the National Park Service. Estimated expenditures for natural resources are 45 million dollars above the recommended appropriations, because of the carry-over of funds for some programs.

Additional contract authority of 200 million dollars is recommended for the Atomic Energy Commission in 1948 to supplement the part-year appropriation allowed by the Congress.


The current high level of economic activity makes heavy demands upon the Nation's transportation system. To meet these demands, the Federal Government must not only perform its regulatory functions but must provide basic facilities and services on an expanded scale for highway, air, and water transport. Most of the Government's activity in these fields since the war represents deferred maintenance. Little has been done so far to effect the long-run improvements that are needed.

The country's airways system is in urgent need of improvement. The installation of landing aids and the modernization of other aids to air navigation must be accelerated in order to assure increased safety and regularity of air transportation, and thus provide a solid foundation on which private capital investment can carry this industry forward. I strongly urge the Congress to provide the funds recommended for this purpose.

Expanding aviation activities also have rendered inadequate many existing airports and have pointed up the need for new ones. The amount in the Budget for the Federal aid airport construction program represents the minimum level consistent with continued aviation development.

The Nation's highway system needs extensive improvement and modernization. While expenditures under the present Federal-aid program will continue at a high level through 1950, the fiscal year 1948 is the last for which new contract authorization is provided. The development of an adequate highway system will require continued Federal aid. In order to assure continuity in programing, I shall submit at an early date specific proposals designed to meet this need.

New ship construction by the Maritime Commission has been limited in this Budget because of the present scarcity of steel, the large surplus of war-built tonnage, and uncertainties regarding the future economic requirements for shipping. Expenditures, though somewhat higher than in 1948, will be largely for construction previously authorized. In view of present uncertainties, it would be unwise for the Maritime Commission to start construction of ships unless it had already concluded contracts for their sale to private operators.

In the 1948 appropriation act, the Maritime Commission was placed on an annual appropriation basis and its revolving fund was abolished. As a result, the Commission has general authority to enter into long-term subsidy contracts under the Merchant Marine Act of 1936, but has neither specific authority to incur financial obligations extending into future years nor funds for payment of them. Although the Commission could still enter into long-term contracts contingent upon implementation through future appropriations, the Commission considers that this might have an adverse effect on ship construction. While restoration of the revolving fund is not recommended, I urge the Congress to provide for the financing of long-term contracts under the 1936 act. The present Budget includes an amount for operating subsidies to cover obligations under these contracts in 1949.

The subject of a sea-level canal connecting the Atlantic and Pacific Oceans and its location is under study, and my recommendations thereon will be submitted to the Congress at a later date.

The St. Lawrence waterway and power project is needed for both transportation and industry. As an important step in advance planning, the Congress should now authorize this project in order that international treaty provisions and other arrangements can be worked out.

Expenditures.--To a large extent the increase in Maritime Commission expenditures after 1947 reflects the elimination of its revolving fund, and is offset by increases in miscellaneous receipts of the Treasury.

Continued emergency conditions, including the large-scale relief shipments to Europe, make it necessary for the Maritime Commission to continue to operate, sell, and charter war-built vessels beyond February 29, 1948, when its present authority expires. The estimates for 1949 assume extension of this authority to June 30, 1949, as recommended in my recent message. The drop in expenditures below 1948 is due largely to an anticipated reduction in operation under general agents. Such operation is now limited to a few specialized services, and these will be terminated as rapidly as possible. In the coastwise and intercoastal services, the Commission has entered into special chartering arrangements looking toward the eventual return to completely private operations.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Promotion of the merchant marine:

Maritime Commission --$282 $328 $222 $122

Inland Waterways Corporation

(Commerce) 3 3

provision of navigation aids

and facilities:

Panama Canal (Army) 16 19 20 16

Corps of Engineers (Army,

civil functions) 88 131 171 192

Coast Guard (Treasury):

Present programs 142 121 109 106

Proposed legislation 12 13

Department of the Interior (1) (1) 1

Provision of highways:

Public Roads Administration

(Federal Works Agency) 205 406 478 461

Forest roads and trails

(Agriculture) 28 18 17 17

Alaska roads (Interior) 6 9 19 13

Promotion of aviation:

Civil Aeronautics Administration


Present programs 86 117 158 156

Alaska airports

(proposed legislation) 2 2

National Advisory Committee

for Aeronautics:

Present programs 35 42 49 48

Proposed legislation 2 10

Regulation of transportation 23 15 15 15

Other services to transportation:

Reconstruction Finance

Corporation --30 (1) (1)

Coast and Geodetic

Survey (Commerce) 9 10 10 11

Alaska Railroad (Interior) 12 15 27 26

Postal service deficit (Post Office) 242 323 321 326

Regulation of communication

(Federal Communications

Commission) 6 6 6 7

Other services to communication 1 2 2 2

Proposed legislation not

included above 2 3

Total 587 1,563 1,646 1,549

1 Less than one-half million dollars.

The maintenance and improvement of rivers and harbors by the Corps of Engineers will call for an increase in expenditures in 1949, principally for projects already under way. Only a very few urgently needed new projects are proposed to be started in 1949.

The reduction in Coast Guard expenditures is due principally to a lower level of construction activity in 1949. Pending legislation, for which expenditures are included in this Budget, would give the Coast Guard specific authority to operate additional ocean weather stations. This program is important to safe and regular overseas air operations and is provided for in an international agreement to which the United States is a party. I urge the Congress to take early action.

The postwar highway aid program, which has been retarded by high costs and material shortages, is now more fully under way, as is evident in the sharp increase in expenditures above the 1947 level. To avoid bidding up costs, however, the expenditures contemplated for 1949 are at a level somewhat lower than could be supported by existing authorizations.

The Budget provides for additional highway construction in Alaska and for the improvement of the Alaska Railroad. These transportation facilities are essential in the development program for the Territory.

An increase is required in expenditures of the Department of Commerce for civil aviation in keeping with the growing importance of this industry to the Nation's economy and security. The establishment and operation of air navigation facilities, and grants-in-aid for airport construction, account for most of this increase.

A moderate increase is recommended in expenditures for the National Advisory Committee for Aeronautics. The basic aeronautical research program of the Committee is of vital importance to the development of advanced types of civilian as well as military planes. The 1949 estimates also include first-year expenditures of 2 million dollars under a proposed program for construction of additional facilities required for research in supersonic aeronautics.

The many economic problems faced by all forms of transportation and communication since the end of the war have imposed an unusually heavy work load upon the regulatory agencies in this field. Moderate increases in staff are provided in order to permit more rapid handling of regulatory proceedings.

The postal deficit is running higher in the current year than was previously anticipated. This results from a larger volume of mail, much of which is carried at rates which do not cover operating costs. Recent price advances for supplies and services have also added to the postal deficit. In addition to the deficit specifically included in the Budget, provision is made in the contingency reserve for 1948 and 1949 to cover pending increases in rail and air charges. I strongly urge early action on the recommendation contained in last year's Budget Message that postage rates be revised so as to permit operation of the postal service without a deficit.

Appropriations and other authorizations.--For carrying out the transportation and communication programs, I am recommending appropriations of 1,549 million dollars for fiscal year 1949, including 28 million dollars in supplemental appropriations which will be submitted upon passage of proposed legislation. Appropriations are running somewhat lower than expenditures principally because of the carryover of funds in the Maritime Commission shipbuilding program and the liquidation of prior years' obligations by the Commission. In 1948, a supplemental appropriation of 89 million dollars will be needed for the postal service in addition to the amount included in the contingency reserve for the increase in rail, and air charges.

The Budget for the fiscal year 1949 includes recommended contract authorizations of 15 million dollars for shipbuilding, about 7 million dollars each for Alaska highways and the Alaska Railroad, 11 million dollars for Alaska airports under proposed legislation, and 48 million dollars for construction of facilities for the National Advisory Committee for Aeronautics (including 30 million dollars under proposed legislation). The appropriation recommended for Public Roads Administration and part of the appropriation for the Department of the Interior are for liquidation of prior years' contract authorizations.


The need to control inflation has made it impossible to eliminate the few wartime controls that still remain in force. Consequently I have requested legislative authority for their extension and for the provision of additional, more effective, and urgently needed anti-inflation measures.

Legislation is now under consideration to extend rent controls, to restore controls over consumer credit, and to provide on a limited basis for mandatory allocations, price controls, rationing, and wage controls. The Congress has already extended export and import controls. Budget expenditures for administering all these controls are reflected in the estimates for this function.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Promotion and regulation

of business:

Wartime and other temporary


Office of Temporary Controls $118 $2 (1)

Housing Expediter:

Present programs 2 18 $1

Proposed legislation 4 28 $30

Department of Commerce 1 2 5 5

Department of Agriculture 2 3

Proposed anti-inflation legislation 20 80 85

Continuing programs:

Antimonopoly programs (Federal

Trade Commission, Justice) 5 5 7 7

Other regulatory programs (Federal

Power Commission, Tariff

Commission, etc.) 9 6 6 6

Department of Commerce:

Present programs 18 21 20 19

Proposed census legislation 9 13

Business loans and guarantees

(Reconstruction Finance Corporation):

National defense loans --36 --19 --22

Other loans to business 42 96 70

Retirement of Smaller War

Plants Corporation capital stock 136 15 5

Aids to private financial

institutions (Reconstruction

Finance Corporation) --66 --38 --25

War damage insurance

(War Damage Corporation):

Payment of profits to

miscellaneous receipts 210

Other 1 20

Control of private finance

(Securities and Exchange

Commission) 6 6 6 6

Total 238 372 190 171

1 Less than one-half million dollars.

While the immediate emergency of inflation demands our primary attention, we must not neglect our programs for protecting and encouraging competition and individual initiative through the established regulatory and promotional programs.

Expenditures.--Expenditures for finance, commerce, and industry will fall sharply in the fiscal year 1949, primarily because of the 210-million-dollar payment in 1948 of war damage insurance profits to miscellaneous receipts. The proposed anti-inflation program accounts for the major increases.

The Office of Temporary Controls was abolished June 1, 1947. All remaining wartime controls administered by this Office have been transferred to other departments or agencies. Estimates for these programs for the 1948 and 1949 fiscal years are included principally in the budgets of the Housing Expediter and the Department of Commerce.

With the housing shortage still acute, the extension of rent control beyond the present expiration date of February 29, 1948, is essential. The estimates assume that these controls, administered by the Housing Expediter, will be strengthened and will remain effective throughout the rest of the current fiscal year and for the fiscal year 1949.

In addition to expenditures of 33 million dollars for rent and export controls, an estimated 80 million dollars will be required to administer and enforce the rest of the anti-inflation program. Price and rationing controls, together with allocation and inventory controls, account for almost all of this total, with minor amounts for wage control and the regulation of speculative trading on the commodity exchanges.

I am requesting further increases for the Antitrust Division of the Department of Justice and the Federal Trade Commission to strengthen enforcement of the antitrust laws, and resist the growing concentration of economic power in many important industries. The increased funds requested for the Federal Trade Commission will also permit inauguration of a new research program designed to develop more effective techniques for identifying and combating monopolistic practices.

I repeat my earlier recommendation for passage of legislation authorizing the Department of Commerce to conduct a new census of business and other surveys. Legislation embodying this recommendation has been approved by the Senate and now awaits consideration in the House. Up-to-date information in this area is essential to assure intelligent action by both business and Government.

New authorizations of Reconstruction Finance Corporation business loans and participations in private bank loans, while somewhat higher than in the fiscal year 1947, are being held down to levels consistent with the anti-inflation program. It would be inappropriate for the Government to restrain inflationary increases in private credit while permitting a substantial expansion in its own credit aids. The Board of Directors of the Corporation has instructed its loan agencies to scrutinize all applications in order to avoid direct loans or guarantees of private loans which create inflationary pressures.

The Corporation is also continuing to press for the early retirement of preferred stock and capital notes in banks and trust companies. Repayment of defense loans made to business is progressing. Prompt repayment of these loans and investments is not only sound business .practice, but is also anti-inflationary.

Accumulated profits of the War Damage Corporation totaling 210 million dollars have already been paid to the Treasury. All remaining obligations, including those owed to participating insurance companies, will be liquidated and the Corporation dissolved before June 30, 1948.

The Budget provides for a small increase in personnel for the Securities and Exchange Commission to improve handling of its continuing heavy work load.

Appropriations.--Appropriations of 171 million dollars for the fiscal year 1949 are recommended for these programs. This total includes 133 million dollars in supplemental appropriations--5 million dollars for export and import controls under legislation recently enacted, 115 million dollars for rent control and other proposed anti-inflation activities, and 13 million dollars for new censuses of business and mineral industries. Expenditures for loans and investments by the Reconstruction Finance Corporation do not require appropriations.

During the current fiscal year, supplemental appropriations of 29 million dollars are recommended to continue some of the anti-inflation controls and to initiate others.


The training and placement of workers, the promotion of sound labor relations, and the maintenance of safe and healthful working conditions are of special importance in this period when uninterrupted full production is so vital to the United States.

The reduced appropriations to the Department of Labor in the fiscal year 1948 have impaired its capacity to perform some of its statutory functions. I am recommending increases in the Department's total appropriation for the fiscal year 1949 sufficient to enable it to carry out efficiently its statistical and labor information services to the general public and to the labor mediation and regulatory agencies, and also to carry out adequately its functions in connection with the administration of the State employment offices.

As I have previously indicated to the Congress, there is a need for legislation to establish a Federal program for the elimination of discriminatory employment practices based on race, religion, color, or national ancestry. A year ago I recommended to the Congress that funds be authorized for grants to States for a program fostering safe working conditions. This Budget includes estimates for this proposed legislation.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Mediation and regulation:

Department of Labor:

Present programs $12 $6 $6 $6

Industrial safety program

(proposed legislation) 6 6

National Labor Relations Board 5 6 9 9

Federal Mediation and

Conciliation Service 2 3 3

National Commission Against

Discrimination in Employment

(proposed legislation) 1 1

Other 3 4 5 5

Training and placement:

Public employment offices 87 69 77 77

Other 2 2 2 2

Labor information, statistics,

and general administration 11 9 8 8

Total 120 97 116 117

Expenditures.--Expenditures of the National Labor Relations Board will rise considerably from the fiscal year 1948 to 1949, because of the expanded responsibilities placed upon this agency by the Labor Management Relations Act of 1947.

Expenditures by the State public employment offices, which are fully financed by Federal funds through the fiscal year 1949, will rise by about 10 percent, or 7 million dollars. More than 2 million dollars of the increase is required to finance on a full-year basis the operation of the farm placement program. In addition, State salaries, rentals, and other costs have increased materially.

The apparent decrease for 1949 in the estimated expenditures for "labor information, statistics, and general administration" results from reclassification to specific programs of certain expenditures which for 1948 are shown under general administration.

Appropriations.--The 117-million-dollar appropriation recommended for fiscal year 1949 includes 6.2 million dollars for proposed legislation, of which 5.6 million dollars is for the safety program.

Because of the expanding activities of the National Labor Relations Board and the difficulty of forecasting the size of its case load, I am recommending that the Congress appropriate 9.4 million dollars at the present time, with the entire amount made available for obligation if needed prior to April 1, 1949.

When the Federal Mediation and Conciliation Service came into existence in August 1947 it was granted a part-year appropriation, which will be exhausted during February 1948. The appropriations recommended in this Budget include a supplemental appropriation of 1 million dollars for the remainder of the 1948 fiscal year.


"General government" comprises most of the expenditures of the legislative and the judicial branches of the Federal Government, as well as some expenditures of the executive branch. The costs of financial management, the Government payment toward the civilian employees' retirement system, and nonrecurring expenditures for certain war liquidation programs make up the greater portion of the total.

The major legislative recommendation in this category relates to surplus property disposal. By the end of the present fiscal year the disposition of war surpluses will have been nearly completed. The inventories of surplus personal property will then have been so reduced that costs connected with the disposal of this property under the provisions of existing legislation will approach and may even exceed proceeds from their sale. There will remain, however, certain surplus real properties which will present problems in lease and property management and require a continuing disposal program.

The time is now at hand to liquidate the temporary disposal agencies, further consolidate and improve the central supply services of the Government, and establish a permanent, modern, and economical system of property management. A program for the accomplishment of these objectives will be submitted to the Congress at an early date.

Expenditures.--In view of the administrative changes to be recommended, no estimates are included in the 1949 Budget for the continued operation of the present surplus property disposal agencies. Instead, 94 million dollars is included under proposed legislation as an estimate of the expenditures that will be required for surplus disposal activities in the fiscal year 1949 under the new system of property management and disposal. Of this amount, 81 million dollars is for domestic and 13 million dollars for foreign disposal programs. In addition, 56 million dollars will be spent to liquidate obligations incurred during the current year by the present disposal agencies.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Program or agency 1947 1948 1949 1949

Legislative functions $28 $34 $33 $33

Judicial functions 16 19 19 19

Executive direction and

management 7 7 7 7

Federal financial management:

Bureau of Internal Revenue 200 189 187 188

Other Treasury bureaus 171 136 130 132

General Accounting Office 39 37 33 33

Other 5 4 4 1

Government payment toward

civilian employees' general

retirement system 220 244 259 259

Other general government:

Surplus property disposal,

foreign and domestic:

Present disposal programs (mainly

War Assets Administration) 440 357 56

Proposed legislation 94 105

Deposits and transfers of receipts,

foreign sales (Army, clearing

account) --19 75 30

Federal Works Agency (mainly

Public Buildings Administration) 67 78 75 65

Reconstruction Finance


Payment of interest to

miscellaneous receipts 91 97 2

Other --76 --17 --12

Cemeteries and return of war

dead (Army, civil functions):

Present programs 12 80 75 46

Proposed legislation 2 2


Present programs 118 133 164 174

Proposed legislation 1 1

Total 1,318 1,473 1,157 1,065

The Bureau of Internal Revenue still has a large volume of work, not only in handling current collections, but also in reviewing wartime tax returns before statutory limitations intervene. Expenditures for tax collection are presently estimated at the same level as in the current fiscal year. I am confident that this level of expenditures is not sufficient to assure complete and equitable application of the tax laws, but the matter is now under investigation by congressional committees as well as by staff of the executive branch. I hope that these studies will result in recommendations for improving tax administration.

Estimated expenditures of the other Treasury bureaus engaged in financial management are reduced slightly for the fiscal year 1949. The organization and operating procedures of the Customs Bureau are the subject of a special survey which will soon be completed. The findings should be helpful to both the Bureau and the Congress.

The cancellation of notes of the Reconstruction Finance Corporation, which I recommend elsewhere in this Message, will almost eliminate payments of interest by the Corporation to miscellaneous receipts.

The estimate for the Government contribution to the Federal employees' retirement system for the fiscal year 1949 is based on an increase in the number of Federal civilian employees who have served in the Government for 5 years and have thereby become potential applicants for benefits.

Expenditures estimated for other general government activities in the fiscal year 1949 include an increase of over 6 million dollars in expenditures of the Civil Service Commission to verify the loyalty of persons entering the Federal service. Also included is 10 million dollars to augment the working capital in the general supply fund of the Bureau of Federal Supply.

Appropriations.--Anticipated supplemental appropriations based on proposed legislation amount to 108 million dollars of the appropriation total for general government for the fiscal year 1949. The total of estimated expenditures for the year is considerably above the appropriation total, principally because it includes expenditures to liquidate obligations against appropriations of prior years for the disposal of surplus property and for bringing home our war dead.


Interest on the public debt represents a fixed obligation of the Federal Government, subject to change only as securities are refired or refunded and interest rates changed. Assuming continued high employment and present tax rates, debt retirement will be substantial during the fiscal years 1948 and 1949. However, other factors will cause some increase in interest payments.

Expenditures.--The increase in interest costs in 1948 and 1949 is the net result of divergent trends in payments on the various types of debt. Interest on nonmarketable obligations, principally savings bonds, and special issues to Government trust funds is rising. Interest on marketable debt is declining.

Increasing numbers of savings bonds purchased during the war are now reaching higher accrual brackets. At the same time net accumulations of Government trust funds will cause further increases in the amount of special issues outstanding. The relatively high rates on these issues are for the most part fixed by statute. Interest payments on nonmarketable debt during 1948 also reflect nonrecurring interest payments on the large volume of armed forces leave bonds redeemed during the year.

The decline in interest payments on the marketable debt arises from two factors. In addition to the substantial debt-reduction program, maturing bonds with high coupon rates of interest are being paid off where possible, or are being refunded into issues with lower rates. On the other hand, short-term interest rates have increased. About 40 percent of short-term Treasury bills, certificates, and notes are held by the Federal Reserve banks. A considerable part of the interest costs on these securities will come back to the Government, since in effect about 90 percent of Federal Reserve bank earnings are currently being paid into the Treasury as miscellaneous receipts.


[ Fiscal years. In millions ]

Expenditures Appropri-

Actual, Estimate, Estimate, ations,

Agency 1947 1948 1949 1949

Treasury Department $4,958 $5,200 $5,250 $5,250

Appropriations.--Interest payments represent contractual commitments which are financed by permanent indefinite appropriations not requiring annual congressional action.


The principal items under refunds of receipts are corporate profits tax refunds and individual income tax refunds.

Expenditures.--Estimated refunds for the fiscal years 1948 and 1949 are more than 800 million dollars below actual refunds in 1947. This decline results principally from the estimated drop in corporate income and profit tax refunds arising out of the adjustment of wartime tax liabilities. These corporate refunds, which were 1.1 billion dollars in the fiscal year 1947, are not expected to exceed one-third of this total during each of the fiscal years 1948 and 1949. Estimated refunds to individuals--mainly due to overpayment of individual income tax under the current payment system--which totaled 1.7 billion dollars in 1947, are estimated to be slightly less in 1948 and 1949. This decrease is due to accelerated refund payments in the fiscal year 1947.

Appropriations.--The specific appropriations of 1,254 million dollars for refunds in the fiscal year 1948 will be inadequate and a supplemental appropriation of 800 million dollars will be required.


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 by act of Congress. Two of the State-chartered corporations, the Export-Import Bank and the Institute of Inter-American Affairs, have already been reincorporated by the Congress. I recommend early action by the Congress on pending legislation to reincorporate the Commodity Credit Corporation and the Virgin Islands Company, and on legislation which will be introduced to recharter the Panama Railroad Company.

I recommend extension of the Reconstruction Finance Corporation beyond the present expiration date of June 30, 1948. In revising the Corporation's charter last year, the Congress restricted its lending authority mainly to business and financial institutions, the area of its major prewar activities. I also recommend that the Congress authorize cancellation of an estimated 9.3 billion dollars in the notes of the Corporation held by the Treasury Department. This cancellation, representing in amount the unrecovered costs to the Corporation of its wartime and reconversion operations through June 30, 1947, will permit a clearer appraisal of its active programs. Since the cancellation is merely a bookkeeping operation, it will have no net effect on the Budget.


[ Fiscal years. In millions ]


Actual, Estimate, Estimate, Appropriations

Agency 1947 1948 1949 1949

Treasury Department $2,897 $2,049 $1,990 $1,990

In accordance with the provisions of section 107 of the Government Corporation Control Act, the Bureau of the Budget will soon complete studies of all wholly owned Government corporations to determine in which cases, if any, their fiscal affairs could be handled more appropriately as regular agencies. The Bureau is also studying agencies engaged in business-type activities to determine whether they might administer their programs more effectively and provide better service to the public if they had some or all of the attributes of corporations. These and future studies are designed not only to develop specific recommendations for submission to the Congress, but also to establish guides for determining when the corporate form of organization should be used.

As a part of the program to secure a more uniform approach to the Government's business activities, I recommend legislation to place the Federal Housing Administration under the Government Corporation Control Act. Under existing law, this agency possesses many of the significant attributes of a corporation and, in nearly all major respects, is treated as such by both the executive branch and the Congress.


(Summary of amounts included in Budget)

[ Fiscal years. In millions ]

Anticipated supplemental

Expenditure appropriations


Function and program 1949 1948 1949

National defense:

Universal training program $400 $500

Drill pay for military reserve components 13 16

Military and naval construction 166 $165 45

International affairs and finance:

European recovery program 4, 000 6,800

Other foreign aid (including China) 440 300 450

Foreign informational and cultural program 17 6 20

Loan for United Nations headquarters construction 30 65

United States participation in

international organizations 4 4

Philippine war veterans' benefits 16 16

Philippine rehabilitation (1) (1)

War damage claims 17

Social welfare, health, and security:

National health program, administrative expenses 15 15

General public welfare program, public

assistance benefits 100 100

Stream pollution abatement 1 1

Housing and community facilities:

Long-range housing program 40 37

Advances for public works planning 10 20

Education and general research:

Aid for elementary and secondary education 290 300

National Science Foundation 5 15

Radio propagation building,

National Bureau of Standards 1 1

Agriculture and agricultural resources:

Revision of price support program --50

Transportation and communication:

Increase in postage rates to eliminate

postal deficit 2

Alaska communications system (1) $1

Construction of Federal Communications

Commission facilities (1) (1)

Addition to Post Office equipment shops $1 1

Coast Guard--additional ocean weather stations 12 1

Census of transportation 1 1

Extension of Maritime Commission's authority

to operate and charter vessels 3

Alaskan airport construction 2 2

Research facilities--National Advisory

Committee for Aeronautics 2 10

Finance, commerce, and industry:

Census of business 9 12

Census of mineral industries (1) (1)

New anti-inflation program 80 $24 85

Extension of rent control 28 4 30


National Commission Against

Discrimination in Employment 1 1

Industrial safety program 6 6

General government:

Surplus property disposal 94 105

Army cemeterial expense 2 2

Weather Bureau--observers for additional

ocean weather stations 1 1

Total 5,735 7,381 1,811

1 Less than one-half million dollars.

2 Not included in Budget totals.

3 Included with estimates for Maritime Commission programs under present laws.



Expenditures and appropriations for proposed legislation--apart from the extensions of authority for Government corporations-are listed in the following table. Expenditures under extensions of existing legislation are included. The proposed extensions of old-age and survivors insurance and unemployment compensation would be financed through trust accounts.

This Budget is the measure of our responsibilities at home and abroad. Although these responsibilities are heavy, the economic strength of this country and the resolution of our citizens are great enough to permit us to discharge them.


Note: The message was transmitted to the Senate and to the House of Representatives on January 12.

Harry S Truman, Annual Budget Message to the Congress, Fiscal Year 1949 Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/232457

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