Harry S. Truman photo

Annual Budget Message to the Congress: Fiscal Year 1950

January 10, 1949

[Released January 10, 1949. Dated January 3, 1949]

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, 1950.

Under the laws of our country, the Budget, when approved by the Congress, becomes the plan of action for the Federal Government. It thus embodies decisions of tremendous importance, particularly in these times, to the American people and to the entire world. The preparation of the Budget is one of the most important duties of the President. It represents a carefully prepared plan for carrying out the many activities and services of Government which the Congress has authorized, and others which I am recommending, in response to the needs and desires of the American people.

This is the fourth Budget prepared since the close of World War II. The character of the postwar world still presents many complex problems and unanswered questions. This Budget is the clearest expression that can be given at this time to the program which the Government of the United States should follow in the world today.

It is rounded on the conviction that the United States .must continue to exert strong, positive effort to achieve peace in the world and growing prosperity at home. Substantial direct assistance is provided for other members of the family of nations, and expenditures in support of our armed forces are materially increased. Funds are included for the necessary strengthening of our economy through the development and conservation of the Nation's productive resources. Increased emphasis is placed on the provision of badly needed measures to promote the education, health, and security of our people.

To support this program, the Budget provides for expenditures of 41.9 billion dollars for the fiscal year 1950, about 1.7 billion dollars above the requirements for the present year. Under existing law and with continuing high levels of economic activity, revenues for the fiscal year would be 41 billion dollars. This would result in an estimated deficit of 873 million dollars.

In a period of high prosperity it is not sound public policy for the Government to operate at a deficit. A Government surplus at this time is vitally important to provide a margin for contingencies, to permit reduction of the public debt, to provide an adequate base for the future financing of our present commitments, and to reduce inflationary pressures. I am, therefore, recommending new tax legislation to raise revenues by 4 billion dollars. Because of the normal lag in the collection of taxes, however, tax receipts in the fiscal year 1950 would be considerably less.

In presenting this financial program to the Nation, I have carefully considered the present economic situation of our country and the effect upon it of large Government expenditures. The Economic Report, submitted recently to Congress, emphasized the compelling need for financial prudence by the Government at this time. The actions taken in preparing this Budget reflect that policy.

Because of heavy prior commitments requiring larger expenditures for a number of continuing programs in the fiscal year 1950 and the presence of inflationary forces in our economy, it has been necessary to deny many requests for additional funds which would normally be desirable. Necessary increases in our national defense program are expected to result in additional expenditures in 1950 of 2.5 billion dollars, or 21 percent, over 1949. Public works already authorized and now under way also require higher expenditures. Despite these and other unavoidable increases, the total expenditures contemplated for 1950 are only 1.7 billion dollars above the level of the present fiscal year.

Within the framework of this Budget, provision is made for inaugurating certain essential economic and social programs which should no longer be delayed. An estimate of 290 million dollars is included for aid to education. An additional 500 million dollars is included for such programs as housing and slum clearance, expanded social security and the national health program. In addition, there will be an increase in receipts and expenditures of trust accounts under my recommendation for strengthening the contributory social insurance system.

The plans of each Government agency have been thoroughly reviewed, and the amounts shown in the Budget represent, in my judgment, the minimum requirements for the next fiscal year. I believe that this Budget reflects the necessities of our national policy and the desires of our people and that an extensive review by the Congress will result in its acceptance as a sound program of governmental action.

The 1950 Budget, like all those since the end of the war, is dominated by our international and national defense programs. Together, they are expected to amount to 21 billion dollars, or half of all Budget expenditures.

International affairs and finance account for 6.7 billion dollars of expenditures in the fiscal year 1950, compared with 7.2 billion dollars in 1949. Most of these funds will be spent as part of the strong economic support we are extending to the free nations of Western Europe, whose recovery is the key to continued independence and to safeguarding freedom in many other parts of the world. Our investment in European recovery will repay us many times in terms of increased strength and improved organization for peace.

But in existing circumstances, economic strength is not enough to assure continued independence to free peoples. Under the Charter of the United Nations, therefore, we have been discussing with some of the Western European countries measures designed to increase the security of the North Atlantic area. To further this objective, I expect later to request funds for providing military supplies to those countries and to certain other countries where the provision of such assistance is important to our national security. It is not possible now to predict accurately what will be needed, and I have therefore included no allowance in the Budget. The fact that additional funds will be required to meet the demands of this program emphasizes even more strongly the need for increased revenues in the years ahead.

While we believe that active participation in the work of the United Nations and support for the economic recovery and growing strength of free nations are the most important steps we can take toward peace, we must also maintain adequate national defense forces. In this Budget, expenditures for national defense are estimated to total 14.3 billion dollars in 1950, compared to 11.8 billion dollars for 1949. New authorizations recommended for national defense in 1950 total 15.9 billion dollars. Defense expenditures to maintain the present program are expected to be higher in 1951, as a result of expanding programs now under way and the large orders already placed for aircraft, ships, and other material and equipment, which will be delivered and paid for in the next few years.

The military forces recommended in this Budget are the most powerful this Nation has ever maintained in peacetime. The principal objective we should have in mind in planning for our national defense at this time is to build a foundation of military strength which can be sustained for a period of years without excessive strain on our productive resources, and which will permit rapid expansion should the need arise. The recommendations in this Budget move toward this objective. I believe that they will permit this Nation to maintain a proper military preparedness in the present uncertain period.


[ Fiscal years. In millions ]

1948 1949 1950

actual estimated estimated

Receipts $42,211 $39,580 $40,985

Expenditures 33,791 40,180 41,858

Surplus (+) or deficit (--) +8,419 --600 --873

NOTE.--Estimated expenditures are based on existing and proposed legislation. Estimated receipts exclude new tax proposals. Throughout this Budget, payments of refunds of Government receipts are reported as deductions from total receipts; in the past, they have been reported as expenditures.

Two other commitments of the Government will continue to have a major impact on Budget expenditures in the fiscal year 1950. These are interest on the public debt and our program of services and benefits provided for veterans and their dependents. Together they total 11 billion dollars, or 26 percent of the Budget.

A general decline in the number of veterans drawing readjustment benefits reduces expenditures for veterans to 5.5 billion dollars, 1.3 billion dollars below the current year. Interest on the public debt, however, shows an increase from 5.3 billion dollars in 1949 to more than 5.4 billion dollars in 1950.

Expenditures for all activities of the Federal Government, exclusive of those required for the four items--international, national defense, veterans, and interest on the public debt--total 10 billion dollars or 24 percent of the Budget.

Programs devoted to social welfare, health, and security require expenditures of 2.4 billion dollars. Of this amount nearly half is in direct grants to States for public assistance.

Development of our natural resources, including atomic energy, is estimated to cost 1.9 billion dollars. Programs devoted to agriculture and agricultural resources require expenditures of 1.7 billion dollars. Provision for transportation and communication facilities and services, many of them supporting our national defense activities, requires 1.6 billion dollars.

All other activities of Government--for housing, education, labor, finance, commerce, and industry and the costs of general government--amount to 2.3 billion dollars, or 5 percent of the total Budget.

Expenditures of 6.4 billion dollars are included within the foregoing Budget totals for new legislation. Of this amount, 5.6 billion dollars is directly concerned with international and national defense activities, while the remainder provides for domestic needs.

There are many activities of Government, authorized at various periods, which impose continuing financial obligations and tend to represent fixed elements in the Budget. A careful review has been made of these programs to assure that they meet only the most essential needs in the light of present conditions. As a result, cutbacks have been recommended in the veterans' hospital construction program, recommendations for new public works have been included only where it is not in the public interest to postpone them, as in the case of some power projects, and an increase in postal rates has been recommended to lower the postal deficit. Similar changes are reflected in other areas.

In addition, a great deal of effort has been devoted to achieving the economies which should be obtained through more effective organization and conduct of Government operations. There is no easy way of attaining this type of economy, but the size and complexity of our governmental activities require that we devote continuing attention to improving the management of the public business. Further, we must make it possible for responsible Federal executives to take the actions which will lead to increased efficiency, economy, and closer coordination of activities.

To make more rapid progress toward this goal, to which I am firmly committed, this Budget includes a request for a management improvement fund of r million dollars to be appropriated to the President and utilized by him to carry on necessary and worthwhile management improvement activities. The Budget also reflects certain anticipated savings which should result from management improvement activities now under way.

To strengthen further the management of the Government, I am recommending the immediate enactment of legislation to increase the salaries of the heads and assistant heads of the departments and agencies. The Budget includes a tentative estimate of the funds needed to provide these increases. I also recommend that the Classification Act be revised to permit the payment of more realistic salaries to career employees and to correct the dislocations and inequities created in recent years. The Government and its employees should be assured that the salaries paid for positions at all levels are fair compensation for the work performed.

Fiscal prudence requires that we consider the Government's program, not on the basis of a single year alone, but in the light of the continuing national policies already adopted. It must be recognized that expenditures in the fiscal year 1951 are likely to be larger than those for 1950. Expenditures for national defense can be expected to rise substantially above the level estimated for 1950. We cannot expect any material decline in our international responsibilities. We must face squarely the fact that we foresee a deficit in the fiscal year 1950 under existing tax laws, even without any allowance for new military aid, and that even higher expenditures will probably be required in future years.

Furthermore, in the fiscal year 1950, the present large excess of receipts of trust accounts, with its anti-inflationary effects, will be sharply reduced by the scheduled payment to veterans of a dividend of about 2 billion dollars from the national service life insurance fund.

Finally, it must be apparent that in times like the present we must be in a position to make new plans if conditions change. I do not consider it prudent under such circumstances for the Government finances to be in unbalance, or even in precarious balance. In prosperous times like the present, we should take the necessary steps to reduce the public debt and place the Government finances on a sounder footing.

Therefore, I am recommending that the Congress enact new revenue legislation.

It is not an easy step for me to take to recommend new taxes. I do so with a double conviction, first, that under present circumstances a prosperous country cannot afford an unbalanced budget and second, that after thorough review of the cost of each Government program my recommendations represent a level below which our responsibilities will not permit us to go in the next fiscal year.

The Budget of the United States Government is large because its responsibilities are large. The Budget reflects the realities of our international position and our concern for a strong and progressive domestic economy. This Nation is today the strongest bulwark of freedom in the world. The decisions we make concerning our national finances must be based on a sober understanding of this fact.


On the basis of existing tax legislation, Budget receipts for the fiscal year 1950 are expected to total 41 billion dollars, an increase of more than a billion dollars over receipts in the current fiscal year. The estimates assume the continuance of full employment and approximately the current levels of economic activity.

Income taxes.--Income taxes on individuals and corporations are the major source of revenue of the Federal Government. Receipts from these taxes represent over two-thirds of Budget receipts at present.

The Revenue Act of 1948, passed over my veto, is causing a sharp reduction of individual income tax collections in the fiscal year 1949. Even though the continuation of the present high level of personal income is assumed, these receipts in the fiscal year 1950 will remain below the corresponding receipts in the fiscal year 1948.

Receipts from taxes on corporations are expected to increase substantially in the fiscal years 1949 and 1950. With the end of the war, the rates of these taxes were reduced and collections declined sharply from the high levels of the war years, but the general prosperity that followed the reconversion period has brought steadily rising profits and higher tax yields.

Excises and miscellaneous receipts.--Excise taxes and miscellaneous receipts are the other major sources of Federal revenue. Excise taxes are expected to continue the gradual upward trend of recent years, reflecting the continued high level of business activity. Miscellaneous receipts have been declining from the peak reached in the fiscal year 1947. The disposal of war surplus is nearing completion, and consequently by the fiscal year 1950 miscellaneous receipts will be approaching a more stable level.

Employment taxes.--The continuation of full employment brings gradually rising revenues from employment taxes. Furthermore, under existing legislation, the tax rate for railroad retirement increases in January 1949 and that for old-age and survivors insurance in January 1950. I recommend that the rate increase for the latter tax be moved forward to July 1949.

I have recommended programs of health and disability insurance and expansion of coverage for the social insurance programs now in operation. These measures would result at the outset in added collections of employment taxes greater than the added payments for benefits, but the funds would be transferred to trust accounts and would not appreciably affect Budget receipts.

Refunds.--This Budget reflects the recent change in Federal financial reporting, under which refunds of receipts are shown as deductions from receipts, rather than as expenditures. These refunds are not true operating costs of the Government but are for the return of overpayments of taxes and duties. Such refunds are exceptionally high in the fiscal year 1949, because of the unusual "over withholding" of individual income taxes for January through April 1948, resulting from the lower rates set retroactively by the Revenue Act of 1948. Interest paid on refunds continues to be shown as an expenditure.


The change in the Budget outlook in the last 12 months has meant a corresponding change in the rate of reduction of the public debt. Instead of the Budget surplus of nearly 5 billion dollars estimated last January for the fiscal year 1949, we now face a deficit of 600 million dollars. Accordingly, there will be no net reduction in the debt during fiscal year 1949, other than that made possible by a small reduction in the Treasury's cash balance during the year. The debt on June 30, 1949 is estimated to be 251.6 billion dollars.


(Including proposed changes in employment taxes and miscellaneous receipts)

[ Fiscal years. In millions ]

1948 1949 1950

Source actual estimated estimated

Direct taxes on individuals:

Individual income taxes $20,997 $18,530 $19,135

Estate and gift taxes 899 797 653

Direct taxes on corporations:

Corporation income taxes 9,851 11,515 12,112

Excess profits taxes 323 194 140

Excises 7,402 7,715 7,900

Employment taxes:

Existing legislation 2,396 2,610 3,324

Proposed legislation:

Health insurance 260

Expanded coverage, old-age

and survivors insurance 1,700

Customs 422 407 407

Miscellaneous receipts:

Existing legislation 3,809 2,276 1,750

Proposed legislation 81


Appropriation to trust funds:

Existing legislation 1,616 1,754 2,420

Proposed legislation:

Health insurance 260

Expanded coverage, old-age

and survivors insurance 1,700

Refunds of receipts 2,272 2,709 2,097

Budget receipts 42,211 39,580 40,985

NOTE.--Payments of refunds of Government receipts are now reported as deductions from total receipts; previously, they were reported as expenditures. Overpayments by taxpayers are not true receipts of the Government nor are they, when refunded, properly chargeable as operating costs of the Government. Payments by wholly owned Government corporations and enterprises for retirement of capital stock and surplus, which were formerly reported as miscellaneous receipts, are also excluded from both receipts and expenditures, since they do not represent operating costs or true receipts of the Government. These improvements in reporting practice result in reducing Budget receipts and expenditures for each year by equal amounts, and therefore have no effect upon the amount of surplus or deficit.

The major reason for the failure to achieve any sizable debt reduction in 1949 is the tax reduction enacted by the Eightieth Congress. The increase in taxes which I am recommending should permit us to make, in 1950, the minimum reduction consistent with responsible fiscal policy in prosperous times such as these.


The complex Budget of the Government can best be summarized in terms of major functions. These major functions--national defense, international affairs and finance, veterans' services and benefits, and so forth--set forth the broad purposes for which the Government spends money, regardless of which department or agency carries them out. Estimated expenditures for the fiscal year 1950 of 41.9 billion dollars include all expenditures from the general and special accounts of the Treasury as well as the net expenditures of Government corporations and enterprises. They exclude expenditures made from trust accounts.


[ Fiscal years. In millions ]

Expenditures 1950

Net new Other

1948 1949 1950 appropria- author-

Function actual estimated estimated tions izations

International affairs and finance $4,782 $7,219 $6,709 $6,349

National defense 10,924 11,745 14,268 13,219 $2,455

Veterans' services and benefits 6,857 6,799 5,496 5,701

Social welfare, health, and security 1,853 1,963 2,358 2,271 92

Housing and community facilities 82 349 388 227 1,987

Education and general research 75 85 414 452 18

Agriculture and agricultural

resources 575 1,805 1,662 745 350

Natural resources 1,091 1,616 1,861 1,549 482

Transportation and communication 1,267 1,757 1,586 944 648

Finance, commerce, and industry 88 102 107 82

Labor 183 184 187 187

General government 1,504 1,187 1,224 1,160 7

Interest on the public debt 5,188 5,325 5,450 5,450

Reserve for contingencies 45 150 200

Adjustment to daily Treasury

statement basis --388

Total 33,791 40,180 41,858 138,536 6,039

1 In addition, this Budget includes 3,036 million dollars of appropriations recommended to liquidate prior year contract authorizations.

The full impact and direction of the Government's program cannot be measured in terms of expenditures alone in any one year. Many of the commitments made under the appropriations and other authorizations enacted by the Congress for any year do not result in expenditures until a later year. For example, of the estimated 1950 expenditures, 34 billion dollars will be made from new appropriations and authorizations recommended in this Budget, and 7.9 billion dollars will be made from those enacted in prior years.

In order to give a comprehensive picture of the financial requirements of Government programs, my Budget Message sets forth the net new appropriations and other authorizations requested. "Net new appropriations," totaling 38.5 billion dollars for fiscal year 1950, represent total appropriations requested (including permanent appropriations), less those to be used to liquidate prior year contract authorizations. "Other authorizations," totaling 6 billion dollars for fiscal year 1950, include contract authorizations which permit the placement of specific contracts but require later appropriations to liquidate these contracts, and special authorizations to use the proceeds of Treasury borrowing to finance certain types of Government programs. Together, "net new appropriations" and "other authorizations," totaling 44.6 billion dollars, represent the new obligational authority recommended for carrying on the Government's business.


The following sections describe in broad outline the Government programs in each of the major functional areas and the principal changes proposed in this Budget.


Two world wars and the years between have convinced the people of the United States that their security and well-being depend on conditions of peace and stability in the world. The complexity of the international postwar recovery problem and the tensions which make the transition to peace more difficult have deepened this conviction.


[Fiscal years. In millions]


Expenditures net new

1948 1949 1950 appro-

actual estimated estimated priations

Reconstruction and military aid:

Economic Cooperation Act--ERP

(existing and proposed legislation) $154 $4,600 $4,500 $4,300

Other proposed aid legislation 355 600

Greek-Turkish Aid (acts of 1947

and 1948) 186 285 136

Export-Import Bank loans 460 0 146

Treasury loan to the

United Kingdom 1,700

Reconstruction Finance

Corporation 4 --31 --35

Foreign relief:

Army (occupied areas) 965 1,265 1,030 1,000

Assistance to China (act of 1948) 1 350 49

Other (mainly under Foreign Aid

Act, UNRRA and post-UNRRA) 1,027 185 7

Palestinian refugee program

(proposed legislation) 16

Displaced Persons Commission 1 2 5

Foreign relations:

Department of State:

Present programs 144 171 171 160

Proposed legislation (mainly

war damage claims) 17 1 2

Other 5 7 4 1

Philippine war damage and


War damage claims (Philippine

War Damage Commission) 23 171 165 165

Rehabilitation program 25 51 46 4

Interest on deposits (Treasury) 2 4 3 3

Participation in international


International Refugee Organization 69 73 70 70

Other present programs 18 53 57 31

FAO building loan and ITO

(proposed legislation) 2 8

Total 4,782 7,219 6,709 16,349

1In addition, this Budget includes 17 million dollars of appropriations recommended to liquidate prior year contract authorizations.

The fundamental objective of United States foreign policy is to achieve world peace and international security resting on the strength, mutual interests, and cooperation of free nations. The Budget reflects this policy in the funds provided for our participation in the United Nations and for the regular operations of the State Department and other agencies. But the instruments of our policy requiring the largest measure of budgetary support are the extraordinary programs of economic and military aid to those nations and peoples who share our international objectives and our determination to make them effective. Through all these means, we are acting to strengthen the great moral force of freedom on which we believe the advancement of people everywhere depends.

Total expenditures for international activities, exclusive of possible expenditures for a new program of providing military supplies to certain countries, are expected to be 6.7 billion dollars in the fiscal year 1950--a drop from the 7.2 billion dollars estimated for the fiscal year 1949. Expenditures for economic assistance may be expected to decline in subsequent years with continued progress toward world economic recovery. But any forward estimate of our international expenditures must be highly tentative in view of the present uncertain world situation.

Reconstruction and military aid.--Our aid to European recovery is the major program of economic assistance in which we are now engaged. Begun in April 1948, this program is expected to result in 4.6 billion dollars of expenditures in the present fiscal year, and 4.5 billion dollars in the fiscal year 1950--nearly 70 percent of our 1950 expenditures for international activities.

United States aid to western European countries and the mutual self-help which it has stimulated among them are already resulting in substantial progress toward economic recovery and political stability. The volume of production--both agricultural and industrial--is increasing as the months go by. This momentum must be maintained if the European economy is to become independent of extraordinary outside assistance by the target date of July 1952. To meet this objective, it is also extremely important for this Nation to undertake through such means as an extended and less restrictive reciprocal trade act, those adjustments in our foreign trade pattern which will help to bring about a higher level and a better balance of world trade.

Further authorizing legislation by the Congress will be necessary before the end of the current fiscal year in order to carry the European recovery program forward without interruption. By the end of December, authorizations issued to the European countries for procurement had nearly reached the limit set by the .presently available Economic Cooperation Administration funds. The bulk of the commodities involved will be shipped by the end of March. This Budget accordingly anticipates a supplemental appropriation request for 1,250 million dollars for the remainder of the current fiscal year, in addition to the 4.3 billion dollar appropriation requested for the fiscal year 1950.

I recommend that, in extending the Economic Cooperation Act, the Congress eliminate the present legal requirement which in effect charges 3 billion dollars of the fiscal year 1949 expenditures for European aid against the fiscal year 1948 surplus. This wholly artificial bookkeeping shift in no way affects the Government's actual financial operations, but it does result in a distorted picture of the Budget surplus or deficit in these 2 years.

I have already referred to the prospective North Atlantic arrangements, now under discussion. In addition, we are considering furnishing military supplies to certain countries in furtherance of our national security. As with the European recovery program, military aid will call for a large measure of mutual aid and self-help among the participating countries. Because of present uncertainty as to cost and timing, no amounts are included for this program in the Budget.

The scope and magnitude of several of our other current assistance programs cannot be accurately foreseen at this time. These now include aid to Greece, Turkey, China, and Korea. Funds are provided for assistance programs of this character in the Budget under "other proposed aid legislation," with appropriations tentatively estimated at 600 million dollars and expenditures at 355 million dollars for the fiscal year 1950. I shall recommend specific legislation and appropriations to the Congress at a later date.

The Export, Import Bank will continue to make loans in fiscal year 1950 for promoting international trade and economic development, particularly in Latin America. Net expenditures of the Bank in the fiscal year 1950 are expected to be relatively low because of rising collections on earlier loans and because our aid to Europe is now financed almost entirely from ECA funds. Mainly because of a large Canadian repayment, the Bank is expected to show no net expenditures in the current fiscal year.

Foreign relief.--Our principal foreign relief activities at the present time are those under the Army's program of government and relief in occupied areas--primarily Germany and Japan. Tentative estimates of about 1 billion dollars of appropriations and expenditures for fiscal year 1950 are included in this Budget--a substantial decline from 1949. These estimates include funds to continue the rehabilitation program now under way in Japan. With these additional sums for rehabilitation and with further ECA recovery aid for Germany in the next fiscal year, progress toward economic recovery in the occupied areas should continue, with a resulting further decline in expenditures in subsequent years.

Foreign relations.--The principal change contemplated in the program of the Department of State is the planned expansion of information and education activities. Expenditures for Foreign Service buildings are expected to decline, so that total expenditures for foreign relations activities are expected to be about the same in the fiscal year 1950 as in 1949. As part of our general program for improved Federal administration, provision is made for increased flexibility in management for the Secretary of State through the consolidation of appropriations. Amounts are included in this Budget to cover the cost of proposed legislation granting Foreign Service personnel pay raises similar to those given most employees under the Federal Employees Salary Act of 1948•

I am requesting legislation authorizing the payment of 17 million dollars in the fiscal year 1949 for payment of war-damage claims of neutral European countries.

Philippine aid.--Our assistance to the Philippine Republic in its recovery from war devastation is now at a peak level. Total expenditures for rehabilitation and for payment of war-damage claims are expected to decline slightly in the fiscal year 1950 and to fall much more sharply in the fiscal year 1951. In our veterans' program we are continuing to give compensation to disabled Philippine veterans who fought in our joint efforts against the Japanese. Provision for financing veterans' hospitals and medical services, authorized by recent legislation, are included in the reserve for contingencies, pending the development with the Philippine Republic of detailed plans for carrying out this program.

International organizations.--Our contribution to the International Refugee Organization is estimated at 70 million dollars in the fiscal year 1950, approximately the same as in 1949. With the expected migration of refugees to the United States and other areas, the IRO program should be substantially completed by June 30, 1950. It is my hope that the present Displaced Persons Act will be speedily stripped of its restrictive and discriminatory provisions in order that we may make a contribution to this program more worthy of our best traditions. A tentative estimate of 16 million dollars for the fiscal year 1949 is also included in this Budget for our contribution to the United Nations' program of relief for Arab and other refugees from Palestine.

Outlays for our participation in other international organizations, including the United Nations, will continue in the fiscal year 1950 at about the same level as in 1949. A 1949 supplemental appropriation of 65 million dollars is included for the loan for the United Nations' headquarters construction. Tentative estimates are included in 1950 for a loan to the Food and Agriculture Organization for construction of a headquarters building, and for our contribution to the International Trade Organization.


In my Budget Message for the fiscal year 1949 I indicated that in spite of the reduction of our armed services to a small fraction of their wartime strength, national defense still remained the largest single Government program. I further indicated that the funds recommended, about 11 billion dollars, provided for only the minimum national defense requirements.

Before the Congress could complete action on that Budget, the uncertainty of world conditions made it necessary to consider steps to develop additional military strength which would give evidence of continuing firmness in world affairs. Therefore, in an address to the Congress on March 17, 1948, I recommended the prompt enactment of universal training legislation and the temporary enactment of selective service legislation. Shortly thereafter, I recommended additional authorizations for national defense, bringing my total recommendations for fiscal year 1949 to more than 14.7 billion dollars.

Since then I have given continued study to our national security requirements for the present and the future. For the time being it is essential to continue the selective service process. However, this is not the solution to the Nation's long-range military manpower and training problem. Permanent legislation providing for universal training is essential if we are to achieve an acceptable degree of national security.

My Budget recommendations for national defense in the fiscal year 1950 are based on a plan for a national defense position of relative military readiness, coupled with a higher degree of mobilization preparedness. This type of military planning will permit us continuously to revise our tactics and develop our weapons to meet modern conditions, but is clearly consistent with our traditional concept of military strength for purposes of defense.

In arriving at my recommendations, I have had the benefit of the considered advice of civilian and military leaders best qualified to evaluate the international, strategic, and economic aspects of our national defense requirements. I believe that these recommendations reflect a proper relationship between our security requirements and our economic and financial resources, and envision an Army, Navy, and Air Force in a condition of relative readiness, all functioning as an integrated team. Moreover, I am convinced that we should plan our military structure at this time so as to insure a balanced military program in the foreseeable future at approximately the level recommended in this Budget.

At the same time we must recognize that preparations for defense must be flexible, and not rigid. They must reflect changes in the international situation, changes in technology and in the economic situation. We must be in a position to alter our military programs as circumstances change.

The National Security Act of 1947 established an organizational framework better than we have ever had before and provided for a more flexible control and adjustment of our military program. The establishment of a Weapons Evaluation Board under the Secretary of Defense is an example of the type of development we are continuously making to achieve the best possible assignment of weapons and tasks among the military services. However, we have had enough experience under that act to recognize that further improvements need to be made which cannot be accomplished under existing law. Therefore, I expect to recommend certain changes in the National Security Act which will help to assure readjustments of our defense program as a whole and in all its parts as security requirements change.

The recommendations for the National Military Establishment for the fiscal year 1950 mark a beginning toward a national defense program in which our air, naval, and land forces plan and operate as a team under a unified strategic concept. The 1950 program gives priority to air power and to strengthening the civilian reserve components, and continues to emphasize research and development and industrial mobilization. The Budget provides for maintaining the necessary occupation forces in the former enemy areas for which satisfactory international settlements have not yet been worked out. The Budget also provides substantial amounts to continue the materiel improvement programs for which large authorizations were enacted under the augmented fiscal year 1949 Budget. Continuing expenditures will be necessary for an orderly replacement program in future years as existing inventories are used up and as materiel wears out or becomes obsolete.

Expenditures by the National Military Establishment for defense purposes in the fiscal year 1950 are expected to amount to somewhat over 13.1 billion dollars, including a tentative estimate of 385 million dollars for programs for which new authorizing legislation will later be requested. The stockpiling of strategic materials and other activities supporting defense are expected to require additional expenditures of about 530 million dollars. Furthermore, a tentative estimate of 600 million dollars has been added for the first year cost of universal training. (When in full operation this program may require expenditures of 2 billion dollars annually.) In total, the national defense budget I am recommending will require estimated expenditures of slightly less than 14.3 billion dollars in the fiscal year 1950, an increase of 2.5 billion dollars over the 1949 level. Somewhat higher expenditures are likely in subsequent years.

Net new appropriations and other authorizations specifically recommended in this Budget for the National Military Establishment in the fiscal year 1950 are 13.7 billion dollars. This total, however, includes an upward adjustment of 279 million dollars for increased cost of the naval ship construction programs authorized in 1949 and prior years. In addition, 830 million dollars is provided as a tentative estimate for additional public works, for military pay adjustments, and for other special programs, dependent upon the passage of necessary enabling legislation. In all, 14.5 billion dollars of new obligational authority is provided for the National Military Establishment for use in the fiscal year 1950, an increase of 700 million dollars over amounts enacted for the fiscal year 1949.


[Fiscal years. In millions]

Expenditures 1950

Program or agency Net new Other

1948 1949 1950 appro- author-

actual estimated estimated priations izations

National Military Establishment

(excluding payments under

Armed Forces Leave Act):

Pay and maintenance of

military personnel:

Pay and allowances of

regular personnel $3,555 $3,434 $3,601 $3,596

Pay of retired personnel 148 168 192 191

Subsistence, travel, and other 1,192 1,407 1,359 1,488

Civilian components 350 590 760 795

Research and development 534 557 505 534

Aircraft and related procurement 791 1,157 1,718 330 $1,992

Naval ship construction 271 309 406 5 247

Military public works

construction 395 286 302 93 20

All other 3,316 3,422 3,908 4,317

Tentative estimate for

proposed legislation 385 645 185

Subtotal, National

Military Establishment 10,552 11,330 13,136 11,994 2 2,244

Activities supporting defense:

Universal training 600 800

Stockpiling of strategic and

critical materials (Treasury) 99 350 525 314 211

Payments under Armed

Forces Leave Act 269 14 1

Reconstruction Finance

Corporation --66 --42 --39

Other 70 93 45 36

Total ................................ 10,924 11,745 14,268 113,144 22,455

1In addition, the Budget includes 2,061 million dollars of appropriations recommended to liquidate prior contract authorizations and 75 million dollars to cover other prior year obligations.

2In addition, 279 million dollars is being made immediately available in the fiscal year 1949 to cover increased cost of completing authorized naval ship construction program.

Of the 13.7 billion dollars of specific recommendations for new obligational authority for the National Military Establishment, 11 million dollars is requested for the Office of the Secretary of Defense, 4.6 billion dollars for the Air Force, 4.5 billion dollars for the Army, and 4.6 billion dollars for the Navy, counting the upward adjustment for ship construction costs mentioned above.

In addition to the new obligational authority for the National Military Establishment, this Budget includes 525 million dollars of new authority for procurement of critical and strategic materials, 36 million dollars for other defense-supporting activities, and a tentative appropriation estimate of 800 million dollars for the inauguration of universal training.

In all, new obligational authority for national defense programs of nearly 15.9 billion dollars is included in this Budget. This compares with 14.7 billion dollars for the fiscal year 1949, including 2.9 billion dollars made available in 1948, and also including tentative supplemental authorizations of 341 million dollars chiefly for stockpiling.

Of the 15.9 billion dollars, 13.2 billion dollars is requested in the form of appropriations and 2.7 billion dollars in contract authorizations. In addition, appropriations of 2.1 billion dollars are requested to liquidate prior year contract authorizations.

Military strength--Summary.--The requirements of the various services have been determined, not separately, but in relation to our total security position and the degree of military readiness which is planned. The basic concept upon which my recommendations are based is that this Nation's military security should rest on a nucleus of highly trained and mobile forces--Army, Navy, and Air--backed by ready reserves of trained men, stand-by equipment and productive facilities, and an integrated mobilization plan which relates our national security requirements to the tremendous productive capacity of American industry. Taken as a whole, the amounts recommended in this Budget will permit the maintenance and operation in the fiscal year 1950 of the augmented defense forces now reached under the increased 1949 Budget program.

Under this Budget, the Air Force in fiscal year 1950 will continue at about the present strength of 412,000 officers and men on active duty. It is contemplated that the Air Force will be organized with a minimum of about 48 combat groups and 10 squadrons, together with 27 groups of the Air National Guard. Within the limit of the funds provided, it is possible that adjustments in unit structure or strategic planning may at any time require changes in the number of active groups. At the end of fiscal year 1950, the Air Force program contemplates an active inventory of 9,200 aircraft of all types from trainers to heavy bombers. Increased funds in the Budget will permit the build-up of supporting forces in the Air National Guard to an average of 45,000 personnel and in the Air Force Reserve to 68,000 personnel in regular training status.

Personnel in the Army will be continued at 677,000 officers and men in order to maintain 10 divisions at increased strengths, together with 59 battalions. The active Army will be backed by the National Guard with an average strength of 325,000 personnel, an Organized Reserve of 230,000 in regular training status, as well as by other reserve personnel and equipment. Continuing responsibilities in the occupation of Germany, Austria, and Japan and in manning outlying bases will engage about 40 percent of the Army strength overseas in fiscal year 1950.


[In thousands]

Regulars and Reserves on Reserves in regular

full-time active duty training status Other Reserves

Dec. 1, 1950 Dec. 1, 1950 Dec. 1, 1950

Apt. 1, 1948 average 1948 average 1948 average

1948 (est.) (est.) (est.) (est.) (est.) (est.)

Air Force 368 411 412 58 113 400 400

Army 538 662 677 375 555 650 650

Navy and Marine

Corps 488 531 527 222 281 900 1,050

Total 1,394 1,604 1,616 655 949 1,950 2,100

NOTE. The recommended strengths for all the services include 18-year-old 1-year enlistees and other personnel in training but exclude cadets and midshipmen at the Military and Naval Academies.

In the naval and marine forces a strength of 527,000 officers and men throughout the fiscal year 1950 is provided. The size of the active naval fleet is planned to be 731 ships, including 288 combatant ships. Its composition will be changed somewhat from the present fleet to accord with assigned functions and presently foreseen defense requirements. The active inventory of regular Navy and Marine Corps aircraft is expected to be 7,450 in the fiscal year 1950.

Under the reserve programs of the Navy and Marine Corps, 281,000 officers and men will be trained in 1950. Stand-by ships and materiel to augment the active Navy will remain available if needed.

Although present recruiting rates indicate that only small inductions, if any, will be necessary under Selective Service, it is essential that such authority remain available in the event that voluntary enlistments drop. Moreover, it must be recognized that the existence of the Selective Service Act has in itself been a contributing factor to the current results of the recruiting programs of the services.

Pay and maintenance of military personnel.--The pay and maintenance for the average of 1,616,000 officers and men on active duty in the fiscal year 1950 will require estimated expenditures of 5 billion dollars, 38 percent of all defense expenditures by the National Military Establishment. Expenditures for pay, allowances, subsistence, travel, welfare, training, clothing, and medical care will average about 3,100 dollars per man in the fiscal year 1950.

The increases in rates of military pay and allowances in 1942 and 1946 did not provide a balanced pay structure for the military services. A general overhauling of the military pay, allowance, and benefit structure is overdue. Since it is desirable for remuneration of military personnel to be in line with salaries of Federal civilian employees and other comparable groups, a tentative amount for this adjustment has been included in the Budget, pending later legislative recommendations.

Civilian components.--Our concept of national defense places important reliance upon the readiness of citizen-soldiers. This Budget provides for larger and better-trained reserves for the Air Force, Army, and Navy. Expenditures for civilian components in the fiscal year 1950, exclusive of amounts for construction of facilities, are estimated at 760 million dollars, 30 percent above outlays in the present year and more than twice the amount spent last year. These expenditures cover drill and training pay and maintenance of reservists, operating expenses, and procurement of equipment over and above amounts transferred from wartime stocks.

The Budget recommendations of 795 million dollars of obligational authority for the fiscal year 1950 contemplate expansion of the reserve programs in 1950 and in later years toward the objectives outlined in my recent Executive order. Such expansion is planned at as rapid a rate as is consistent with sound organization, economical operation, and effective integration with the regular forces. The funds recommended for 1950 will permit an average of 949,000 officers and men in regular training status in air, naval, and ground units, as compared to 655,000 now participating.

Research and development.--Scientific and technical advances are vital to a dynamic national defense program. To develop improved weapons and equipment and add to our basic knowledge, new appropriations of 534 million dollars are recommended for direct costs of research and development for the fiscal year 1950. This amount does not include substantial outlays for indirect costs such as the pay and maintenance of military personnel engaged in research and development activities, and the construction and maintenance of facilities.

Direct expenditures for research and development in the fiscal year 1950 are estimated at 505 million dollars. This is somewhat below the estimate for the fiscal year 1949, when payments for programs initiated at the end of the war will be completed. About one-half of the expenditures for research and development will be for aeronautical research and development.

Aircraft and related procurement.--For the fiscal year 1949, 2.8 billion dollars of new obligational authority was provided for aircraft and related procurement, of which 2.0 billion dollars for the Air Force was made available for obligation until the end of 1950 and included some amounts for nonrecurring expenses.

It is estimated that 3.2 billion dollars in unexpended authorizations from 1949 and prior years will be carried forward to the fiscal year 1950. New obligational authority of 2.3 billion dollars is recommended for the fiscal year 1950 to permit contracts for approximately 34 million airframe pounds. This will make a total of 5.5 billion dollars in aircraft and related equipment to be delivered and paid for in 1950 and subsequent years.

Expenditures for aircraft and related procurement in the fiscal year 1950 are estimated at 1.7 billion dollars, about 500 million dollars more than in the present year. Deliveries of 37 million airframe pounds are now scheduled for fiscal year 1950 and are expected to be slightly higher in fiscal year 1951.

Aircraft from wartime reserves will continue to meet a part of the replacement requirements in fiscal year 1950. In subsequent years, when these reserves are depleted, an increase in aircraft procurement may be required if the strength and structure of the Air Force and naval aviation are to be maintained at the level and replacement rates contemplated in this Budget.

Naval ship construction.--Expenditures for naval ship construction in fiscal year 1950 are estimated to be 406 million dollars, an increase of about 100 million dollars over the estimate for 1949.

Including the construction in fiscal year 1949, more than 1 billion dollars of naval ship construction, under present authorizations, will remain to be completed in fiscal year 1950 and later years. I am including in the Budget 279 million dollars to cover increased costs of completing the .present construction program, with some readjustment in types of ships to be built. In addition, I am requesting 52 million dollars of new authorizations for certain ships which will be substituted for some of those previously authorized.

Military public works construction.--Expenditures for military public works construction by the Air Force, Army, and Navy in the fiscal year 1950, under existing legislation, are estimated at about the current level of 300 million dollars. This construction is largely for research and development facilities and badly needed housing for troops and dependents, both in the United States and overseas. This Budget recommends new obligational authority for the fiscal year 1950 of 113 million dollars for projects for which legislative authorization exists.

There are, however, additional requirements for family housing, for research and development facilities, and for other military construction which are not yet authorized. A tentative estimate for these additional military public works is included in the Budget, pending the enactment of authorizing legislation.

All other military expenditures.--The remaining expenditures of the National Military Establishment in fiscal year 1950, are estimated at 3.9 billion dollars compared with 3.4 billion dollars in 1949. These expenditures cover the procurement of other materiel (in addition to aircraft and ships), supplies, and services. The largest part of these expenditures will be for civilian workers engaged in production, maintenance, and administrative activities, both overseas and in the United States. Of all Federal civilian employees, approximately 865,000, or about 40 percent, will be employed in defense activities by the National Military Establishment.

Expenditures for procurement of equipment (exclusive of aircraft and ships), particularly for the Army, will increase in the fiscal year 1950 as deliveries on 1949 contracts are made, even though new obligations for this purposes in 1950 will be lower. Expenses of maintaining and operating facilities and equipment including aircraft will also increase over the 1949 level, largely in the Army and Air Force.

Increased emphasis has been given to industrial mobilization preparedness in the Budget for the National Military Establishment with the recommendation of appropriations of approximately 129 million dollars for fiscal year 1950 as contrasted with 57 million dollars provided for 1949. In addition to making provisions for the continued maintenance of tools and industrial plants held in stand-by status, the programs for industrial mobilization planning with industry and within the military establishments are being increased. Added emphasis is being given to coordinating the cataloging of supply items among the military services, and a greater integration of current procurement with industrial mobilization plans.

Stockpiling and other defense activities. The aim of the stockpiling program is to provide a basic reserve of materials in which accessible resources are deficient, thereby permitting a rapid and sustained economic mobilization in the event of emergency. Stockpile procurement continues to be hampered by materials shortages and rising prices, since it must meet the competition of current industrial consumption, including that for military purposes. However, the concentration of procurement on the more urgently required materials should permit us to make substantial progress toward our goal of a reasonably adequate stockpile with minimum effect on current consumption.

Toward the stockpile goal, this Budget recommends 525 million dollars of new obligational authority for the fiscal year 1950 and supplemental authorizations of 310 million dollars for the present fiscal year. Of these amounts 211 million dollars for 1950 and 270 million dollars for 1949 are in contract authorizations to be used primarily for developmental contracts. A total of 800 million dollars in obligational authority has already been enacted in the last 3 years. In addition, by the end of fiscal year 1950, materials valued at about 700 million dollars will have been transferred to the stockpile from war surplus inventories and from Economic Cooperation Administration operations. Of the total stockpile objective of 3.7 billion dollars, materials and authorizations amounting to 2.3 billion dollars will have been provided.

Deliveries and expenditures, of course, will lag behind authorizations. Expenditures in the fiscal year 1950 are estimated at 525 million dollars, an increase of 175 million dollars in outlays over the current year. By the end of the fiscal year 1950, materials valued at about 1.6 billion dollars are expected to be on hand.

The stockpile represents an addition to the supplies obtainable in an emergency from domestic production and imports from protected sources. The recommended authorizations will permit the stockpile to be built up to the point at which, with the aid of prompt and effective allocations, a comparatively high degree of protection will be afforded to our economy in the event of emergency.

Expenditures for all other defense programs, including expenses of the Selective Service System, maintenance of reserve industrial plants by the Federal Works Agency, and by other agencies, are estimated at 46 million dollars in the fiscal year 1950. On the other hand, net receipts of 39 million dollars are estimated in the Reconstruction Finance Corporation defense program.


As a nation we have sought to give our veterans opportunities to work, to earn, and to recapture the normal pattern of their lives. In addition to our general programs for full employment, increased health services, improved housing and greater security for all, we have provided an extensive program of special benefits and services to veterans and their dependents.

The extent and scope of constructive measures to assist veterans of our earlier wars to return to useful civilian life were limited. Too often prior to World War I our country belatedly attempted to discharge its obligation to veterans merely by bestowing upon them pensions and gratuities. In contrast, servicemen of World Wars I and II have received more timely and better treatment both in the service and out. Improved medical and hospital care, insurance benefits, vocational rehabilitation, compensation, and other benefits have been provided to disabled servicemen or to the dependents of the deceased. Servicemen of World War I received adjusted compensation, while World War II veterans are receiving readjustment benefits to assist them in obtaining education, training, jobs, businesses, and homes.

At the present time our expenditures for veterans' programs are declining as readjustment benefits for World War II servicemen fall off. However, the long-run trend of compensation and pension costs and of hospital and medical care is gradually upward. This means that over-all expenditures under present legislation will remain high even after the completion of the temporary programs under the Servicemen's Readjustment Act.

The program of veterans' services and benefits should reflect the fundamental fact that our primary long-run obligation is to dependents of veterans deceased from service causes and to veterans disabled in the service. In the fulfillment of these obligations we have two basic purposes. The first is to alleviate financial hardship to dependents of veterans deceased from service causes. The second is to help veterans surmount the physical and economic handicaps of their service disabilities. At the same time, we should .preserve and stress our basic objective of assisting the recipients of these benefits to be as nearly as possible self-reliant and self-sustaining members of our society.

The necessity for new or extended benefits for veterans without service disabilities should be judged, not solely from the standpoint of service in our armed forces, but in the light of existing social welfare programs available to all, veterans and nonveterans alike. In recent years social security protection, including unemployment and old-age and survivors insurance and old-age assistance, has been made available to a large percentage of our general population. Prior to World War I the lack of such general benefits was, of course, one of the main reasons for the enactment of special benefits to veterans. At the present time we seek to broaden and extend these social security programs and to enact a comprehensive national health and disability insurance program for all our people, including veterans, who with their immediate families will soon constitute 40 percent of the population.

Total expenditures for veterans' benefits and services are expected to be 5.5 billion dollars in the fiscal year 1950, about 1.3 billion dollars below estimates for the current fiscal year. This drop reflects the virtual completion of unemployment and self-employment allowances, an expected sharp decline in educational training programs, and the inclusion in the fiscal year 1949 of a nonrecurrent payment to insurance trust funds. Even at the expected lower level, expenditures for veterans' 'programs will still comprise more than one-eighth of the total Budget.

Readjustment benefits.--The readjustment program has provided valuable educational and other opportunities to veterans of World War II. It is estimated that by the end of the fiscal year 1950, 6,000,000 veterans will have used education and training benefits, more than 9,000,000 will have received unemployment and self-employment allowances, and nearly 2,000,000 will have obtained loan guarantees for homes and businesses. By the end of the fiscal year 1950 total outlays under the Servicemen's Readjustment Act since 1945 will have exceeded 13 billion dollars.


(Excluding trust accounts)

[ Fiscal years. In millions ]


Expenditures net new

Program or agency 1948 1949 1950 appro-

actual estimated estimated priations

Readjustment benefits (Veterans


Education and training $2,497 $2,481 $1,993

Unemployment and self-employment

allowances 677 424 78

Loan guarantees 64 48 48 $2,552

Other 75 88 80

Pensions (Veterans Administration) 2,080 2,140 2,111 2,221

Insurance (Veterans Administration) 151 488 62 77

Hospitals, other services, and

administrative costs:


Veterans Administration 17 56 81

Corps of Engineers (Army,

civil functions) 36 127 179

Federal Works Agency 53 3 1

Current expenses:

Veterans Administration:

Hospital and medical care 536 597 574 567

Other activities 377 345 287 282

All other agencies 4 2 2 2

Total 6,567 6,799 5,496 5,701

Enrollment in school, job, and farm training courses is estimated to decline to 1,575,000 in 1950 from this year's average enrollment of 2,000,000. In 1950 more than twothirds of the participants in this program will be in on-the-job, on-farm, and below-college-level training, while less than onethird will be in colleges and universities. Total expenditures, estimated at approximately 2 billion dollars in the fiscal year 1950, reflect the increased rates of subsistence allowances enacted in the last session of the Congress.

I am recommending reenactment in its present form of the provision of the 1949 appropriation act prohibiting the use of funds for avocational and recreational training. This constructive action on the part of Congress in eliminating expenditures for courses which are inconsistent with the basic purpose of the Servicemen's Readjustment Act is expected to save more than 50 million dollars this year.

Under present law only a small number of veterans will be eligible for unemployment and self-employment benefits after July 25, 1949. The average number of claimants to be paid in these two programs during the fiscal year 1950 is estimated at 74,000 as compared to about 400,000 in the fiscal year 1949. Expenditures decline correspondingly to 78 million dollars. By the end of the fiscal year 1950, aggregate outlays for veterans' unemployment and self-employment benefits, since 1945, will have exceeded 3.5 billion dollars.

Under the loan-guarantee title of the Servicemen's Readjustment Act, veterans obtained loans amounting to 7.4 billion dollars up to June 30, 1948, more than nine-tenths for homes, and the rest for farms and businesses. About 45 percent of this total is guaranteed or insured by the Government. Recent experience has shown a decline in the number of loans guaranteed. The estimates assume 322,000 loans in the fiscal year 1949 and 293,000 in 1950.

Pensions.--It is estimated that an average of 2,968,000 individuals and families will receive compensation and pension payments in the fiscal year 1950, an increase of 52,000 over the number for the present year. About one-fourth of these payments involve nonservice-connected death or disability. The 1950 expenditure estimate of 2.1 billion dollars for pensions includes 1.4 billion dollars in compensation for service-connected cases, and 500 million dollars in pensions for nonservice-connected cases. It also includes 180 million dollars for subsistence allowances to service-disabled veterans in training, a decline of 70 million dollars from the present year. These expenditures reflect the increased rates of compensation enacted by the last Congress for dependents of veterans deceased or disabled from services causes.

Insurance.--The Government contributes to the veterans' life insurance funds for war hazard claims. Budget expenditures for veterans' insurance, largely for such contributions, are estimated at 62 million dollars in fiscal year 1950. A tentative estimate of 413 million dollars is included for an additional contribution to the national service life insurance fund in the fiscal year 1949. This large non-recurring item in the present year results from a re-evaluation of the Government's liability for war risk claims.

Hospital and domiciliary construction.-- The construction program under which the Veterans Administration has been proceeding was planned and authorized during and immediately after the war. Now that we have the benefit of a period of postwar experience, I have reviewed the veterans' hospital and domiciliary construction program and find that to continue with the construction of the full number of 90 authorized hospitals will result in a serious overbuilding, in terms of beds needed to meet foreseeable requirements. A reduction in the program will still make it possible to provide for all service-connected patients in every geographical area and will provide an even more liberal allowance of beds for nonservice-connected patients than at present.

I have therefore directed that the program which I had previously authorized be curtailed by approximately 16,000 beds and asked the Administrator of Veterans Affairs to recommend specific adjustments in the program. I have approved his recommendations for the cancellation of 24 hospital projects, and the reduction in planned capacity of 14 additional hospitals. This will result in a reduction of 279 million dollars in the total of 1.2 billion dollars of construction previously authorized, and will reduce expenditures in the fiscal year 1950 by 115 million dollars. However, hospitals scheduled for completion will cost 42 million dollars more than originally estimated. Therefore, a net rescission of 237 million dollars in contract authorizations is recommended. Under this revised program, expenditures in the fiscal year 1950 for construction of hospital and domiciliary facilities are estimated at 260 million dollars, an increase of 77 million dollars over the fiscal year 1949, due to the progress of construction already under way.

Hospital and other services and administration.--Current expenses for hospital and medical care are estimated at 574 million dollars in the fiscal year 1950, 23 million dollars less than the peak expenditure in 1949. This decline reflects largely a downturn in the out-patient medical care program and increased use of excess supplies now in stock. Expenses of the in-patient care program will increase. The 1950 estimates provide for an average daily patient load of about 140,000, an increase of 4,000 over the current year.

Other current expenses, which are chiefly the costs of administering the nonmedical benefit programs of the Veterans Administration, continue to decline in line with work loads.

Trust accounts.--Veterans of the two World Wars hold 7,500,000 active policies under the Government life and national service life insurance programs. Premiums and earnings, supplemented by Government contributions to cover claims involving war risks, have built up substantial accumulations in these trust funds.


(Trust accounts)

[ Fiscal years. In millions ]

Item 1948 1949 1950

Receipts: actual estimated estimated

Transfers from general and special accounts $145 $482 $56

Premiums, interest, and other 677 712 745

Total 812 1,194 801

Expenditures for benefit, refunds, and other (deduct) 377 381 2,421

Net accumulation 445 813 --1,620

Assets of the national service life insurance fund will reach an estimated 7.7 billion dollars in the current fiscal year. The Government contributions anticipated for the fiscal years 1949 and 1950 will bring total Government contributions to the national service life insurance fund to over 4 billion dollars.

An initial dividend estimated at about 2 billion dollars is scheduled for payment during the fiscal year 1950 to all servicemen who hold or have held national service life insurance. The Veterans Administration is now reviewing insurance records to determine the status of the fund, after which the amount of the dividend and the method of payment can be decided.


In the last 15 years the Federal Government has established a basic pattern of activities in the field of social welfare, health, and security. The national system of oldage and survivors insurance, the system of regular grants to States for public assistance payments to the needy aged and blind and to dependent children, the Federal-State system of unemployment insurance, and several grant programs for the promotion of public health and of children's welfare were established by the Social Security Act of 1935. More recent laws established the railroad retirement system and grants to States for the school lunch, hospital construction, and mental health programs. Also included in the Government's social welfare, health, and security programs are the older system of grants to States for vocational rehabilitation, and those Federal services directed toward the prevention of crime and the apprehension and detention of criminals.

Under the Social Security Act, the national policy contemplated that old-age and survivors insurance would be the primary Government measure affording economic protection to the needy aged and dependent children, and that unemployment compensation would provide temporary assistance to the unemployed. Other types of social insurance were to be added later to provide more adequate protection against major economic hazards of our society. Public assistance was designed as a backstop, a second line of defense, eventually to be replaced in large measure by social insurance benefits. We have not made progress toward this objective in the last decade. Individual benefit payments under public assistance now are substantially higher than under oldage and survivors insurance. They are more adequate, in many cases, than under unemployment insurance.

Three principal steps should be taken now to strengthen and complete the system of social insurance, and thereby to make our governmental programs consistent with the basic national policy in this field.

First, old-age and survivors insurance should be extended to nearly all the 25 million gainfully employed persons not now covered; the scale of benefits should be sharply raised; benefits should be provided for women at an earlier age; and higher part-time earnings should be permitted. (In addition, coverage under the unemployment compensation system should be extended and benefits made more adequate, as indicated in the "Labor" section of this Message.)

Second, disability insurance should be provided to protect against loss of earnings during illness or other temporary disability, and to assure continuing annuities to workers who become permanently disabled and therefore unable to earn a livelihood.

Third, a comprehensive national health program should be established, centering in a national system of medical care insurance, accompanied by improved services and facilities for public health and medical care.

These recommendations have had extended public discussion. Action is long overdue. I am confident that the Congress will enact promptly the legislation needed to achieve an integrated, comprehensive system of social insurance. In addition, I repeat my recommendation that the Congress give departmental status to the Federal Security Agency.

The needed legislation includes not only measures to establish administrative procedures and authorize benefit payments, but also provisions for financing them. At present, workers and employers each contribute to the old-wage and survivors insurance fund at a rate of 1 percent of the covered pay roll. Under present law, this rate will advance on January 1, 1950 to 1 1/2 percent each for employers and workers. The tax applies only to the first 3,000 dollars of earnings of each employee in any year, and earnings in excess of that amount are not counted in calculating the retirement benefits. My recommendations contemplate raising the tax rate on presently covered employment on July 1, 1949, the date when increased benefits should be made available. In addition, I propose that we raise the ceiling on taxable earnings, as well as extend the pay-roll tax to workers and employers not now covered. The addition of insurance coverage for medical care and disability benefits will also require some additions to the pay-roll tax rates in order that the whole social insurance system will continue to be substantially self-supporting.

The financial impact of these recommendations is mainly in the trust accounts. For the fiscal year 1950, benefit payments and administrative expenses from the major trust accounts in the field of social welfare (other than unemployment insurance) are estimated at 1.3 billion dollars under existing laws. Under the legislation which I recommend, these payments would be doubled. Apart from this new legislation, they would rise by more than 100 million dollars above the total for the current fiscal year.

The total of Budget expenditures for social welfare, health, and security also is expected to rise in the fiscal year 1950, to nearly 2,358 million dollars, exclusive of expenditures from trust accounts. The increase over the fiscal year 1949 is 394 million dollars, of which 147 million dollars is in transfers to the railroad retirement trust account and 86 million dollars is for increased grants to the States for public assistance under present Federal law. Most of the remainder of the increase is divided between present programs for the promotion of public health and proposed new legislation for medical care insurance and public assistance.

Excluding trust-account transactions, new appropriations requested for social welfare, health, and security for the fiscal year 1950 are estimated at 2,271 million dollars. In addition, 92 million dollars of new contract authority will be needed, making a total of 2,363 million dollars of new obligational authority for these programs. This does not include 40 million dollars of appropriations necessary to liquidate contract authority made available in prior years, mainly for hosipital construction grants. Of the new appropriations in Budget accounts, 84 million dollars is for proposed legislation. All the rest is for programs under present laws.

Public assistance to the aged and other special groups.--The public assistance pro grams of the Federal Government are all carried on in cooperation with the States, and the expenditures are almost entirely in the form of grants to State governments.


(Excluding trust accounts)

[Fiscal years. In millions]


Expenditures Net new Other

Program or agency 1948 1949 1950 appro- author-

actual estimated estimated prtations izations

Assistance to the aged and other special groups:

Federal Security Agency:

Public assistance:

Present law $733 $977 $1,064 $1,059

Proposed legislation 65 65

Vocational rehabilitation and

other programs 27 23 23 23

School lunch (Department

of Agriculture) 68 75 75 75

Retirement and dependents'


Railroad Retirement Board 763 569 716 716

Federal Security

Agency and other 3 5 9 9

Promotion of public health:

Federal Security Agency:

Present programs 135 177 234 174 $91

Medical care insurance system

(proposed legislation) 15 15

Federal Works Agency and other 11 21 35 12

Crime control and correction

(Department of Justice and other) 84 90 91 92 1

Other programs:

Present programs (Federal Security

Agency and other) 28 26 27 26

Federal Security Agency, change

in employees' accident

compensation rates

(proposed legislation) 4 4

Total 1,853 1,963 2,358 1 2,271 92

1In addition, this Budget includes 40 million dollars of appropriations recommended to liquidate prior year contract authorizations.

NOTE.--The Federal-State system of unemployment compensation and the Federal system of railroad unemployment insurance, formerly included in this category, are now reclassified under Labor.

By far the largest amounts are for assistance to the aged, the blind, and dependent children, for which Federal Government expenditures under present laws are estimated at 1,064 million dollars in the fiscal year 1950. Each State determines its own scale of benefits to individuals in these public assistance categories, and the Federal Government reimburses the States for from 50 to 75 percent of the payments in each case, up to maximum individual benefit rates specified in the Federal law. The level of these matching payments was raised by action of the last Congress.

Because of this grant arrangement, the amount of Federal expenditure for public assistance in any one year is not directly subject to Federal budgetary control, but is determined by the action of the several States in fixing benefit rates and approving individual claims for assistance. The total amount of Federal expenditures has steadily increased as the rising cost of living has compelled the States to give more assistance and the number of needy aged persons in our population has continued to rise. This increase in public assistance expenditures would be slower, and should ultimately be reversed, if other contributory insurances are made adequate to carry most of the load.

The Budget includes 65 million dollars as the tentative estimate of first-year expenditure under proposed legislation to improve the present public assistance system and to help cover State relief payments to persons not now eligible for assistance from Federal grants.

Railroad retirement insurance.--The expected rise in transfers to the railroad retirement trust account, from 565 million dollars in this fiscal year to 716 million dollars in 1950, reflects mainly a statutory increase in the tax rate, which has just become effective, and the continued rise in railroad pay rolls.

The estimates for 1950 assume favorable legislative action on several proposed changes in the timing of transfers from Budget accounts to the trust accounts. These relate to Federal Government payments for military service credits, administrative expense appropriations, and the transfer of the special railroad taxes to trust accounts. The changes would not affect the benefit rights of any individual or the tax liabilities of any employer.

Good budgeting requires that the law be revised so that payments by the Federal Government to the railroad retirement trust fund on account of military service credits allowed to railroad employees may be made annually in the years ahead on the basis of the actuarial value of claims actually approved as workers retire. As the law now stands, these payments are to be made in advance, without adequate relationship to eventual requirements for actual benefits. We have already advanced 160 million dollars to the trust fund to cover such future claims. Unless the law is amended, a further transfer of about the same amount may be required in the fiscal year 1950, and this would have to be added to the total of Budget expenditures.

Good budgeting requires also that the railroad retirement tax be transferred to the trust fund as it is collected, rather than on the basis of annual specific appropriations in advance of collections, as is the present practice. The estimates assume that an annual indefinite appropriation will be substituted, and also that the administrative expense appropriations will be consolidated and financed directly from the trust account.

Public health.--Federal expenditures for public health purposes comprise substantial grants to State and local governments to help them combat disease and to meet part of the cost of new hospitals, as well as expenditures for direct Federal operations.

For the fiscal year 1950, I am recommending appropriations sufficient to double the general health grants to States, raising them to 22 million dollars, in order that the States in turn may extend and strengthen local health services. These stronger health services are an essential part of our national health program. I recommend that the present statutory limitation on the amount of such general health grants to States be removed from the Public Health Service Act, so as to authorize in later years the provision of larger amounts for the further improvement and expansion of local public health services. It is clearly more desirable to follow this course than to add new and separate grant programs or to continue to expand existing specialized health programs.

The estimates for 1950 provide for continuing at about the 1949 level the grants to States for specialized health programs, such as venereal disease and tuberculosis. Provision is made for new grants under the National Heart Act of 1948 and for grants for initial surveys under the Water Pollution Control Act of 1948. The Federal-aid hospital construction program will require additional contract authority to maintain the current limited volume of new hospital building.

I have included in Budget accounts for the fiscal year 1950 a tentative estimate of 15 million dollars for initial expenditures for inaugurating the system of medical care insurance.

New facilities for medical and related research to be carried on directly by the Public Health Service are in process of construction. As these are completed and staffed, we shall achieve a substantial expansion of specialized types of research which will contribute significantly to the health and longevity of our people.

Crime control and correction.--The work load of the Federal Bureau of Investigation is expected to continue at a high level in the fiscal year 1950, largely because of investigations of personnel employed in atomic energy work and international activities and the strengthening of the internal security program. A decline is expected in the inmate population of Federal prisons, and this will 'permit some reduction in staff, but the saving will be partly offset by higher per capita costs for care of prisoners.

Federal employees' accident compensation.--Expenditures under the Federal Employees' Compensation Act of 1916, as amended, are estimated for the fiscal year 1950 at 9 million dollars more than in 1949, but the increase is wholly for war claims payments to American citizens abroad who were injured or suffered damage from wartime enemy actions. These payments will be covered by some of the proceeds of certain enemy-owned property.

Compensation payments to Government employees injured and to dependents of those killed in line of duty will continue under present law at about 14 million dollars a year. The benefit rates have not been changed since 1927. They are now quite inadequate. I recommend that these benefit rates be liberalized. The Budget includes a tentative estimate of 4 million dollars for this proposed legislation.

Trust accounts.--As I emphasized in a message to the Congress last May, this period of high employment and earnings offers a particularly opportune time for strengthening and broadening our social insurance system. At such a time, our people are best able to begin providing for protection against the major economic hazards to which everyone is exposed. Although the recommended improvements will mean an immediate large increase in benefit payments, they will also result at the outset in a sizable increase in savings held in the social insurance trust accounts. This will help to reduce inflationary pressures and build a cushion of consumers' purchasing power against possible future recession.

Despite benefit payments of more than 1.3 billion dollars under present laws, the major trust funds for social welfare, health, and security for the year are expected to add 3.0 billion dollars to their assets during the fiscal year 1950. This will bring the aggregate assets of these funds above 19 billion dollars. The legislation I have recommended will add an estimated 460 million dollars to these assets in the fiscal year 1950.


(Major trust accounts)

[ Fiscal years. In millions ]

1948 1949 1950

Fund and item actual estimated estimated

Federal old-age and survivors insurance trust fund:


Appropriation from general receipts $1,616 $1,754 $2,420

Interest and other 191 231 266

Proposed legislation extending coverage, raising

tax base, and adding disability benefits 1,700

payments of benefits and administrative

expenses (deduct):

Existing legislation 559 656 745

Proposed legislation 1,500

Net accumulation (including

proposed legislation) 1,248 1,330 2,141

Railroad retirement account: 1


Transfers from Budget accounts 758 565 716

Interest on investments 39 51 62

Payments of benefits, salaries and expenses (deduct) 222 289 317

Net accumulation 575 327 461

Federal employees' retirement funds:


Salary deductions and transfers from

Budget accounts 486 566 693

Interest 108 120 139

Payments of annuities and refunds, and

expenses (deduct) 244 274 277

Net accumulation 350 412 555

Medical care insurance trust fund

(proposed legislation):

Receipts from pay-roll contributions 260

Payments for benefits (deduct)

Net accumulation 260

1Adjusted for proposed changes in legislation.

The trust account assets are invested in Government securities, and the interest earnings are added to the principal of each trust fund. Although all benefits are paid directly from these accounts, the handling of contributions varies. Pay-roll tax collections under the railroad retirement system are included in Budget receipts and the transfers to the trust account appear as Budget expenditures. Proceeds of the pay-roll tax for old-age and survivors insurance are transferred to the trust account without affecting expenditures; this transfer is made through a deduction from receipts and an equal credit to the trust account. Amounts withheld from the salaries of those Government employees covered by Federal employees' retirement acts, as their payments to the retirement funds, are credited directly to the trust accounts.


The objective of the Federal housing program is to improve the housing standards of the Nation and, in particular, to help low-income and moderate-income families obtain more adequate housing in a suitable community environment. To this end the Federal Government provides a wide variety of financial aids for both private and public housing construction, as well as research and other assistance on cost reduction.

In the past 3 years, housing construction has risen to the level it took 6 years to reach after World War I. Conversions of older houses have also increased the housing supply, and extensive repairs and modernization have improved housing standards. As a result, many of the most acute emergency needs, especially of veterans, have been met, and the number of families compelled to live with others or to make other temporary arrangements has been reduced.

Despite these encouraging gains, we still have a long way to go. The programs recommended in this Budget, both under existing and proposed legislation, are directed primarily towards improving the housing of low- and moderate-income groups. These programs emphasize lowering of housing costs and production of rental housing, and provide continued preference for veterans' housing requirements.

Research in costs and markets.--Basic to the entire housing program, both private and public, is the use of all available methods to lower construction costs. Technical research on the limited basis authorized by the Housing Act of 1948 has already begun. More extensive technical research, and analysis of housing markets and land-use, which would be authorized in the further legislation which I have recommended, are needed to assure effective use of both private and public funds in meeting our housing needs. The Housing and Home Finance Administrator will take the leadership in bringing potential cost reductions to the attention of industry and of State and local agencies in the form most useful to them.

A census of housing should again be authorized as part of the regular decennial census in 1950. Such a census would provide comprehensive and up-to-date information needed by both private industry and public agencies.

Slum clearance and urban redevelopment.--I have recommended for several years legislation to authorize the Federal assistance needed to permit cities to start clearing their slums and preparing the sites necessary for sound urban development, primarily private housing. We should not delay longer in authorizing initiation of the first installments of this long-term program. I recommend, therefore, that the Housing and Home Finance Administrator be authorized to contract for Federal grants amounting to 100 million dollars a year for

5 years. In addition, I recommend loan authorizations of 25 million dollars for the fiscal year 1950 and larger authorizations in the following 4 years, totaling 1 billion dollars for the 5-year period. The only Federal expenditures likely in the fiscal year 1950 are loans of 10 million dollars for planning the projects.

Private housing.--The great bulk of the housing of the Nation is today and should remain privately owned and privately financed. In addition to the general aids provided for all types of housing, the Federal Government aids private housing through sharing financial risks and providing a supplementary source of funds.

Over one-third of the new housing started in the next fiscal year, it is estimated, will be financed by mortgages insured by the Federal Housing Administration. In the years ahead our mortgage insurance system should give increased emphasis to assisting housing cooperatives and production of rental housing and lower-priced sales housing. Amendments are needed for these purposes, as well as to simplify the variety of insurance aids now available. Both the Federal Housing Administration and the Reconstruction Finance Corporation will encourage increased production of low-priced housing by special financial assistance to producers using efficient large-scale construction methods. In addition, as part of our veterans' program, the Government will continue to guarantee loans made to veterans to help finance construction and purchase of homes.


[ Fiscal years. In millions ]


Expenditures Net new Other

Program or agency 1948 1949 1950 appro- author-

actual estimated estimated priations izations

General aids to housing:

Housing and Home Finance Agency:

Existing programs $1 $1 $2 $2

Proposed legislation:

Research and administration (1) 2 2

Slum clearance 10 $125

Alaska housing 5 10

Commerce Department: Proposed

census of housing 6 15

Housing Expediter (excluding

rent control) 6

Aids to private housing:

Housing and Home Finance Agency:

Federal Housing Administration --19 5 7

Home Loan Bank Board:

Home Owners' Loan Corporation --156 --123 --95

Proposed stand-by borrowing authority:

Federal Savings and Loan Insurance

Corporation 750

Federal home loan banks 1,000

Reconstruction Finance Corporation:

Existing programs:

Mortgage purchases, net 113 333 149

Loans to large-scale producers 5 13

Other 4 2 (1)

Proposed assistance for rental

and cooperative housing 50

Department of Agriculture:

Proposed farm housing program 20 5 27

Public housing programs:

Housing and Home Finance Agency:

Public Housing Administration:

Existing programs:

War housing 48 48 34 162

Veterans' re-use housing 44 12 1 12

Low-rent housing 11 --1 12 6

Other --5 2 1 1

Proposed low-rent housing 15 129 5 85

Other agencies --1 --1 --1 (1)

Provision of community facilities:

Reconstruction Finance

Corporation 25 35 32

Federal Works Agency:

Existing programs 10 15 8 1

Proposed legislation:

Disaster relief 3 5 ......

Alaska public works 1 2 ......

Total 82 349 388 227 1,987

1Less than one-half million dollars.

The Federal National Mortgage Association, a subsidiary of the Reconstruction Finance Corporation, will continue to assist private lenders in certain cases where credit is short by purchasing federally insured and guaranteed mortgages. In the fiscal year 1950 these purchases, under the present authority, will result in estimated net expenditures of 149 million dollars. I am recommending revisions of the present limitations on mortgage purchases, which will result in an estimated 50 million dollars of additional expenditures. In order to prevent inflationary pressures, any such broadening should of course be confined to measures urgently required to finance the most-needed types of housing construction, particularly rental housing and housing cooperatives.

As another credit aid to private housing, the Federal home loan banks provide an important supplementary source of credit for the savings and loan associations which make about one-third of all home-mortgage loans. The Federal Savings and Loan Insurance Corporation insures the share-accounts of its member associations. Both the banks and the Corporation are supervised by the Home Loan Bank Board.

I am recommending basic revisions in the financial structure of these agencies designed to encourage substitution of private capital for Federal investments, to permit them to borrow from the Treasury in the event of any future emergency, and to give the Home Loan Bank Board more specific authority over the borrowing and lending operations of the member associations. Under this legislation, the additional retirement of Federal investment in home loan bank stock in the fiscal year 1950 will increase Budget receipts by an estimated 81 million dollars. The stand-by borrowing authority requested for the home loan banks and the Corporation amounts to 1,750 million dollars. I do not anticipate that any use will be made of this new authority except in time of emergency, but it will provide additional assurance to the millions of shareholders, comparable to the assurance now given to bank depositors.

I am again recommending that the Congress provide for more adequate Federal aids to construction and improvement of privately owned farm housing. The new program would authorize the Secretary of Agriculture to provide loans for farm housing, as well as contributions for housing for farmers on potentially self-supporting farms and limited grants to improve substandard housing of low-income farmers.

Public housing.--Except for 3,000 permanent low-rent units authorized before the war, Federal assistance for new public housing since the war has been limited almost entirely to provision of temporary accommodations under the veterans' re-use program. With every month that passes, legislation to authorize a new and broader program of Federal assistance for low-rent public housing becomes more necessary. Only through such a program can cities make a substantial start in providing permanent housing for the low income families for whom private enterprise cannot reasonably be expected to provide.

The legislation which I am now recommending would provide the Federal assistance required to permit construction of 1,050,000 low-rent units over a 7-year period. It would authorize the Public Housing Administration to make contracts with local public agencies providing for annual Federal contributions over a 40-year period sufficient to assure acceptable housing for low-income families at rents they can afford to pay. Contracts involving maximum annual contributions of 85 million dollars would be authorized for the fiscal year 1950, rising to a maximum annual amount of 445 million dollars by the end of the fiscal year 1954. In addition, the lending authority of the Public Housing Administration would be increased by 700 million dollars primarily for temporary financing. To minimize the cost of the program, the local housing agencies would meet their long-term financial requirements by selling to the public taxable obligations fully protected by the pledge of annual Federal contributions. Disbursements during the first year will amount to an estimated 120 million dollars, almost entirely for short-term loans.

The Public Housing Administration also has been administering the disposition of permanent and temporary units built under the war housing and veterans' re-use programs. I am recommending legislation to make possible more expeditious sale to private owners of all permanent war housing units, except those transferred to local housing agencies for low-rent housing. Adequate protection would be provided for present occupants. Legislation also is needed to permit transfer of all Federal ownership and other rights in temporary housing (with limited exceptions) to local communities which apply for such transfer. This step would permit the entire responsibility for such housing to be vested in local authorities, who can most readily determine the continuing emergency need.

Community facilities.--In accordance with the economic stabilization program, the Reconstruction Finance Corporation is limiting its new loans to public agencies to relatively low levels. Other expenditures will be made to complete the Brooklyn-Battery tunnel and to meet other prior commitments.

I again recommend legislation authorizing the Federal Works Agency to provide prompt assistance to communities in rebuilding facilities after floods and other disasters. A tentative appropriation estimate of 5 million dollars is included for this purpose.

Alaska housing and public works.--As part of the program to develop the resources of Alaska, I have recommended special assistance for both private and public housing. Such housing is badly needed, but is hampered by excessive construction costs. This Budget provides for a 10-million-dollar revolving fund to finance loans and construction by the Alaska Housing Authority. I also recommend a 2-million-dollar appropriation to the Federal Works Agency to provide for certain urgently needed public works in Alaska.

Appropriations and other authorizations-Summary.--Most of the expenditures for existing programs in the fiscal year 1950 will be financed from the corporate funds of the Reconstruction Finance Corporation provided in earlier years.

New appropriations of 44 million dollars and other authorizations of 1,987 million dollars would be called for under my legislative recommendations. The proposed stand-by borrowing authority of the Federal Savings and Loan Insurance Corporation and of the Federal home loan banks accounts for 1,750 million dollars. Slum clearance, low-rent public housing and farm housing proposals require contract and loan authorizations of 237 million dollars in the fiscal year 1950. An increase of 700 million dollars in the lending authority of the Public Housing Administration would be provided in the fiscal year 1949. It is estimated that 35 million dollars of the 174 million dollars in permanent appropriations, representing anticipated receipts from war housing and veterans' re-use housing, will be spent for current management and disposition activities. The remaining 139 million dollars will be transferred to the general fund of the Treasury without affecting Budget expenditures.


It is important to the continued progress of the Nation that we raise our educational standards and expand our fundamental research. At the present time the Federal Government promotes education by providing professional leadership and advice to educators, and by supporting vocational education and the land-grant colleges through grants-in-aid to the States. It also supports Howard University and educational institutions for the blind and deaf, and provides for the education of Indians. The Government provides library and museum services through the Library of Congress, the Smithsonian Institution, the National Gallery of Art, and the Botanic Gardens, and carries on general research through the National Bureau of Standards, the Bureau of the Census, and the Naval Observatory.

Expenditures in the fiscal year 1950 for education and general research are estimated at 414 million dollars. The increase of 329 million dollars over 1949 is almost entirely for proposed grants to States for education and for the decennial census of population.

In addition to these general programs, many Federal agencies carry on specialized education and research activities which are included in other functional groupings. Some of these are the education benefits for veterans, fellowship and other training programs designed to produce needed specialists, and research for military and other purposes.

Aid to education.--Although the Federal Government is engaged in this broad range of educational activities, we are not yet assuring all the children of our Nation the opportunity of receiving the basic education which is essential to a strong democracy. In many areas, teachers' salaries are low, particularly in the elementary grades. Too many are leaving the profession; too few are entering. Enrollments are rising. As a result, overcrowded classrooms and substandard instruction are common. As the large number of children born during and after the war reach school age, the situation will become even worse.

Many States are finding it difficult, even with high tax rates, to pay adequate salaries or to take other corrective measures. It is therefore urgent that the Congress enact legislation to provide grants to the States in support of a basic minimum program of elementary and secondary education for all our children and youth. This Budget includes a tentative appropriation estimate of 300 million dollars for such grants in the fiscal year 1950.

We know that a shortage of school buildings exists in many parts of the country as a result of wartime deferment of construction and the increase in the school-age population. We do not know the overall extent of the shortage, the particular areas in which it exists, and whether State and local governments can alleviate it without special Federal aid for construction. In order to provide an adequate factual basis for further consideration of the problem, I ask the Congress to authorize a survey of educational building needs and the adequacy of State and local resources available to meet these needs.


[Fiscal years. In millions]


Expenditures Net new Other

Program or agency 1948 1949 1950 appro- author-

actual estimated estimated priations izations

Promotion of education:

Office of Education (Federal

Security Agency):

Present programs $33 $34 $34 $34

Federal aid to education

(proposed legislation) 290 300

Survey of educational building

needs, and study of scholarships

and fellowships

(proposed legislation) 1 1

Federal Works Agency and other 6 4 1 (1)

Educational aid to special groups:

Bureau of Indian Affairs (Interior) 12 11 12 12

Howard University (Federal

Security Agency) and other 3 6 12 5 $6

Library and museum services 8 10 10 10

General-purpose research:

Department of Commerce:

Seventeenth decennial census (1) 2 36 70

Other Census Bureau programs 7 7 6 6

National Bureau of Standards:

Present programs 5 9 8 9

Radio propagation building

(proposed legislation) (1) (1)

National Science Foundation

(proposed legislation) 2 3 12

Other agencies 2 1 1 (1)

Total 75 85 414 2 452 18

1Less than one-half million dollars.

2In addition, this Budget includes 6 million dollars of appropriations recommended to liquidate prior year contract authorizations.

It has become increasingly obvious that the national welfare demands that higher education be made available to more of our talented young people. We should now determine the soundest and most practicable means of providing additional opportunities for capable young people who could not otherwise afford a college or university education.

The Budget estimates include 1 million dollars as a tentative estimate of appropriations needed for these surveys when authorized by the Congress.

Howard University.--An extensive building program is under way at Howard University to meet part of the need which results from the doubling of student enrollment since 1946. Additional contract authorizations of 6 million dollars are requested in connection with this building program.

National Science Foundation.--The strength and economic welfare of our country in years to come are largely dependent on the advances that can be made in basic scientific research. To maintain and expand the Nation's efforts in scientific research and to help assure an adequate supply of trained scientists in the future, I again urge that the Congress enact legislation creating a National Science Foundation in a form which does not contain the basic administrative defects of the bill passed by the Eightieth Congress. This Budget includes tentative estimates of 2.5 million dollars of appropriations and, in addition, 12.5 million dollars of contract authority to enable the Foundation to establish its organization and initiate its program during the fiscal year 1950.


Federal programs for agriculture include a wide variety of services, grants, loans, and other payments designed to promote the conservation and development of agricultural resources and to improve the efficiency of farm production. They include financial and other assistance aimed to assure reasonable stability in farm income. Finally, they include special aids to farmers whose farm resources are limited in order to give them an opportunity to improve their economic status. The common objective is to promote adjustments within the farm economy and between it and other parts of the national economy which will enable agriculture to contribute its part to the economic development of the Nation as a whole and assure farmers a fair share in the fruits of that development.


[ Fiscal years. In millions ]


Expenditures Net new Other

Program or agency 1948 1949 1950 appro- author-

actual estimated estimated priations izations

Loan and investment programs:

Department of Agriculture:

Commodity Credit Corporation --$200 $866 $538

Grain storage facilities (proposed

legislation) 25

Farmers Home Administration 61 122 116 $115

Rural Electrification

Administration, net 239 283 330 6 $350

Other corporate transactions --67 --63 --14 7

Other agencies 2 (1) 2 2

Other financial aids:

Department of Agriculture:

Conservation and use 236 227 174 290

Exportation and domestic

consumption 51 87 55 50

Sugar Act 60 71 65 65

International Wheat Agreement

(proposed legislation) 56 (1)

Other agencies --3 (1) (1)

Agricultural land and water


Present legislation 48 59 61 60

Flood control--Missouri Basin

(proposed legislation) 1 4

Other development and

improvement of agriculture 147 153 151 149

Total 575 1,865 1,662 745 350

1Less than one-half million dollars.

The calendar year 1948 was another year of high prosperity for American agriculture. Because of the high level of national income and the continuing need abroad for American food and fiber, cash receipts from farm marketings totaled approximately 30.8 billion dollars--slightly larger than the 30.2 billion dollars in 1947. With rising production costs, however, net farm income declined for the first time in 10 years--from 17.8 billion dollars in 1947 to an estimated 17.2 billion dollars in 1948. This compares with 6.4 billion dollars in 1941.

The ratio of prices received by farmers to prices paid has gradually declined from the peak of 133 in October 1946 to 109 in December 1948. A continuation of the downward trend in this ratio will mean smaller net incomes for farmers in 1949 and 1950, an adjustment from the high levels of the immediate postwar years. This adjustment, prevented from becoming excessive by the operation of price supports, will contribute to over-all stabilization of the economy and to a lowering of the cost of living.

The principal factor causing the fluctuation in total agricultural expenditures is the volume of price support outlays by the Commodity Credit Corporation. This program largely accounts for the estimated increase of 1,230 million dollars in expenditures from the fiscal year 1948 to 1949, and the decrease of 143 million dollars from 1949 to 1950. Apart from price support outlays, expenditures in 1950 for agriculture and agricultural resources are expected to be larger than in 1949 because of the higher level of loan disbursements for rural electrification, larger outlays to encourage conservation of agricultural land resources, smaller net repayments on loans made by the Federal Farm Mortgage Corporation, and the proposed International Wheat Agreement.

Price support.--Net outlays of the Commodity Credit Corporation are estimated to be 866 million dollars in 1949 and 538 million dollars in 1950 as compared with net receipts of 200 million dollars in 1948. Because of the very large production of wheat, corn, and cotton in the 1948 crop year, market prices of these commodities have declined to support levels, resulting in loan outlays or the acquisition of considerable stocks in the current fiscal year. Price support expenditures are expected also to be large on potatoes, eggs, and flaxseed.

For the 1949 crop year, production of cotton, wheat, and corn will probably again exceed anticipated domestic and export requirements, even assuming lower yields per acre than in 1948. If 1949 production should equal the magnitude of the 1948 crops, expenditures of the Commodity Credit Corporation would be considerably larger in the fiscal year 1950 than now estimated.

As I said a year ago, price supports should be regarded "chiefly as devices to safeguard farmers against forced selling under unfavorable conditions and economic depression." Their purpose is to bring an element of stability into agriculture. At the same time, they should not place excessive burdens on the Treasury and taxpayers or inhibit shifts in production needed to meet peacetime demands and to promote adequate conservation of our soil resources. The 'postwar revisions in the price support programs, which take effect largely in the fiscal year 1951, need certain amendments to make the price support mechanism and the quota provisions more workable.

Two major defects were noted at the time I signed the bill granting a Federal charter to the Commodity Credit Corporation. The first, the restriction on the Corporation's authority to acquire storage facilities, has prevented the Government from fulfilling its obligations under the price support program. The second, the provisions removing the Corporation from the direct supervision of the Secretary of Agriculture, divide responsibility and make more difficult the sound administration of our agricultural program. I recommend that the charter of the Commodity Credit Corporation be amended to correct these deficiencies.

Rural electrification.--Despite the extreme shortages of materials and electrical equipment since the war, the rural electrification program has made notable progress. The percentage of total farms electrified has risen from 48 percent on June 30, 1945, to over 68 percent on June 30, 1948. With the carryover of approximately 120 million dollars from prior-year loan authorizations of the Rural Electrification Administration, I recommend that the new loan authorization be reduced from 400 million dollars to 350 million dollars in 1950. New loan advances to rural cooperatives are estimated to be 360 million dollars in the fiscal year 1950 compared with 310 million dollars in 1949. With the rising percentage of total farms electrified, Rural Electrification Administration loans may be expected to level off in 1951 and decline in later years.

Conservation.--The long-run well-being of both the farmer and the Nation depends on the 'preservation of our soil resources. To accomplish this objective, the Soil Conservation Service provides technical advice and services to farmers. The ultimate goal as it affects the farmer is a plan of management for his farm which will insure both sustained full production and preservation of the soil. The Federal Government also makes payments to farmers to encourage desirable conservation practices. Expenditures for this program are estimated to increase from 227 million dollars in the fiscal year 1949 to 274 million dollars in 1950. For the 1950 crop-year conservation program (to be reflected in expenditures in the fiscal year 1951), I recommend planning for a 262.5 million-dollar program to include the cost of administering any acreage allotments or marketing quotas which may be adopted as well as payments to farmers and related administrative expenses.

A flood control survey report covering the watershed of the Missouri will soon be presented to the Congress. If this report is approved by the Congress, a 1949 supplemental appropriation of approximately 5 million dollars will be required to initiate needed land-use changes and the construction of terraces and other structures to retard water flow and soil erosion on the lands in the Missouri Basin. These operations are essential supplements to the flood control works of the Corps of Engineers on the downstream channels. Larger appropriations will be required in the years following 1950.

Wheat Agreement.--If the International Wheat Agreement is successfully renegotiated, I shall recommend its ratification and the enactment of the necessary legislation to fulfill its provisions. Under this proposal, the principal exporting and importing countries would guarantee over a period of years an annual trade of a large volume of wheat within an agree&upon price range. Thus, the Agreement would provide an orderly solution of some of the problems of international trade over the next few years without the demoralizing effect of unilateral action by governments acting independently. Approximately 56 million dollars is allowed in this Budget to cover the probable loss to the Commodity Credit Corporation in bridging the gap between the price of wheat for the farmer under the price support program and the price at which wheat is made available to foreign purchasers under the Agreement. Costs are expected to be less in later years and will be more than balanced by benefits to farmers and to the Nation in terms of greater stabilization of world trade.

Regional Agricultural Credit Corporation.--In order to simplify the Government lending operations which assist agriculture, I recommend that the Regional Agricultural Credit Corporation be abolished, and that its functions and the capital stock revolving fund be transferred to the Secretary of Agriculture. Under this proposed change the Secretary could direct existing farm credit agencies to draw upon the revolving fund to extend emergency credit to farmers in the event of floods, droughts, or other natural disasters.


The Federal Government has far-reaching responsibilities for the conservation and development of our natural resources. It must necessarily assume responsibility for the development of atomic energy; it must assure the proper utilization of its extensive land holdings which contain valuable forest, grazing, mineral, water, fish, wildlife, and recreational resources; it must provide for the improvement of such public resources as the major streams of the country. In addition, the Government must foster reasonable standards of conservation and development of resources in private ownership in the interest of the national welfare. We should reappraise our plans for using and conserving our resources in the light of the marked changes that have occurred during and since the war.

In this Budget, programs are being restricted to the lowest level consistent with the heavy demands on our natural resources for both civilian and national defense requirements. The estimated expenditures give particular consideration to the serious needs for electric power in certain areas and for critical minerals. They also allow for work made urgent by repeated postponements during and since the war.

Expenditures for the Government's natural resources programs in the fiscal year 1950 are estimated at 1,861 million dollars, an increase of 245 million dollars over 1949. The largest expenditures, 725 million dollars, will be made by the Atomic Energy Commission. Other large expenditures include 481 million dollars for flood control by the Corps of Engineers and 344 million dollars by the Bureau of Reclamation for development of water resources in the West. These activities represent more than fourfifths of the total estimated expenditures in 1950 and largely account for the increase over 1949.

New obligational authority recommended in 1950 consists of 1,549 million dollars in net new appropriations and 482 million dollars in contract and loan authorizations, of which 427 million dollars is in contract authorizations for the Atomic Energy Commission. Appropriations required to liquidate prior-year contract authorizations amount to 391 million dollars.

Atomic energy.--To an increasing extent our national welfare and security are linked to our atomic energy program. We must continue to add to our knowledge of this resource and move ahead with practical development. Special emphasis is given to the development of nuclear reactors as an eventual means for converting atomic energy into electricity and into power for propulsion of ships and airplanes.

The 1950 Budget provides increased funds for the production of fissionable materials and the development of the science and technology of atomic energy. The present high costs of rapidly accomplishing these purposes must be balanced against the ultimate and far greater costs of failure to move ahead vigorously in this field.

Land and water resources.--Present high costs of construction and large competitive demands from various sectors of the economy make it necessary to undertake new river basin projects only where urgency is evident. More than 90 percent of the recommended expenditures for river basin development in the fiscal year 1950 is to continue work started in prior years. Despite this restriction, Federal outlays for these resources will be about 1 billion dollars in 1950.


[Fiscal years. In millions]


Expenditures Net new Other

Program or agency 1948 1949 1950 appro- author-

actual estimated estimated priations izations

Atomic energy:

Atomic Energy Commission $466 $632 $725 $365 $427

Other agencies 9 2 (1)

Land and water resources:

Corps of Engineers

(Army, civil 246 442 481 505

Bureau of Reclamation (Interior) 175 282 340 380

Rehabilitation and betterment

projects (proposed legislation) 4 5

Bonneville Power Administration

and southwestern power

transmission system 18 31 41 27 24

Other Interior 9 15 15 15

Tennessee Valley Authority 34 29 49 56

Department of State and other 3 5 10 4

Forest resources:

Forest Service and other

(Agriculture) 57 62 69 68

Department of the Interior 3 5 5 5 (1)

Mineral resources:

Bureau of Mines

and other (Interior) 26 34 31 30

Department of the

Navy and other 7 15 18 10

Commercial production of

synthetic fuels

(proposed legislation) 1 30

Incentive .payments for

exploration and development

of minerals (proposed legislation,

Interior) 5 15

General resource surveys

(Interior) 10 14 17 18

Fish and wildlife resources

(Interior and other) 12 25 24 24

Recreational use of

resources (Interior) 16 22 26 23

Total 1,091 1,616 1,861 2 1,549 482

1Less than one-half million dollars.

2In addition, this Budget includes 391 million dollars of appropriations recommended to liquidate prior year contract authorizations.

In view of the magnitude of the investment in these resources and its economic effects, there should be careful surveillance of the programs in order to prevent waste and assure sound development. We should apply the lessons of our Tennessee Valley experience without delay wherever they offer promise of improvement.

An essential first step for the flood control, reclamation, and other development activities is an expansion by the Geological Survey of its water resource investigations and topographic surveys.

The flood control program of the Corps of Engineers, involving the construction of major storage reservoirs, channels, and levees, will be limited in the fiscal year 1950 almost entirely to continuation of work on projects started in prior years. Particular emphasis is now given to the Mississippi River Basin but major projects are under construction in river basins on the Atlantic seaboard and Gulf coast, the Central Valley and Los Angeles areas in California, and the Columbia Basin.

The program of the Bureau of Reclamation is going forward on major projects in the Central Valley of California, the Columbia Basin, the Colorado River area, and the Missouri Basin. Because of the great increase in the estimated cost of the Missouri Basin development, the present plan should be reexamined to determine needed changes.

The anticipated shortage of power in some areas of the country makes it urgent that we move forward at a faster rate on certain of the Federal hydroelectric power projects in order to obtain benefits as early as feasible. Two large projects to be constructed by the Corps of Engineers are recommended for initiation in the Columbia Basin in the fiscal year 1950, in order to meet increasing power demands.

The Tennessee Valley, where the Government has broad responsibilities for power supply, faces a power shortage in the near future. Expansion of Tennessee Valley Authority's generating capacity is vital not only for the growing normal power demands, but also for the expanding needs of the atomic energy program. I recommend an immediate appropriation for 1949 to initiate construction of a steam plant to permit more effective utilization of the hydroelectric power resources of the area, and additional funds for 1950 to expedite progress on the project.

Construction by the Government of transmission and distribution facilities is essential in some areas for marketing the power from Government projects in compliance with law, which gives priority to public agencies and cooperatives. Funds have been recommended in the Budget for this purpose.

The Federal lands administered by the Bureau of Land Management contain resources that are both large and diverse in character. A large portion of these lands is in the grazing districts of the West and is an important part of the livestock economy of that area. The Bureau's administration of mineral resources includes not only the resources on the public lands, but also those on several million acres of land where surface rights have passed into private ownership. Aggregate receipts from these Federal land resources greatly exceed the costs of administration.

Mineral resources.--Two World Wars as well as subsequent needs for world recovery have drawn heavily on our mineral resources. The Federal Government has a responsibility for assuring the adequacy of these resources through intensive surveys, investigations, and exploration; fundamental research; and sound conservation practices. Funds recommended for the Bureau of Mines and some activities of the Geological Survey are directed to these purposes. In addition, I recommend legislation which will authorize incentive payments for the exploration and development of strategic and critical minerals.

The country must face squarely the fact that a major portion of its rapidly increasing energy requirements is being met by oil and gas, which constitute only a small portion of our energy reserve. The prospects are that we shall become increasingly dependent on foreign sources of oil unless appropriate action is taken. I recommend legislation to provide for proper conservation and planned use of the oil reserves under the sea which are vested in the Federal Government. The Federal Government should take steps also to encourage commercial production of synthetic liquid fuels from our abundant reserves of coal, lignite, and oil shale. I recommend legislation to authorize the Government to provide financial assistance for this purpose.

Other resource programs.--Programs for the development of our forest, fish, and wildlife resources will be at about the same level in 1950 as in 1949. The increase in expenditures for forest resource development is explained by the inclusion in this function of forest development roads, previously classified with forest highways under the transportation function. An increase is recommended for the operation and improvement of the national parks. This increase is in recognition of the problems created by severe curtailment of upkeep in recent years, and the increased use of the parks as indicated by a trebling of the number of visitors since the close of the war.

Alaskan resources.--In my Message to the Congress in May 1948, I stressed the need for certain immediate actions to aid in the development of Alaskan resources. I recommend in this Budget funds for housing, community facilities, and transportation in this important area. In addition, the Budget includes increased expenditures for the investigation and development of Alaskan timber, water, land, mineral, fish, and wildlife resources.


The Federal Government has a major responsibility in the development and regulation of the vital transportation and communication industries. The Government has, at various times, provided direct or indirect assistance to most segments of these industries. It must continue to do so where necessary. The ultimate objective of such assistance is the balanced development of these industries, to the end that they can eventually provide all necessary services at the minimum cost to the immediate user and to the taxpayer.

A major part of the Federal expenditures for transportation and communication are for basic facilities such as highways, airports, waterway improvements, and navigation aids. As postwar programs have developed, expenditures for such facilities have increased considerably in recent years. By fiscal year 1950, most of these programs will reach a level which is likely to be sustained with relatively little change in the near future.

While expenditures for these programs will increase between fiscal years 1949 and 1950, total expenditures for transportation and communication are estimated to decline from 1.8 billion dollars in fiscal year 1949 to 1.6 billion dollars in 1950. This decline results from an estimated reduction in the postal deficit, in line with my recommendation for postal rate revisions.

Postal service.--The postal deficit for fiscal year 1950, on the basis of current postal rates, would be more than 400 million dollars. A deficit of this size is unsound; it imposes upon the general taxpayer a financial burden which should properly be borne by the users of the service.

Large postal deficits are resulting from a record volume of postal business, most of which is carried at rates which do not cover handling costs. The low rates for parcel post have led to substantial diversion of express traffic from common carriers, with the result that the Post Office Department is now receiving a volume and type of parcel business which it cannot efficiently handle with existing facilities. Present rates for second and third class mail are so low that they make only a small contribution to the costs of handling such mail. While the national interest in disseminating information justifies some preferential treatment for periodicals and other second class matter, there is no sound basis for the extremely low rates now in effect.

In the last 2 years, I have recommended that the Congress raise postal rates to bring them more nearly into line with the creased costs of postal operations. A partial revision in rates was effected by the Eightieth Congress, but this did not offset the cost of the postal pay raise which was concurrently enacted. I therefore strongly urge again that the Congress enact at once an adequate revision of the postal rate structure. I have asked the Postmaster General to submit his recommendations for rate revisions sufficient to reduce the deficit to a reasonable level. The added revenue from such revisions, estimated at 250 million dollars for the fiscal year 1950, is shown in the Budget under proposed legislation. The remaining deficit would represent largely the costs of Government penalty mail, franked mail, air-line subsidies, and other costs not properly chargeable to the users of the postal service. Aside from such costs, postal operations should be conducted on a self-sufficient basis, with rates maintained at a level adequate to accomplish that objective.

Aviation.--Commercial aviation, the newest of our transportation industries, is still in a stage of development that requires subsidy assistance. The program of the Civil Aeronautics Administration for modernizing the Nation's airways will assist the air lines in achieving greater safety and regularity, higher load factors, and thus eventually in reducing their dependence upon Federal financial aid. This program includes principally the installation of landing aids at major airports, and of new airway facilities to permit greater precision and flexibility in air navigation. The present transitional program, utilizing types of equipment currently available, is now getting fully under way, and the 1950 Budget recommendation contemplates its completion within a few years. Research and development work required for a longer-range program will be actively started in the fiscal year 1950, looking toward a complete all-weather air navigation system within a period of about 15 years.

New obligational authority for the Federal aid airport construction program is held to 40 million dollars in this Budget. Within these funds, primary emphasis will be placed upon the construction and improvement of large airports which are required for commercial air transport, and which would also have potential national defense importance.

The basic aeronautical research conducted by the National Advisory Committee for Aeronautics is essential for the design and development of improved aircraft, both military and civilian. The 1950 Budget provides for new facilities, and increased use of existing facilities, primarily for research upon military aircraft requirements.

Water transportation.--Promotion of the merchant marine, through Maritime Commission construction and operating subsidies, dies, will require some increase in expenditures in the fiscal year 1950. The Budget recommendations provide for the construction of new vessels related to the national defense. With minor exceptions, contracts for sale of these vessels to private operators will be required before construction is begun. Within recent months, the Commission has let contracts for the construction of five passenger-cargo vessels, and has received bids on the construction of a large, high-speed passenger liner. Construction activity on these and other merchant vessels will increase Maritime Commission shipbuilding expenditures from 26 million dollars in fiscal year 1949 to 121 million dollars in fiscal year 1950.


[ Fiscal years. In millions ]


Expenditures Net new Other

Program or agency 1948 1949 1950 appro- author-

actual estimated estimated priations izations

Promotion of aviation:

Civil Aeronautics Administration

(Commerce) $98 $150 $196 $127 $67

National Advisory Committee

for Aeronautics 38 44 60 56 22

Promotion of the merchant marine:

Maritime Commission 183 152 182 90 60

Inland Waterways Corporation


Present .programs 2 1 1

Proposed legislation 2 2

Provision of navigation aids and facilities:

Panama Canal (Army,

civil functions) 11 20 16 15

Corps of Engineers (Army,

civil functions):

Present programs 114 168 209 229

Proposed St. Lawrence seaway

and power project 8 20

Coast Guard (Treasury) 106 141 148 150

Department of the Interior (1) 1 1

Provision of highways:

Public Roads Administration

(Federal Works Agency) 331 444 501 166 470

Forest roads and trails

(Agriculture) 18 26 3 2

Alaska and Indian roads (Interior) 7 19 28 12 7

Regulation of transportation

(Interstate Commerce Commission

and Civil Aeronautics Board) 15 15 15 15

Other services to transportation:

Reconstruction Finance

Corporation --1 --4 2

Coast and Geodetic

Survey (Commerce) 10 11 11 11

Alaska Railroad (Interior) 25 33 40 29 22

Postal service deficit (Post Office):

Present .programs 304 527 402 404

Proposed legislation --250 --250

Regulation of communication

(Federal Communications

Commission) 6 7 7 7 ......

Alaska communications system:

Present programs 1 2 3 3 ......

Proposed legislation 1 4

Total 1,267 1,757 1,586 2 945 648

1Less than one-half million dollars.

2In addition, this Budget includes 495 million dollars of appropriations recommended to liquidate prior year contract authorizations.

By the end of the fiscal year 1949, the Maritime Commission expects to have determined the postwar operating subsidy rates for all essential trade routes. Subsidy expenditures will therefore be on a full-year basis in fiscal year 1950, and are estimated at 22 million dollars, more than twice the 1949 level. The substantial increases in construction and operating subsidy programs will be largely offset by declines in other Maritime Commission expenditures, particularly those for vessel operation and for liquidation of prior-year obligations.

The activities of the Coast Guard in maintaining rescue stations, enforcing maritime laws, and operating navigational aids, are of primary importance to safety at sea of both air and surface transportation. These programs are expected to cost 148 million dollars in fiscal year 1950. This is slightly higher than in 1949 as a result of the fullyear operation of ocean weather stations and a higher level of maintenance of other Coast Guard facilities.

River and harbor improvement by the Corps of Engineers is held in the 1950 Budget to the minimum required for navigation and related purposes. Most of the 1950 program will represent work on existing projects. Only 12 new projects, of high urgency, are proposed to be started in 1950.

I again urge the Congress to give early approval to the St. Lawrence waterway and power project. The navigational aspects of this project have recently assumed an increased importance as a result of the prospects for developing high-grade iron ore deposits in Labrador. As our domestic deposits become depleted, the proposed seaway will become an important link between our steel industry and this new potential source of ore. Furthermore, this dual-purpose project is needed as a source of low-cost power.

The Inland Waterways Corporation, which helps bring the advantages of water transportation to shippers, large and small, urgently needs additional capital to modernize its equipment. Such rehabilitation should enable the Corporation to demonstrate the prospects for profitable operation of its services, and permit the sale of the Corporation to a private operator at terms which would safeguard the interests of both the Government and the users of the service. I recommend that the Congress authorize the additional capital funds needed.

Highways.--Federal grants-in-aid for road construction have been increasing substantially in recent years, and in fiscal year 1950 will be close to the level authorized in existing legislation. Even with this high level of Federal aid, our highways are not being improved as fast as they wear out, nor are they being modernized to the extent required by postwar traffic conditions. Nevertheless, present high costs and the limited capacity of the construction industry make it undesirable for expenditures in the fiscal year 1950 to exceed the estimated level of 501 million dollars.

Federal regulation.--Although most of the expenditures in this function are accounted for by the services, facilities, and subsidies discussed above, a highly important Federal responsibility is exercised by the regulatory agencies in this field. The regulation of rates and other aspects of transportation and communication services help to assure that the public interest will be adequately and efficiently served. The general economic adjustments within the past few years have substantially increased the normal work loads of these agencies. The Civil Aeronautics Board and the Federal Communications Commission in particular have been faced with major technological and economic developments within their expanding fields. Despite these increased problems, the present budgetary situation makes it desirable to hold these agencies to essentially their present levels.

Appropriations and other authorizations--Summary.--To carry out the above programs, I am recommending 1,593 million dollars in new obligational authority. Of this amount, 648 million dollars represent new contract authorizations, and 945 million dollars represent net new appropriations. Excluded from the total of new obligational authority are additional appropriations of 495 million dollars which will be required for the liquidation of prior-year contract authorizations.


Except in times of war or other emergency, the Federal Government's finance, commerce, and industry programs are limited in the main to enforcing effective competition and to providing a wide variety of financial and nonfinancial aids to private industry. The principal agencies administering these programs are the Department of Commerce, Reconstruction Finance Corporation, and the various business regulatory agencies. I have already discussed the more specialized regulation and promotion of particular industries such as transportation and communication.

Total expenditures for finance, commerce, and industry programs are estimated at 107 million dollars in 1950, or slightly above the

1949 level. To carry out these programs, I am including in the Budget appropriations of 82 million dollars for fiscal year 1950, including tentative estimates of 44 million dollars for extension of existing stabilization activities and for new controls under the proposed stand-by authority. Supplemental appropriations of 24 million dollars will also be required for the current fiscal year, chiefly for stabilization activities and for completion of the Census of Business.

Stabilization program.--The major economic problem facing our country is to prevent further inflation and to move on into a stable economic situation without an intervening recession. To provide the necessary legislative authority, I recommend extending and strengthening the existing statutes covering rent, export and transportation controls, materials allocations, control of consumer credit, and bank-reserve requirements. In addition, I am recommending new authority for stand-by price and wage controls and for the allocation of a broader list of commodities, for use if voluntary measures prove inadequate, and for studies of the need for expanding productive capacity in shortage industries. Budget expenditures for this stabilization program are estimated at 41 million dollars in 1950.

Antimonopoly program.--A strong antimonopoly program is essential for the preservation of our free enterprise institutions. It can also provide immediate assistance in the present effort to restrain inflation. By concentrating enforcement activities in major consumer commodities, conspiracies responsible for high prices can be broken and the cost of living reduced.


[Fiscal years. In millions]


Expenditures net new

1948 1949 1950 appro-

Program or agency actual estimated estimated priations

Promotion and regulation

of business:

Stabilization program:

Housing Expediter--rent control

and veterans' priorities:

Present programs $19 $18

Proposed legislation 5 $23 $24

Department of Commerce:

Present programs 1 4

Proposed legislation 1 5 5

Department of Agriculture 3

Treasury Department 1

Proposed stabilization legislation 2 13 15

Continuing programs:

Antimonopoly program (Federal

Trade Commission, Justice) 5 7 7 7

Other regulatory agencies 6 6 7 7

Department of 19 27 23 18

Business loans and guarantees

(Reconstruction Finance


National defense loans 5 --19 --6

Other loans to business 35 54 37

Aids to private financial institutions

(Reconstruction Finance

Corporation ) --21 --10 --9

War damage insurance (War

Damage Corporation) 20 1

Control of private finance

(Securities Exchange Commission) 6 6 6 6

Total 88 102 107 82

A substantial increase in funds for the Federal Trade Commission and the Department of Justice has been made available for the current fiscal year. I am recommending a small further increase in 1950, which will permit more adequate investigation of the extent of monopoly and monopolistic practices.

Business loans.--To restrain inflationary credit expansion, general loans to business in 1950 by the Reconstruction Finance Corporation will be held to approximately the 1948 level. A somewhat higher level is estimated for 1949 owing to substantial authorizations early in the fiscal year.

Collections on national defense loans and holdings of preferred stock in financial institutions continue but at a declining rate, as liquidation of these large depression and wartime programs is now nearing completion.


In our free enterprise system the conditions of employment of the labor force of more than 63 million persons are primarily matters for the joint determination of labor and management. The role of the Federal Government is to assure that acceptable minimum standards of wages and working conditions are maintained and that both individual workers and organized groups of working people have a fair opportunity to improve their economic status. The Federal Government also promotes apprenticeship training and collects and publishes labor statistics and related information which are used widely by business, labor, and the general public. For the fiscal year 1950, the Government's labor programs will require Budget expenditures of 187 million dollars, approximately 3 million dollars more than in 1949.


[ Fiscal years. In millions ]


Expenditures net new

1948 1949 1950 appro-

Program or agency actual estimated estimated priations

Mediation services and regulation

of employment conditions:

Department of Labor:

Present programs $5 $6 $6 $6

Industrial safety program

(proposed legislation) 3 3

National Labor Relations Board 5 9 9 9

Federal Mediation and

Conciliation Service 2 3 3 3

National Commission Against

Discrimination in Employ-

ment (proposed legislation) 1 1

Other 4 5 5 5

Labor information, statistics,

and general administration:

Department of Labor 8 7 8 8

Placement services and

unemployment compensation


Federal Security Agency 71 137 140 139

Railroad Retirement Board 15 15 11 11

Department of Labor 70

Training of workers:

Department of Labor 2 3 3 3

Total 183 184 187 187

NOTE.--The Federal-State system of unemployment compensation and the Federal system of railroad unemployment insurance, formerly classified in Social welfare, health, and security, are now included in Labor.

The Labor Department should be substantially strengthened through reorganization to bring together the units which properly belong in it. Toward this end I shall recommend certain organizational changes essential for more effective administration of the Government's labor program.

Mediation services and regulation of employment conditions.--In my Message on the State of the Union I have already recommended urgently needed legislative action to provide fair laws under which management and labor can develop more fully the opportunities for cooperative production that collective bargaining affords. I have also recommended that the Congress promptly amend existing laws in order to establish up-to-date minimum standards for wages.

This Budget includes tentative estimates to carry out the legislation which I have proposed to authorize grants to the States to foster safer working conditions, and to authorize establishment of a national commission against discrimination in employment.

Labor information and statistics.--For programs now authorized in the Department of Labor, I am recommending increases to restore the facilities of the Department to meet more adequately the increasing needs for current information on employment, hours and earnings, consumer prices, and other subjects.

Placement services and unemployment compensation administration.--Public employment services and administration of unemployment insurance will require approximately 150 million dollars or about 80 percent of all expenditures for labor programs. Except for 11 million dollars for the Railroad Unemployment Insurance program, these funds are expended principally through grants to States.

Provision has been made, in the reserve for contingencies, for any added costs which may arise because of future statutory increases in State salary rates or because of unexpected increases in State workload.

Trust accounts.--Total unemployment benefit payments are rising above the 1948 level, in large part because of increased labor turnover, the return of prewar seasonal patterns and because many insured workers have exhausted their claims to veterans' unemployment allowances from the Federal Government and collect State benefits when unemployed. Growth of the labor force and liberalization of State laws are also factors. Receipts are below the 1948 level because of changes in the law relating to railroad unemployment.

My proposal to strengthen the unemployment compensation system contemplates that coverage will be extended to workers in small establishments, Federal employees, and other workers not now insured. It contemplates that in some States the level of benefits will be raised and their duration extended.


Under "general government" are grouped not only the general management activities of the Government but also legislative and judicial functions, citizenship services, and government of the territories. Most of the expenditures in this category are for collecting the internal revenue, interest on refunds of receipts, the Government contribution to the Federal employees' retirement system, property supply and disposal, and the maintenance and operation of public buildings. The Weather Bureau also is included under general government, because its activities relate to several major functions of the Government. Similarly, the general expenditures of a few departmental offices are classified in this category.

Total expenditures for general government ment functions have declined from a peak in the fiscal year 1948 and are now leveling off at about 1.2 billion dollars. Although the biggest reductions in war-liquidation programs have already occurred, further reductions are expected. Some increases, however, are estimated in the expenditures for permanent programs and services, particularly, in 1950 for tax collections and the employees' retirement system. Total new authorizations requested for general government activities for the fiscal year 1950 are 57 million dollars less than estimated expenditures. I am postponing requests for contract authority for a general public buildings program and requesting only 7 million dollars in contract authority for other construction.


(Trust accounts)

[ Fiscal years. In millions ]

Item 1948 1949 1950

Receipts: actual estimated estimated

Deposits by States and railroad

unemployment taxes $1,148 $991 $1,017

Interest 165 181 185

Proposed legislation extending coverage

and improving benefits 230

Payments (deduct):

State and railroad unemployment withdrawals 856 963 1,020

Proposed legislation 150

Net accumulation 457 209 262


[ Fiscal years. In millions ]



Net new Other

1948 1949 1950 appro- author-

Program or agency actual estimated estimated priations izations

Legislative functions $32 $37 $46 $35 ......

Judicial functions 18 20 26 21 ......

Executive direction and

management 7 7 10 8

Surplus property disposal,

foreign and domestic:

Present disposal programs

(mainly War Assets

Administration) 312 118 16

Proposed legislation 13 21 21

Deposits and transfers of receipts,

foreign sales (Army,

clearing account) 96 9

Federal financial management:

Bureau of Internal Revenue 185 209 233 233

Other Treasury bureaus 194 150 133 136

General Accounting Office 34 36 37 37

Other 3 5 5 1

Interest on refunds of receipts 57 82 82 82

Government payment toward

civilian employees' general

retirement system 244 224 328 328

Federal Works Agency (mainly

Public Buildings Administration):

Present programs 71 78 91 74

Office building (proposed

legislation) 5 7

Reconstruction Finance Corporation:

Payments of interest to

miscellaneous receipts 89 1 14

Other --39 --26 --25

Cemeteries and return of war

dead (Army) 87 73 30 6


Present programs 115 150 168 169 $7

Salary increases for heads and

assistant heads of agencies

(proposed legislation) 2 2

National Capital

Sesquicentennial Commission

(proposed legislation) (1) 1

Special fund for management

improvement (proposed legislation) 1 1

Total 1,504 1,187 1,224 2 1,160 7

1Less than one-half million dollars.

2In addition, this Budget includes 26 million dollars of appropriations recommended to liquidate prior year contract authorizations.

Property management.--Last year I submitted to the Congress proposals for a comprehensive property management program for the Federal Government. The Congress took action to repeal certain of the provisions of the temporary legislation for surplus property disposal and to provide for termination of the War Assets Administration February 28, 1949, but it failed to complete action on permanent property management legislation. Such legislation is urgently needed to achieve economies by modernizing the Government's supply and disposal systems. This legislation should designate a single property management agency. The remaining functions of the War Assets Administration should be transferred directly to this agency.

At the end of February, the War Assets Administration will have residual inventories of surplus property amounting to more than 2.5 billion dollars in terms of original cost. I am recommending a supplemental appropriation of 15 million dollars for the fiscal year 1949 and 21 million dollars for the fiscal year 1950 on the assumption that a single property management agency will be made responsible for these disposal activities upon dissolution of the War Assets Administration.

Revenue collection.--The operations of the Bureau of Internal Revenue have been extensively reviewed by the Congress and also by a special management committee appointed by the Secretary of the Treasury. As a result the Bureau is currently engaged in decentralizing its administration, improving office procedures, expanding its enforcement staff, and training its personnel to do a better job. In addition to nearly 2,000 enforcement personnel to be added this fiscal year, the Budget provides for a further increase of more than 7,000 in the fiscal year 1950. The Government has an obligation to its taxpayers to undertake complete collection of all the taxes that are legally due and to assure equitable treatment to each taxpayer. I am confident that the additional expenditures will represent a sound investment.

Retirement system.--Last February legislation was enacted which liberalized the provisions of the Federal employees' general retirement system by increasing annuity payments and adding survivorship benefits. Higher payments to the retirement fund are required to finance these new provisions. The rate of deductions from employees' salaries for retirement purposes was increased from 5 percent to 6 percent. It is also necessary to increase by over 100 million dollars in the fiscal year 1950 the Government's payment toward the retirement system, based on the revised retirement provisions and the higher Federal pay roll estimated for the fiscal year 1950.

Public buildings.--Because of the present inflationary conditions I am not now recommending a general public buildings program, although in many areas the Government is inadequately housed and such a program cannot be delayed indefinitely. However, I am proposing that work be started immediately on the construction of one building which should be completed in time for use by the Census Bureau in connection with the 1950 decennial census, and will thereafter be available for other needs.

Government Services Corporation.--I recommend that the Congress create a new, self-supporting, Government corporation to provide certain cafeteria and recreational services, primarily for Federal employees, in Government buildings and on Government property. At present, these services are provided by several organizations which do not fall within the normal governmental framework. This is essentially a governmental responsibility, and should be subject to the usual processes of governmental review and control.

Virgin Islands Company.--I renew my recommendation that the Virgin Islands Company be given a permanent Federal charter under comprehensive legislation. This Company is a chief contributor to the economic welfare of the Virgin Islands. The present stop-gap measure, which extended the life of the Company for only 1 year and with narrow powers, contributes little toward making the Virgin Islands economically self-sustaining and raising the standard of living of its citizens.

The National Capital.--The role of the National Capital Park and Planning Commission should be redefined and a stronger statutory basis established for the proper development of the District of Columbia and nearby areas in Maryland and Virginia.

I am not forwarding at this time an estimate of appropriation for the District of Columbia Redevelopment Land Agency to provide for the assembly of property in slum or blighted areas in the District of Columbia. When the redevelopment plans now being prepared by the National Capital Park and Planning Commission are approved, an estimate will be transmitted for consideration by the Congress.

I recommend pay increases for the employees of the District of Columbia government, including the teachers in the public schools, who were unfairly excluded from the Federal Employees Salary Act of 1948.


Expenditures for interest on the public debt in the fiscal year 1950 are estimated at 5,450 million dollars, an increase of 125 million dollars over the fiscal year 1949; and the 1949 estimate is, in turn, higher than actual expenditures in the preceding year by approximately the same amount.

The continued increase in interest on the public debt arises in several ways. Accruals on the large volume of savings bonds outstanding reach higher brackets each year. There will also be a further increase in the amount of special issues held by Government trust funds, and these issues bear relatively high coupon rates which are, in part, fixed by statute. In addition, the increases in short-term interest rates which in July 1947 are now beginning to be reflected in the cost of the debt. This factor is, to some extent, offset by the interest saving which has been effected funding maturing bonds bearing high rates of interest into short-term issues bearing lower rates of interest.

Interest payments on marketable issues which may be bought and sold in the market--will account for 55 of interest payments on the debt in the year 1950. The amount of interest marketable issues is falling gradually cause of a decline in the total volume obligations and the retirement or of bonds bearing relatively high rates interest. A portion of the interest paid on marketable issues goes to the Federal Reserve banks, and most of such payments are coming back to the Government as miscellaneous receipts. This is a result of the Federal Reserve policy of paying approximately 90 percent of net Reserve bank earnings into the Treasury. Budget receipts from this source are estimated to rise from 140 million dollars in 1949 to 250 million dollars in 1950, thereby offsetting most of the increase in the total interest cost of the debt.


[ Fiscal years. In millions ]

Expenditures 1950

1948 1949 1950 appro-

Agency actual estimated estimated priations

Treasury Department $5,188 $5,325 $5,450 $5,450

Interest payments are a fixed obligation of the Federal Government. Their payment is financed by permanent indefinite appropriations not requiring annual congressional action.


Estimated expenditures, appropriations, and other authorizations included in the Budget total for programs under proposed new legislation are shown in the following table. The items in the table are of such importance as to warrant early enactment and financing in the next fiscal year. Moreover, legislative proposals for these items are sufficiently developed to permit tentative estimates of first year budgetary requirements.

The Budget also contains a general reserve for contingencies. It is designed as a minimum provision both for unforeseen contingencies and for legislative proposals now in the discussion stage, which may require action before the end of the next fiscal year.


(Summary of amounts included in the Budget)

[ Fiscal years. In millions ]

Anticipated supplemental

Estimated appropriations and other

expendi- authorizations

Function and program tures 1950 1949 1950

International affairs and finance:

Economic Cooperation Administration $4,300.0 $1,250.0 $4,300.0

Other foreign aid 355.0 600.0

Food and Agriculture Organization building fund 1.0 7.0

Contribution to International Trade Organization 1.0 1.0

War damage claims 17.0

Palestinian refugee program 16.0

Foreign service pay increase 1.4 .6 1.7

National defense:

National Military Establishment (public works, 645.0

special programs, military pay adjustment, etc.) 385.0 (185.0)

Universal training 600.0 800.0

Social welfare, health, and security:

Medical care insurance system 14.9 15.0

Public assistance 65.0 65.0

Change in employees' accident compensation rates 3.8 4.0

Housing and community facilities:

Slum clearance, low-rent housing, farm housing

and research .2 11.7 (700.0) (236.5)

Special assistance for rental and

cooperative housing 50.0

Census of housing 6.0 15.0

Stand-by borrowing authority:

Federal Savings and Loan Insurance Corporation ($750.0)

Federal home loan banks (1) (1,000.0)

Alaska housing $5.0 10.0

Alaska public works 1.0 2.0

Disaster relief 3.0 5.0

Education and general research:

Federal aid to education 290.1 300.2

Survey of educational building needs, and study

of scholarships and fellowships 1.0 1.0

Radio propagation building 0.2

National Science 2.5

Foundation 2.0 (12.5)

Agriculture and agricultural resources:

Amendment of Commodity Credit Corporation

charter (grain storage) 25.0

Flood control, Missouri River Basin 4.0 5.0

International Wheat Agreement 55.7 0.2

Natural resources:

Commercial production of synthetic liquid fuels 1.0 (30.0)

Incentive payments for exploration and

development of minerals 5.0 15.0

Bureau of Reclamation, rehabilitation and

betterment projects 4.0 5.0

Transportation and communication:

Additional revenue from increased postal rates --250.0 --250.0

Inland Waterways Corporation,

subscription to capital stock 2.0 2.0

St. Lawrence seaway and power project 8.0 20.0

Alaska communications system 0.8 3.6

Finance, commerce, and industry:

Anti-inflation program 13.5 3.0 15.0

Export control 4.7 1.6 5.0

Rent control 23.3 5.4 24.0


Industrial safety program 3.1 3.1

National Commission Against

Discrimination in Employment 0.5 0.6

General government:

Construction of Census Building 4.8 7. 4

Surplus property disposal 20.6 15.0 21.0

Salary increases for heads and assistant

heads of agencies 1.5 1.0

Special fund for management improvement 0.9

National Capital Sesqui-Centennial Commission 1.2 1.5

1,315.3 2 6,660.7

Total 2 6,175.5 (700.0) (2,214.0)

1Budget receipts of 8r million dollars from additional retirement of Federal home loan bank stock.

2Excluding additional postal revenue, total estimated expenditures are 6,425.5 million dollars and anticipated supplemental appropriations are 6,910.7 million dollars.

NOTE.--Figures in parentheses are authorizations other than appropriations.

The responsibilities of free men match the personal rights and political freedoms which are theirs. The Budget of the United States reflects our power for freedom and the advancement of mankind in our country and in the world.


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

The message and the budget document (1429 pp.) are published in House Document 17 (81st Cong., 1st sess.).

Harry S Truman, Annual Budget Message to the Congress: Fiscal Year 1950 Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/230146

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