Dwight D. Eisenhower photo

Annual Budget Message to the Congress: Fiscal Year 1960.

January 19, 1959

To the Congress of the United States:

The situation we face today as a Nation differs significantly from that of a year ago. We are now entering a period of national prosperity and high employment. This is a time for the Government to conduct itself so as best to help the Nation move forward strongly and confidently in economic and social progress at home, while fulfilling our responsibilities abroad. The budget of the United States for the fiscal year 1960, transmitted herewith, will effectively and responsibly carry out the Government's role in dealing with the problems and the opportunities of the period ahead.

This budget proposes to increase our military effectiveness, to enhance domestic well-being, to help friendly nations to foster their development, to preserve fiscal soundness, and to encourage economic growth and stability, not only in the fiscal year 1960 but in the years beyond. And it dearly shows that these things can be done within our income.

We cannot, of course, undertake to satisfy all proposals for Government spending. But as we choose which ones the Government should accept, we must always remember that freedom and the long-run strength of our economy are prerequisite to attainment of our national goals. Otherwise, we cannot, for long, meet the imperatives of individual freedom, national security, and the many other necessary responsibilities of Government. In short, this budget fits the conditions of today because:

1. IT IS A BALANCED BUDGET.--My recommendations call for an approximate equality between revenues and expenditures, with a small surplus.

2. IT IS A RESPONSIBLE BUDGET.--By avoiding a deficit, it will help prevent further increases in the cost of living and the hidden and unfair tax that inflation imposes on personal savings and incomes.

3. IT IS A CONFIDENT BUDGET.--It anticipates, in a rapidly advancing economy, increases in revenues without new general taxes, and counts upon the unity and good judgment of the American people in supporting a level of government activity which such revenues will make possible.

4. IT IS A POSITIVE BUDGET.--It responds to national needs, with due regard to urgencies and priorities, without being either extravagant or unduly limiting.

5. IT IS AN ATTAINABLE BUDGET.--Its proposals are realistic and can be achieved with the cooperation of the Congress.

Any budget is a financial plan. The budget for the Government is proposed by the President, but it is acted upon by the Congress which has the duty under the Constitution to authorize and appropriate for expenditures. Therefore, responsibility for the Governments finances is a shared one. Achievement of the plan set forth in this budget from here on depends upon congressional response, popular support, and developments in our economy and in the world.


The actions we take now on the 1960 budget will affect the fiscal outlook for many years to come. This budget was prepared in the light of the following general prospects for Government finances for the next few years.

Growth of revenues.--Our Nation's population and labor force will continue to increase. The output per hour of work on our farms and in our factories can also be expected to grow as it has in the past. With sustained economic expansion, with employment of our people and resources at high levels, and with continued technological advance, the value of total national production and income will be substantially larger in the future than it is today.

Economic growth generates higher personal incomes and business profits. Under our graduated income tax system, with present tax rates, budget receipts should grow even faster than national income, although the rise in receipts certainly will not be uniform from year to year. Also, some tax reforms and downward tax adjustments will be essential in future years to help maintain and strengthen the incentives for continued economic growth. With a balance in our finances in 1960, we can look forward to tax reduction in the reasonably foreseeable future. In the long run, taxes should be so arranged that in periods of prosperity some annual provision is made for debt reduction, even though at a modest rate.

Control of expenditures.--The estimated 1960 expenditures, while $3.9 billion less than in 1959, will still be $12.4 billion higher than in 1955, an average increase of almost $2.5 billion a year. These figures emphasize that if we are to succeed in keeping total expenditures under control in the coming years we must recognize certain hard facts.

First, defense spending will remain extremely large as long as we must maintain military readiness in an era of world trouble and unrest. Until there is a significant and secure casing of world tensions, the actions by the Department of Defense to realign forces, close unneeded installations, and cut back outmoded weapons will achieve only relatively small expenditure reductions. Keeping our military structure capable and ready to meet any threat means that we must continue to strengthen our defenses. It is but a reflection of the world in which we live to stress again the fact that modern weapons are complex and costly to develop, costly to procure, and costly to operate and maintain.

Second, without one single new action by the Congress to authorize additional projects or programs, Government outlays for some of our major activities are certain to keep on rising for several years after 1960 because of commitments made in the past. For example, commitments for urban renewal capital grants have exceeded net expenditures by about $200 million or more for each of the last 3 years. Money to meet these commitments will be paid out in the years immediately ahead. Similarly, continued construction of the many water resources projects underway throughout the country will raise expenditures for these programs in the next 2 years beyond the current record amount.

Moreover, inescapable demands resulting from new technology and the growth of our Nation, and new requirements resulting from the changing nature of our society, will generate Federal expenditures in future years. As a matter of national policy we must, for example, make our airways measure up to the operational and safety needs of the jet age. We must not forget that a rapidly growing population creates virtually automatic increases in many Federal responsibilities.

Fiscal soundness and progress.--Both domestic and defense needs require that we keep our financial house in order. This means that we must adhere to two policies:

First, we must review all government activities as a part of the continuing budgetary process from year to year. Changing circumstances will inevitably offer opportunities for economies in a variety of existing Federal programs. If we do not make such reviews and act forthrightly on their findings, the combination of old commitments and new authorizations for new or enlarged Federal responsibilities could swell expenditures unnecessarily and inconsistently. Consonant with this policy of review, reductions have been recommended in this budget for 1960 appropriations which will affect expenditures not only in that year but also in later years. Furthermore, this budget contains proposals to modify certain activities and institute certain charges for special services. These recommendations are practicable and sound. They should be enacted.

Second, we must examine new programs and proposals with a critical eye. Desirability alone is not a sound criterion for adding to Federal responsibilities. The impact today and tomorrow on the entire Nation must be carefully assessed.

Our economy will continue to grow vigorously. This growth will produce additional Federal revenues, but it will not produce them without limit. We cannot take our resources for granted and we cannot spend them indiscriminately. We must deal with new conditions as they arise. We must choose what the Federal Government will do and how it will do it. If the choice is responsibly made, reductions obtained through economies and the rising revenues accompanying economic growth will produce surpluses which can be used to lessen the burden of taxes, meet the cost of essential new Government services, and reduce the public debt. The proposals in this budget have been formulated with these long-run objectives in mind.


Budget expenditures are proposed to be held to $77 billion in fiscal 1960, which is $3.9 billion less than the estimated 1959 level of $80.9 billion.

With continued vigorous economic recovery, and with the relatively few new tax adjustments proposed herein, budget receipts in fiscal 1960 are expected to reach a total of $77.1 billion, an increase of $9.1 billion over fiscal 1959.

Thus a very modest surplus of about $0.1 billion is estimated for 1960, compared with a recession-induced deficit of $ 12.9 billion in the current fiscal year. This estimated balance assumes enactment of recommendations for extending present excises and corporation income taxes scheduled for reduction under existing law, for some new tax legislation to remove inequities and loopholes, for increased charges for special services, and for reductions in some current programs. It also assumes that certain programs can be made self-financing by stepping up the sale of portfolio assets.

Financing of the $12.9 billion budget deficit for the current fiscal year will increase the public debt to $285 billion by June 30, 1959, $2 billion in excess of the present permanent debt limit. With a balanced budget in 1960, a $285 billion debt is indicated also for June 30, 1960. On the basis of these estimates, it will be necessary to renew the request made during the past session of Congress for a permanent debt ceiling of $285 billion and, further, to seek an increase in the temporary debt ceiling sufficient to cover heavy borrowing requirements during the first half of the fiscal year 1960, borrowings which would be repaid before June 30, 1960.

The new authority to incur obligations recommended for fiscal 1960 is $76.8 billion, which is slightly less than the estimates for expenditures and for receipts. Further reductions in new obligational authority can be attained in 1961 by the Congress enacting my recommendations for program modifications.


[Fiscal years. In billions]

1957 1958 1959 1960

actual actual estimate estimate

Budget receipts $71.0 $69.1 $68.0 $77.1

Budget expenditures 69.4 71.9 80.9 77.0

Budget surplus (+) or deficit (-) +1.6 --2.8 --12.9 +0.1

New obligational authority 70.2 76.3 1 82.4 76.8

1 Includes $8.7 billion of anticipated supplemental requests.

A consolidation of budget and trust fund transactions on a cash basis shows that the total Federal receipts from the public in fiscal 1960 are expected to exceed payments to the public by $0.6 billion. This figure exceeds the budget surplus in 1960 mainly because (1) cash payments of interest on redeemed savings bonds are less than the accrued interest included in budget expenditures and (2) trust fund receipts exceed trust fund expenditures.


[Fiscal years. In billions]

1957 1958 1959 1960

actual actual estimate estimate

Receipts from the public $82.1 $81.9 $81.7 $93.5

payments to the public 80.0 83.4 94.9 92.9

Excess of receipts over payments 2.1 0.6

Excess of payments over receipts 1.5 13.2


Extension of present tax rates.--The budget outlook for 1960 makes it essential to extend present tax rates on corporation profits and certain excise taxes another year beyond their present expiration date of June 30, 1959.

Development of a more equitable tax system.--Considerable progress was made last year in removing unintended benefits and hardships from the tax laws. Continued attention is necessary in this area. As the budget permits, additional reforms should be undertaken to increase the fairness of the tax system, to reduce the tax restraints on incentives to work and invest, and wherever feasible to simplify the laws. I hope that the committees of the Congress will work with the Treasury Department in preparing further adjustments of our tax laws for the future.

I urge the Congress to take action now on certain specific changes to maintain or increase revenues and to make the laws more equitable. The Treasury Department has recently proposed an equitable plan for taxing the income of life insurance companies. Specific proposals for corrective amendments of the laws on taxation of cooperatives will be transmitted to the Congress shortly. The Treasury will also recommend an amendment specifying the treatment processes which shall be considered mining for the purpose of computing percentage depletion in the case of mineral products. This amendment, prompted by court decisions, is designed to prevent an unintended extension of percentage depletion allowances to the sales price of finished products; a similar recommendation with respect to cement and clay products was made to the Congress last year.

Other changes in tax rates.--In order to make highway-related taxes support our vast highway expenditures, excises on motor fuels need to be increased 1 1/2 cents a gallon to 4 1/2 cents. These receipts will go into the highway trust fund and preserve the pay-as-we-go principle, so that contributions from general tax funds to build Federal-aid highways will not be necessary.

At the same time, to help defray the rising costs of operating the Federal airways, receipts from excises on aviation gasoline should be retained in general budget receipts rather than transferred to the highway trust fund. The estimates of budget and trust fund receipts from excise taxes reflect such proposed action. They also include a proposal to have users of the Federal airways pay a greater share of costs through increased rates on aviation gasoline and a new tax on jet fuels. These taxes, like the highway gasoline tax, should be 4 ½ cents per gallon. I believe it fair and sound that such taxes be reflected in the rates of transportation paid by the passengers and shippers.


[Fiscal years. In billions]

1958 1959 1960

actual estimate estimate

Individual income taxes $34.7 $36.9 $40.7

Corporation income taxes 20.1 17.0 21.5

Excise taxes 8.6 8.5 8.9

All other receipts 5.7 5.6 6.0

Total 69.1 68.0 77.1

As part of my proposals referred to later in this message to return responsibility for certain Federal programs to the States in this instance, responsibility for vocational education and for waste treatment facilities-Federal excise taxes on local telephone service should be revised effective July 1, 1960, to allow limited credits for telephone taxes paid to the States.

Revenues.--The resurgence of our economy has been stronger than was assumed in the budget estimates that were published last September. Consequently, budget receipts for the fiscal year 1959

are now expected to total $68 billion instead of the $67 billion estimated at that time.

The estimate of $77.1 billion in receipts for 1960 is contingent on enactment of the tax recommendations mentioned earlier. Of this estimate, approximately $76.5 billion reflects the increases in receipts under present tax rates and present tax sources while $0.6 billion is from new taxes and increased nontax sources.

The anticipated rate of recovery of revenues in fiscal 1960 may be compared with the experience of the fiscal years 1955 and 1956, which reflect the recovery from the recession of the calendar year 1954. After adjusting for comparability in corporate tax payment dates, the increase in revenues from 1955 to 1956 was more than the increase estimated in this budget. With similar forces of economic recovery at work today, I have confidence that our revenue estimate is sound and will be attained.


Eleven key features of the budget recommendations are summarized below:

1. STRENGTHEN THE EFFECTIVENESS OF OUR ARMED FORCES BY FURTHER MODERNIZATION AND BY IMPROVED EFFICIENCY OF OPERATIONS; AND STRENGTHEN FREE WORLD SECURITY BY CONTINUED MILITARY ASSISTANCE TO OUR ALLIES.--This budget assures that essential defense needs are met. The budget recommendations will bolster the defense of our country against possible attack and enable our forces to respond more quickly and vigorously to any emergency. At the same time, and as part of our effort to keep America strong, this budget reflects policies to streamline operations, to remove duplication of weapons, to accentuate the principle and practice of unification, and to minimize maintenance costs--in short, to assure the maximum defense from each dollar expended. A realignment of the Armed Forces and a continuing reappraisal of existing defense activities are underway to accomplish these objectives. This can be illustrated by the changes in the composition of expenditures for the Department of Defense. While the estimated total expenditures for the Department will increase $145 million from 1969 to 1960, those for procurement of missiles and for research, development, test, and evaluation will rise more than $800 million.

In addition to strengthening our own Armed Forces, and recognizing the inseparability of free world defense, the budget continues to provide through military assistance the critical margin of weapons and equipment required by our allies who, with us, forge a strong shield against possible aggressors.

2. ASSIST FREE NATIONS IN THEIR ECONOMIC DEVELOPMENT THROUGH WELL-CONSIDERED PROGRAMS.--Today the less-developed nations--a score of which have attained independence since World War II--are struggling to improve their economic and social conditions. The success of these efforts is vital not only to the freedom and well-being of the millions of people within their boundaries but also to the population of the entire world. Fortunately, the free countries of the world are taking many actions together to promote trade with and to expand investment in such nations. As part of this joint effort, the following actions for the United States are recommended:

(a) Increase substantially our subscriptions to the International Bank for Reconstruction and Development and the International Monetary Fund. This should be done promptly.

(b) Bring the capitalization of our Development Loan Fund up to the amount originally recommended for the fiscal year 1959 by enacting a supplemental amount of $225 million.

(c) As a supplement to established institutions, create a joint development banking institution with our Latin American neighbors.

(d) Increase the emphasis on economic development in the mutual security programs through such measures as the appropriation of $700 million for the Development Loan Fund and $211 million for technical cooperation in fiscal 1960.

(e) Enact legislation to expand the mutual security investment guaranty program.

3. PROMOTE SCIENTIFIC RESEARCH AND SPACE EXPLORATION.--In the current fiscal year, total expenditures for basic and applied research and for scientific development have reached record amounts and a supplemental appropriation for 1959 to advance space technology is recommended.

For the fiscal year 1960, research and development expenditures will be increased still further, with emphasis on space exploration, peaceful uses of atomic energy, and basic science. Extensive space exploration investigations are being initiated, utilizing satellites and probes. Development work is going forward on high-energy fuel rockets, a million-pound thrust engine, and a nuclear rocket engine.


[Fiscal years. In millions]

1958 1959 1960

actual estimate estimate

Department of Defense 1 $2,314 $3,289 $3,692

Atomic Energy Commission 637 790 846

National Aeronautics and Space Administration 89 153 280

Department of Health, Education, and Welfare 179 236 250

Department of Agriculture 111 128 127

National Science Foundation 35 60 80

Other agencies 133 192 208

Total 3,498 4,841 5,484

1 Figures for 1958, 1959, and 1960 are not fully comparable because of changes in appropriation structure; they also exclude about $2 billion of procurement funds in each year in support of research and development.

4. CARRY FORWARD CURRENT PUBLIC WORKS PROGRAMS--NOW LARGER THAN EVER BEFORE.--Increases were provided last year in construction programs for water resources, health facilities, public buildings, airways, and highways, partly to combat the recession. As a result, Federal expenditures for civil public works in fiscal 1960 will be the highest in history. It therefore seems both possible and prudent to take a breathing spell in the initiation of new projects. Accordingly, no additional funds are proposed in 1960 for starting new water resources projects, general office buildings, and veterans hospitals. Furthermore, reduced new spending authority is recommended for grants for local public and private hospitals, health research facilities, and for waste treatment works, although expenditures under earlier authorizations will continue to be high. Highway expenditures will increase in accordance with the program planned under the Federal Aid Highway Act, and modernization of airway facilities to meet operational and safety needs will go forward at a higher level of expenditure.

The combined outlay for reclamation, flood control, and navigation projects is estimated to be higher than ever before in 1960. Expenditures are expected to increase again in fiscal 1961 and to hold at that level in 1962 even without new starts beyond those for which initial appropriations have already been made. The new water resources projects authorized for starting in 1959 will be so spread out as to schedule initiation late in the year, wherever practicable, and, in a few cases, construction may be deferred until the fiscal year 1960.


Expenditures from budget and trust funds, including grants and loans to State and local governments

[Fiscal years. In millions]

1958 1959 1960

actual estimate estimate

Highways and roads $1,589 $2,559 $3,097

Water resources and related developments 971 1,031 1,089

Office buildings and post offices 78 200 310

Aviation and space flight facilities 110 195 233

Schools and hospitals 183 215 201

Other structures 175 343 312

Total 3,106 4,543 5,242

5. CONTINUE AT A HIGH LEVEL PROGRAMS WHICH PROMOTE THE GENERAL WELFARE OF OUR PEOPLE.--This budget makes provision for programs which are of utmost importance to our individual citizens. Expenditures for health research and for constructing various types of health facilities will be at a record level in 1960. Activities to improve education, especially in science and mathematics, will be increased significantly in 1960 as a result of programs started or expanded in fiscal 1959. Grants to States for vocational rehabilitation will be higher in 1960 than in 1959, with services provided to 314,000 disabled persons. Public assistance grants to the aged, the blind, the disabled, and to dependent children will continue to rise. Strengthened programs in the Food and Drug Administration are recommended.

Proposals will be made for widening the coverage of unemployment compensation, for extending and improving the minimum wage and 8-hour laws, and for providing added protection in labor-management relations. I am again proposing legislation to strengthen safeguards on the conduct of labor union affairs, including the strengthening of the law enacted last year requiring public reporting on union welfare and pension plans.

In the housing field, the budget recommends broadening the authority of the Federal Housing Administration and removing the ceiling on the total volume of mortgage insurance it can provide. Legislation is also recommended authorizing capital grants for urban renewal projects for a 6-year period. Annual contributions to local housing authorities for low-rent public housing projects will rise in 1960 as more projects are completed. Commitments by the Federal National Mortgage Association to purchase mortgages on housing for urban renewal areas for relocating displaced families and for the elderly will continue to rise in 1960.

6. FOSTER COMMUNITY DEVELOPMENT WITH INCREASED LOCAL PARTICIPATION.--The Federal Government is helping local communities meet many of the major problems of community development created by increasing population and growing urbanization. Federal expenditures for grants and long-term loans to assist 14 major types of capital improvements alone will reach an estimated $2.1 billion in 1960, or almost double the amount actually spent for these programs in 1958. By the close of fiscal 1960, commitments for future Federal expenditures for the same programs are estimated to be over $6 billion.


Federal grants and long-term loans, excluding net operating expenses

[Fiscal years. In millions]

Expenditure Outstanding


June 30, 1960 1

1958 1959 1960

actual estimate estimate

Airport grants $43 $50 $55 $162

Area assistance loans (proposed) 7 43

College housing loans 165 234 186 329

Development corporation loans (Small

Business Administration) 4 15 6

District of Columbia construction grants

and loans 11 15 16 73

Health research facilities construction

grants 12 20 20 55

Hospital construction grants 105 123 128 288

Public facility loans 11 24 30 34

Public housing, annual contributions 95 111 120 2 240

School construction grants to federally

affected areas 80 78 51 98

Urban renewal capital grants 35 76 100 1,393

Urban renewal and relocation housing

mortgage purchases 20 122 181 450

Waste treatment works grants 17 30 30 82

Total, budget funds 594 887 939 3,253

Highway grants for urban areas (trust

fund) 534 911 1,136 2,929

Total, budget and trust funds 1,128 1,128 1,075 6,182

1 Including allocations and program reservations.

2Estimated maximum annual payment to cover debt service on long-term bonds sold to finance projects. (Unamortized capital costs underwritten by Federal contributions are estimated at $5 billion.)

These totals show how rapidly direct Federal aid to communities is growing. They exclude many other Federal programs which indirectly assist development or redevelopment of communities, such as construction of river and harbor improvements and air navigation facilities, grants for intercity highways, purchases of general housing mortgages and guaranties of housing and business loans of many types. They also exclude Federal aid to communities for nonconstruction programs in such fields as health and welfare.

Federal programs should foster orderly development in a way that will encourage private participation and will share costs equitably among the beneficiaries and the various levels of government. Legislation will be proposed to meet these objectives in the programs for urban renewal, college housing, highways, airports, schools in federally affected areas, and construction of waste treatment facilities. The budget also provides for a new program to assist industrial redevelopment of areas which have severe and persistent unemployment. The Congress is urged to enact legislation for such assistance along the line I have recommended previously.

7. DISCONTINUE TEMPORARY EMERGENCY MEASURES AND STRENGTHEN PERMANENT PROGRAMS FOR ECONOMIC STABILITY.-- Among the governmental actions taken last year under the stress of the recession were two temporary measures involving substantial Federal expenditures.

Funds were advanced to the States and Territories to finance extended unemployment benefits for workers who had exhausted their regular benefits. Only 17 jurisdictions chose to receive these advances for all workers who could be made eligible. Five other States enacted their own legislation extending the period of benefits for those covered under the regular State program. Of the remaining States and Territories, some obtained Federal aid for extended unemployment benefits for veterans and Federal employees alone, while 17 had no extended benefit legislation of their own and did not take advantage of the Federal program at all. In view of the rapidity of the economic recovery and the lack of uniformity of State participation, it is now estimated that expenditures over the life of this program will be $206 million less than the $666 million appropriated for it.

Another temporary measure was the authorization for Government purchases of $1 billion of mortgages on low-cost housing. This full amount has been committed. By the end of fiscal 1959, it is estimated that the Government will have spent over $600 million for such mortgages and will have over $300 million of commitments still outstanding, for which expenditures will occur in 1960.

Direct emergency Federal expenditures for unemployment benefits and for emergency stimulation of home construction are unnecessary on a continuing basis. It is better to strengthen our essential continuing programs for economic growth and stability, and this budget so contemplates.

8. CONTINUE THE ADJUSTMENTS NEEDED FOR A FREER AGRICULTURAL ECONOMY WITH LESS RELIANCE ON THE FEDERAL TREASURY.--The agricultural sector of our economy is in the paradoxical situation of having more efficient farms than ever before and yet of being more dependent upon Federal financial aid. During the current fiscal year, budget expenditures for agriculture and agricultural resources are expected to reach a peak of $6.8 billion. For the coming year, they are estimated to decline to about $6 billion, mainly as a result of the termination of the acreage reserve of the soil bank.

About three-quarters of these expenditures are for price supports and other programs to stabilize farm prices and income. Other expenditures for agriculture consist primarily of payments for conservation; loans for rural electrification, telephones, and farm ownership and operation; and research and extension activities.

Last year, the Congress enacted some changes in price-support laws, but additional amendments are necessary to help our agricultural economy adjust to the continuing revolution in farming technology. Changes are also needed in other agricultural programs. Legislative proposals will be transmitted later which should help our agricultural economy gradually free itself from so much Government support and control.

9. REDUCE THE BURDEN ON THE GENERAL PUBLIC FOR SERVICES TO SPECIAL GROUPS.--Certain Government activities confer measurable special benefits on identifiable groups or individuals beyond the benefits to the general public. The cost of Federal services which convey special benefits should be recovered through charges paid by the beneficiaries rather than through taxes on the general public.

In furtherance of this principle, the recent Congress approved some adjustments in postal rates, and increased the fees for a few other relatively small services. On the other hand, it increased postal employees' pay and highway construction grants without providing the additional charges needed to finance such expenditures. As a result of these and other developments, further legislation is necessary to put the postal service on a self-supporting basis and to finance highway construction without drawing on the general revenues.

This budget recommends legislation to make the activities listed in the following table more nearly self-supporting.


[In millions]

Fiscal Full

year annual

1960 effect 1

Support highway expenditures by highway-related taxes: 2

Finance deficiency estimated under present law $241.0 $818.0

Transfer financing of forest and public lands highways to trust

fund 41.0 41.0

Revise postal rates 350.0 350.0

Charge specifically for use of Federal airways:

Transfer aviation fuel taxes from highway trust fund to general

fund 34.0 34.0

Increase taxes on aviation fuels 51.0 70.0

Revise fee schedule for noncompetitive oil and gas leases 14.0

Raise patent and trademark fees 3.5 3.5

Miscellaneous increased fees and cost recoveries 11.5 20.8

Total 732.0 1,351.3

1 Net change on annual basis with present workload or first full fiscal year effect.

2Trust fund receipts, as distinct from budgetary savings, will be increased by an estimated net amount of $690 million in 1960 and nearly $900 million in subsequent years.

10. ENCOURAGE PRIVATE LENDING THROUGH FLEXIBLE INTEREST RATES FOR GOVERNMENT CREDIT PROGRAMS.--In a number of important cases, present legislation on programs for making loans, purchasing mortgages, and insuring or guaranteeing private loans sets inflexible and uneconomic restrictions on interest rates. This creates unneeded and hidden subsidies and requires excessive use of Federal funds by discouraging private lending.

To correct this situation, I recommend that for interest rates on new loans and commitments:

(a) The 4 3/4% ceiling on loans guaranteed by the Veterans Administration be replaced by a maximum rate not in excess of the rate for mortgages on sales housing insured by the Federal Housing Administration. This change will also have the effect of revising the interest rate ceiling on direct housing loans of the Veterans Administration.

(b) The ceilings of 4½% and 5% for rental (including armed services ) and for cooperative housing mortgages insured by the Federal Housing Administration be increased to levels adequate to assure private financing.

(c) The present statutory interest rate of 2 % for loans made by the Rural Electrification Administration be replaced by a rate which will cover the current cost to the Treasury of equivalent-term borrowing and other reasonable costs.

(d) The statutory standard for college housing loans made by the Housing and Home Finance Agency (the rate at present is 2 7/8% ) be amended to authorize a rate which will cover the current cost to the Treasury of equivalent-term borrowing and other reasonable costs.

(e) The 3 1/2% ceiling on ship mortgage loans by the Maritime Administration be replaced by authority to charge the full costs of the loans.

Such actions by the Congress will encourage the participation of private capital, and, in the long run, will reduce Government expenditures significantly. At the same time, Government guaranties or insurance will continue to permit interest costs to borrowers more favorable than the rates charged in the open market for similar loans.

11. ACHIEVE LONG-RUN ECONOMIES BY ADAPTING PROGRAMS TO CHANGED CIRCUMSTANCES.--Changing conditions in recent decades have resulted in the enactment of hundreds of laws and the creation of vast new programs administered by new or enlarged agencies. In this same period, few Government programs or operations have been discontinued or reduced. Furthermore, in many cases, worthwhile objectives have been pursued with outmoded activities or methods and with accompanying excessive costs to taxpayers. This is a wasteful and inefficient way to conduct public business.

It is proposed in this budget that we start anew to amend the basic legislation for a number of Government programs and operations in order to adapt them to present circumstances and assure that they accomplish their. objectives more effectively and with less cost.


Actions can and should be taken to achieve more effective control over the budget by improving present practices and procedures, especially those related to the consideration of budgetary requests.

Consider full fiscal situation.--The procedure used by the Congress for the review of fiscal matters is one which only the Congress itself can determine. Nevertheless, I believe that achievement of any overall fiscal objective is handicapped by the absence of arrangements under which the Congress can look at the fiscal situation as a whole. Such an arrangement was contemplated under a procedure established in the Legislative Reorganization Act of 1946, but apparently did not prove satisfactory to the Congress. Over the years since that arrangement fell into disuse, the executive branch has made considerable progress in achieving a more comprehensive consolidated executive budget which sets forth a financial plan, including the effect of proposed legislation. I sincerely hope that the Congress will again consider ways by which it can more effectively overcome the diffused consideration which results from separate appropriation bills, the provision of new obligational authority outside of the appropriations process, and the separate deliberations on revenue bills and the debt limit.

Item veto. The item veto is another important and needed reform, regardless of whether appropriations are made in a number of bills or in a consolidated bill. In either case, the necessity of accepting or rejecting a bill in its entirety prevents the President from considering separable provisions on their own merits. Congress has recognized the value of an item veto by granting it to governors of our territories and insular possessions. Most States have adopted this device. Presidents of both parties, starting as far back as Ulysses S. Grant, have recommended an item veto. Legislation granting an item veto to the President should apply to legislative measures authorizing expenditures as well as to appropriation bills, and should include authority to reduce the amount of an appropriation as well as to strike out an item. The use of such a veto by a President would not remove the final authority of the Congress, which would still retain its constitutional power to override any specific veto.

Public enterprises. The appropriation and fund structure of the Government needs a new review and some overhaul. For example, major lending programs and other business-type activities are now financed through revolving funds, which enable their expenditures and applicable receipts to be more easily related to each other and thus improve their operating flexibility. However, there are several notable exceptions-among them the Rural Electrification Administration, Farmers' Home Administration, and the power marketing agencies of the Department of the Interior. Legislation will be proposed to permit these enterprises to be budgeted through revolving funds. The possibility of converting still more business-type activities to a revolving fund basis will continue to be studied, with a view to making recommendations to the Congress.

More adequate control over the financial affairs of the Government could be achieved if all Government corporations which possess authority to draw money from the Treasury or to commit the Treasury for future expenditures were brought under the budget provisions of the Government Corporation Control Act. As in past years, legislation to accomplish this purpose will be again submitted to the Congress. I urge that it be enacted.

Legislation will also be proposed to incorporate the Alaska Railroad to facilitate its operations on a business-like basis.

Accrued expenditures and other controls.--In accordance with Hoover Commission recommendations, legislation was enacted last year to enable the Congress to exercise more direct control over the level of Government spending through limitations on accrued expenditures. As an initial step, this budget proposes such limitations for six appropriations. The beginning that can thus be made in improved congressional control should be extended as rapidly as experience warrants.

This budget extends the cost-based budgeting procedures which are necessary to get a proper measure of financial performance for many of the various agencies and programs. Further extensions will be made as agency accounting systems are made adequate to support them.

Continuing improvements.--Efforts to improve financial management practices need to be continued. Considerable progress has already been made by the executive agencies under the leadership of the joint accounting program which is sponsored by the Bureau of the Budget, the Treasury Department, and the General Accounting Office. But there remain a number of unsatisfactory situations, unimportant in earlier years of smaller budgets, that are now worthy of attention.

In the past, a number of appropriation items have been placed on a permanent basis and, in some of these cases, the major result achieved has been weaker control over the expenditures concerned. In addition, even though there are a few justifiable exceptions, the practice of providing authorizations to expend from debt receipts and contract authority outside the appropriation process is generally inconsistent with sound standards of budget practice.

Other inconsistencies occur in the system for making financial authority available to Government agencies. Some guaranty programs are fully funded by specific grants of obligational authority, some are partially funded, and others have an open-end call upon the Treasury. Some collections of funds now credited to miscellaneous receipts might be more properly credited against the related expenditures deliberately incurred to generate the receipts. Criteria for the use of revolving funds and trust funds have not been consistently applied.

Another problem in budgetary control has developed over the use of foreign currencies. In view of the volume of currencies generated by transactions under the Agricultural Trade Development and Assistance Act of 1954 and the numerous competing demands for their use for supplementary United States programs, more adequate procedures parallel to those governing dollar obligations are necessary. The action required by the Congress to authorize the use of certain of these currencies, for which a supplemental request will be transmitted for fiscal 1960, now relates to only a small portion of the currencies which will actually be used for Government programs.

The Director of the Bureau of the Budget is undertaking studies of the various weaknesses and inconsistencies mentioned herein to determine the most appropriate courses of action. Corrective recommendations will be made to the Congress as needed.


The table below compares current estimates for each of the nine major functional categories in this budget with the actual figures for fiscal 1958 and the latest estimate for 1959. The recommendations and estimates for 1960 are discussed in the sections of this message which follow the table.


[Fiscal years. In millions]


1958 1959 Percent

Function actual estimate Estimate of total

Major national security $44,142 $46,120 $45,805 59.5

International affairs and finance 2,234 3,708 2,129 2.8

Commerce and housing 2,109 3,509 2,243 2.9

Agriculture and agricultural resources 4,389 6,775 5,996 7.8

Natural resources 1,543 1,708 1,710 2.2

Labor and welfare 3,447 4,380 4,129 5.4

Veterans' services and benefits 5,026 5,198 5,088 6.6

Interest 7,689 7,601 8,096 10.5

General government 1,356 1,673 1,735 2.2

Allowance for contingencies 200 100 .1

Total 71,936 80,871 77,030 100.0


The changes in emphasis in the four major national security programs for the fiscal year 1960 reflect the growing armed strength of the United States and its allies and the continuing modernization of defense methods. The Department of Defense will significantly increase expenditures for procurement of missiles and for development and evaluation of new weapons, while reducing expenditures for other procurement and for construction. The Atomic Energy Commission is advancing all phases of its programs, particularly research in the peaceful uses of atomic energy. Our allies' progress in equipping their armed forces and the deliveries under military assistance in 1959 and prior years permit a reduction in military assistance expenditures. Expenditures for stockpiling and expansion of defense production will be reduced because basic stockpiling objectives for most materials are now fulfilled and because many defense production expansion contracts have already been completed.

Total expenditures for major national security programs in fiscal 1960 are estimated to be $45.8 billion.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

Department of Defense--Military Functions:

Present program $39,062 $40,800 $40,693 $39,287

Proposed legislation for construction 252 1,563

Subtotal 39,062 40,800 40,945 40,850

Atomic energy:

Present program 2,268 2,630 2,717 2,622

Proposed legislation 28 150

Subtotal 2,268 2,630 2,745 2,772

Stockpiling and expansion of defense production:

Present program 625 378 140

Proposed legislation 125

Subtotal 625 378 265

Military assistance:

Present program 2,187 2,312 1,600

Proposed legislation 250 1,600

Subtotal 2,187 2,312 1,850 1,600

Total 44,142 46,120 45,805 1 45,222

1 Compares with $40,448 million of new obligational authority enacted for fiscal 1958 and $45,704 million (including $619 million of anticipated supplemental authorizations) estimated for fiscal 1959.

DEPARTMENT OF DEFENSE--MILITARY FUNCTIONS.--The defense program for 1960 calls for new appropriations of $40,850 million. This is $288 million less than the appropriations estimated for 1959 . However, approximately $0.7 billion of the funds appropriated by the Congress for 1959 in excess of the amounts recommended will be added to the 1960 program.

Expenditures in 1960 are estimated at $40,945 million, which is $145 million more than in 1959 and about $ 1.9 billion more than the amount spent in 1958 --continuing the upward trend which began in 1956. Over the 5-year period from 1955 to 1960, annual expenditures for defense will have increased by over $5.4 billion.

Recent developments.--In the 1959 budget message I recommended a substantial acceleration of our defense effort in selected areas to enable our military strategy, techniques, and organization to keep pace with the rapid strides in science and technology.

During the last year we have made substantial progress in accelerating or starting key programs. The Atlas intercontinental ballistic missile has successfully completed a full-range test and the first operational Atlas missiles will be at launching sites by the end of the current fiscal year. Additional missiles will be put in place in 1960. The first units of the intermediate range missile Thor have already been deployed to the United Kingdom and additional units of both Thor and Jupiter will be deployed during the next 18 months. Construction is already well along on the first five submarines which will be equipped to fire the Polaris solid fuel ballistic missile and the first such submarine will go into operation in the calendar year 1960. Construction of the sixth Polaris submarine has begun and three more are authorized and will be started in fiscal 1960. Coming along at a rapid rate is the Titan, an advanced liquid fur intercontinental ballistic missile. Development work is progressing rapidly on a "second generation" solid fuel intercontinental ballistic missile, the Minuteman.

For air defense, the Nike-Hercules, which is capable of being armed with a nuclear warhead, is replacing the Nike-Ajax. The Bomarc ground-to-air missile, capable of destroying attacking aircraft at extended ranges, will, when operational, augment manned interceptor planes. To meet the threat of attack by ballistic missiles, the Nike-Zeus missile is being developed at an accelerated pace and construction is underway on a new ballistic missile early warning system.

A dispersal program for our strategic bomber force and its supporting tankers is nearing completion. To improve the effectiveness of the B-52 intercontinental bombers, the production of the Hound Dog air-to-ground missile has been accelerated.

Important scientific data have been obtained from the satellites and lunar probes launched to date. The recent successful use of the Arias as a satellite clearly demonstrated the potential usefulness of satellites in the field of communications. The Department of Defense will continue to investigate satellite applications of specific military interest. Its space programs will be closely coordinated with those of the National Aeronautics and Space Administration.

The time has come to consolidate our position in key areas of defense affected by recent advances in missiles. Sufficient progress has been made on new weapons systems to permit us safely to eliminate marginal systems and to reduce the number of competitive projects. The solid fuel Pershing and Sergeant missiles will replace the liquid fuel Redstone and Corporal. Production of the Regulus II (a ship-based aerodynamic intermediate range missile) has been terminated, and the Rascal air-to-ground missile program has been canceled.

Because of a change in tactical concepts, the decoy missile G-lore has been eliminated. The Seamaster jet powered seaplane project will be stopped. Other weapon systems of lesser importance have also been eliminated. No more appropriations are planned for the Jupiter and Thor intermediate range ballistic missiles after 1960, unless unit in addition to those already being provided to our allies through the military assistance program should later be agreed upon.

Thus, by concentrating our efforts on the more advanced and more promising weapons systems, we can increase substantially the combat capabilities of our military forces with a relatively small increase in the overall cost of defense.

Reorganization of the Department of Defense.--The Department of Defense Reorganization Act of 1958, approved on August 6, 1958, is being put into effect.

A streamlined chain of command is being established running directly from the Secretary of Defense through the Joint Chiefs of Staff to united and specified commands which have been given full operational control of the forces assigned to their commands. The organization of the Joint Chiefs of Staff has been strengthened to provide the Secretary of Defense with the military advice and assistance required for effective planning and direction. The committee system of the Joint Staff has been employed by seven new directorates, including one for operations. Appropriate instructions have been issued to delineate the additional responsibility of the Joint Chiefs of Staff and to outline their relationships with , agencies of the Department of Defense.

A director of defense research and engineering has been appointed to assure that all scientific and technological resources of the Department of Defense are put to the best possible use. I expect the new organization to provide more effective leadership, help to eliminate duplication, and develop an integrated research and development program.

In addition, improvements have been made in the administrative procedures of the Department of Defense. Operating methods in the Office of the Secretary of Defense have been improved. Nearly 200 committees have been abolished. The responsibilities and functions of the assistant secretaries are being clarified.

The job ahead is to develop within this organizational framework the management relationships that will improve the decision-making process, clearly fix responsibilities, and provide to all agencies of the Department a full understanding of the broad national requirements that determine our military policy. The attainment of this objective will provide the teamwork that is essential for the continued maintenance of an effective and, at the same time, economical defense effort.

Military personnel policy.--This budget provides for a military force of about the same overall size and composition in fiscal 1960 as that planned for the end of the current fiscal year. This force, however, will have significantly greater combat power as new weapons continue to be added to inventories.

The number of active duty military personnel during 1960 will continue at the level planned for the end of the current fiscal year except for a small reduction in the Air Force. Since the end of the Korean conflict, we have followed the policy of reducing numbers of military personnel as more powerful weapons become available to our forces. However, it has become increasingly apparent that the Communist bloc is following a policy of deliberately and constantly probing free world positions to test our determination to resist the further forcible expansion of Communist influence. Under these circumstances, it is prudent not to plan for any significant changes during fiscal 1960 in our deployments overseas or in our ready military forces at home.

A major effort has been made during the last few years to enhance the attractiveness of military service as a career. The most recent action along this line has been the enactment of military pay adjustments and adoption of recommendations of the Advisory Committee on Professional and Technical Compensation. Although these and earlier measures increase the average cost per man, they have had highly beneficial effects in all the services. The quality of inductees and enlistees has improved. The first term reenlistment rate has increased and the experience and skill levels have been raised. These improvements point to greater stability of personnel, smaller basic and technical training loads, and, over the longer run, may permit some further reductions in military personnel.

The objective of our defense effort today is the same as it has been in the past--to deter wars, large or small. To achieve this objective we must have a well rounded military force, under unified direction and control, properly equipped and trained, and ready to respond to any type of military operations that may be forced upon us. We have such a force now, and under this budget we will continue to have such a force.

Strategic forces.--A principal element of our deterrent power is the Strategic Air Command. The 43 wings of this Command are maintained at a high state of readiness and can react quickly and effectively to meet any major threat to our national security. This Command will be further strengthened during fiscal 1960 by additional deliveries of the improved B-52 intercontinental jet bomber and by the first deliveries of the new supersonic B-58 medium jet bomber together with additional KC-135 jet tankers. In addition, a new and important weapon will be provided by the introduction of Atlas missiles.

Our deterrent forces are complemented by the tactical units of the Army, Marine Corps, and Air Force and the mobile carrier task forces of the Navy, all with striking potential of great magnitude. The submarines designed to launch the Polaris missile will add significantly to our deterrent strength as they come into the fleet.

Air defense forces.--The North American air defense system is well established and is being improved constantly. Our forward warning line, which we operate jointly with Canada, stretches from the mid-Pacific around the northern edge of the continent and across the Atlantic approaches. Behind this line we have an extensive surveillance, tracking, and communications network. Elements of the structure are being tied ,together for operation by the semiautomatic ground environment ( SAGE ) system.

All the services contribute military elements to the unified command responsible for maintaining our air defense capability. The Air Force provides warning and control and the longer range weapons systems. The Army provides the shorter range weapons and over 70 Nike-Ajax and Nike-Hercules ground-to-air missile battalions will be in operation by the end of fiscal 1960. The Navy provides sea and air based radar which extend the early warning systems. National Guard units of many States participate in air defense. In addition, other regular and reserve forces of all the services stand ready in the event of need.

These forces, together with Canada's Air Defense Command, comprise the North American Defense Command and provide an air defense shield of growing effectiveness for the entire continent.

Sea control forces.--Historically, the Navy has been assigned the primary mission of controlling sea-lanes. In the conduct of amphibious warfare and antisubmarine campaigns, it is equipped to support the commands responsible for actions ranging from localized emergencies to large-scale military operations. It is ready to conduct prompt and sustained combat anywhere in the world at sea or adjacent to the sea, and is able to exploit the mobility, surprise, and concealment afforded by the world's free oceans.

The naval forces will operate 864 ships, including 389 warships, in 1960. The carrier task forces will be strengthened with new Forrestal class carriers and higher performance aircraft possessing both conventional and atomic firepower. The cruiser, destroyer, and frigate forces are steadily acquiring a guided missile capability.

Special programs, including research and scientific studies, are underway to enhance our antisubmarine capabilities. Task forces of specially equipped ships and planes specifically designed for antisubmarine warfare are being employed.

Tactical forces.--The tactical elements of the ground, naval, and air forces combine to deal with situations short of general war or to carry out essential tasks in event of general war. These forces include 14 Army divisions organized along pentomic lines and able to deliver both nuclear and high explosive firepower. Many of these divisions are deployed overseas and are evidence of this Nation's determination to participate actively in the collective defense of the free world.

The Army divisions are supported by the tactical air wings of the Air Force, approximately half of which are deployed overseas. Other important elements of our tactical forces are the 3 divisions and 3 air wings of the Marine Corps. In areas adjacent to the seas these forces can also be supported by carrier-based aircraft.

Both the Army and Marine Corps divisions are backed up by a variety of support units organized to provide both nuclear and nonnuclear military power. Air and sea transportation for these forces are provided by the Air Force and the Navy.

The readiness of our tactical forces to respond to potential aggression was well demonstrated during the Lebanon and Quemoy crises.

Appropriation structure.--In my message to the Congress last year transmitting recommendations relative to our entire defense establishment, I pointed out the need for the Secretary of Defense to have adequate authority and flexibility to discharge his heavy responsibilities. One of the areas requiring attention is the pattern under which funds are appropriated.

This budget proposes a rearrangement of appropriations for the Department of Defense in terms of major purposes rather than of organization units. These broad categories are: (1) military personnel; ( 2 ) operation and maintenance; ( 3 ) procurement; ( 4 ) military construction; and (5) research, development, test, and evaluation. This rearrangement will permit consideration of the Department of Defense budget on a more uniform and more clearly understandable basis.

Operating costs.--The annual operating costs of the Department of Defense for active and reserve military personnel, for retired pay, and for operation and maintenance are approximately the same in 1960 as in 1959. They are estimated at about $22.3 billion in 1960, not taking into account credits of $0.4 billion in revolving funds. Savings from a somewhat lower average number of military personnel and somewhat smaller inventories of aircraft and ships to be supported in 1960 are offset by higher unit costs.

The average cost per man in uniform will be somewhat higher because of (1) required increases in the Government's social security contributions as employer, (2) additional longevity pay reflecting the larger proportion of career personnel, and (3) the proficiency pay provisions of the new military pay law.

The average cost of operating and maintaining each weapon and unit of equipment will be higher because they are more complex. Other elements of increased cost are the additional SAGE centers which will be operational in 1960, the increased cost of medical care for dependents of military personnel, and the larger number of family housing units which will have to be supported by the Department in 1960.

For the past 5 years, the Department of Defense has pursued a vigorous program to provide adequate housing for military personnel and their families, both within the continental United States and overseas. This program has met with significant success and sufficient numbers of units have been built or are under construction to satisfy a major part of the military requirements. With the recommended extension of the armed services mortgage insurance program for another year and with a more adequate interest ceiling, private enterprise and local community support should be able to meet most of the remaining requirements for military housing in the continental United States. Some new Government-operated housing will still be required, however, for new installations and certain existing installations in the United States and overseas.

Procurement, research, and construction.--Expenditures for procurement, research, development, test, and evaluation, and military construction are estimated at $19 billion for 1960. There is an increase over 1959 in the combined expenditures for procurement and for research, development, test, and evaluation and a decrease in expenditures for military construction. Missile systems in 1960 will take a larger share of total procurement expenditures and aircraft will take less. Ships and other weapons and equipment will take about the same amount as in 1959.

This budget will provide for the procurement of a total of 1,610 aircraft, including jet bombers and jet tankers, land based and ship based fighters, ship based attack aircraft, trainers, helicopters, and transports. Funds are also provided for the continuation of the development of the B-70, a new high altitude supersonic intercontinental bomber, and a new high speed interceptor.

Work will also continue, at about the same level as in 1959, on the development of a nuclear power plant for military aircraft. Until such a power plant is successfully developed, and the technical problems involved in operating a nuclear powered aircraft safely are solved, there is no practical military value in attempting to build the airplane itself. It is the judgment of my scientific advisers, which I approve, that the pace of this program should continue to be geared to valid technical considerations.

In addition to providing for the missiles discussed earlier, the budget also includes funds for a wide variety of tactical missiles, for both the ground and naval forces, and for additional quantities of air-to-air missiles.

The shipbuilding program proposed for 1960 includes another Forrestal-class carrier, the eighth of its class. In line with the Navy's recommendation, this carrier will be conventionally powered. It is only good sense to wait until we have more experience with the construction of the first nuclear powered carrier authorized in the 1958 program before we start the construction of another.

The 1960 shipbuilding program also provides for 17 other new ships and for converting 13 ships to more modern types. In addition to the carrier, the ship construction program includes 6 guided missile destroyers and frigates, 3 nuclear powered attack-submarines, and 8 other vessels. Nine Polaris submarines have been authorized to date. This budget provides for the advance procurement of long lead time components for three additional Polaris submarines. Conversions include a cruiser, 8 destroyers, and 4 other vessels. This modernization will improve the antisubmarine warfare capabilities and extend the useful life of World War II destroyers.

Research will be conducted on, among other things, very early warning systems, ballistic missile defense, solid fuel chemistry, and the use of military satellites and other military vehicles for navigation and communication purposes. I am also requesting $150 million for the Department of Defense emergency fund--the same amount as provided for 1959--to provide for the exploitation of breakthroughs or unanticipated developments which may occur during the coming year.

Provision has been made for the essential needs of our ground forces. Included in this budget are funds for weapons, ammunition, engineering and training equipment for the Army and Marine Corps ground forces to enhance the combat power of the individual soldier.

Legislation for military operations.--There are a number of existing provisions of law concerning military personnel which will require legislative action during this session of Congress to extend the expiration dates. They include induction authorities under the Universal Military Training and Service Act, the special enlistment program authorized by the Armed Forces Reserve Act, the act suspending the permanent limitation on the authorized active duty strength of the Armed Forces, and the Dependents Assistance Act.

In the Department of Defense Appropriation Act for fiscal year 1959, the Congress enacted mandatory minimum strengths for the reserve components of the Army, an unprecedented departure from past policy. This action cuts deeply into the concept of flexibility overwhelmingly endorsed by the same Congress in the Department of Defense Reorganization Act of 1958. It is entirely inconsistent with a policy of promptly adjusting our military forces and concepts to rapidly changing world conditions and revolutionary advances in science and technology. Furthermore, I consider these mandatory provisions wasteful of resources that can be more appropriately applied elsewhere. I strongly urge, therefore, that the Congress repeal these mandatory provisions at an early date, and recommend that future defense appropriations contain no similar provisions.

The Departments of the Army, Air Force, and Commerce have for some years been operating long-line communications in Alaska. With Alaska now a State, a communications system should be developed which will be more responsive to the growing needs of the Alaskan economy and people, as well as to the needs of the Government agencies operating in that State. In my judgment, such a system can best be developed by private enterprise. I will therefore soon submit to the Congress proposed legislation to authorize the sale of these Government-owned communications facilities.

For the past several years the Department of Defense Appropriation Act has contained a rider which limits competitive bidding by firms in other countries on certain military supply items. This restriction is sharply at variance with the general law, popularly known as the Buy American Act. I strongly urge that the Congress not reenact this rider.

There are special problems involved in our present system of proficiency flying and its relationships to flight pay for personnel assigned to flying duty. The Secretary of Defense has been requested to make a study of these problems in the interest of improvements and economies.

Legislation on military property, construction, and procurement.-Changes in military concepts, weapons, and training requirements have markedly reduced or eliminated the need for some military installations and property while creating additional requirements for new types of facilities. Consideration should be given to legislation to streamline procedures and legal requirements for disposing of such obsolete facilities and real property. Such procedures would also reduce administrative costs of managing property and place property which is now exempt from State and local taxes on the tax rolls.

In this connection, section 601 of Public Law 155, 82d Congress, imposes restrictions on the executive branch of the Government with respect to certain real estate transactions of the Department of Defense. As stated in the budget message last year, the Attorney General has advised me that this provision of law reflects the exercise of legislative authority not warranted by the Constitution. I again recommend its immediate repeal.

The continued and rapid growth in the use of petroleum products has made questionable the need for maintenance of the relatively small naval petroleum reserves as a significant defense measure, since it would appear that the nationwide, even worldwide, petroleum industry must be relied upon to provide efficiently for our petroleum requirements in both peace and war. Accordingly, the administration will study (and I would hope the Congress would do likewise) the advisability of disposing of the anachronistic naval petroleum reserves, thereby relieving the Department of the Navy of an inappropriate responsibility and also providing additional revenue to the Federal Government.

This budget contains recommendations for $1.6 billion additional authorization for acquisition and construction of facilities for the Armed Forces. The details of this program are now under study in the Department of Defense and are subject to modifications in consonance with the program planning of the Armed Forces. The program will be held to the minimum requirements for facilities and installations essential to the modern weapons systems being made operational. I will submit at an early date both the additional authorizations and the related estimates of appropriations for the military construction programs.

Another matter which will require the attention of the Congress during this session is the expiration of the Renegotiation Act on June 30, 1959. This is the law under which excess profits gained on certain Government contracts and related subcontracts are recaptured by the Government through renegotiation. I recommend that this act be extended.

DEVELOPMENT AND CONTROL OF ATOMIC ENERGY.--Expenditures by the Atomic Energy Commission are expected to reach an all-time high of $2.7 billion in fiscal 1960. This large amount reflects our determination to maintain our position of world leadership in the field of nuclear military armaments until such armaments are brought under adequate international control and to promote the development of peaceful applications of atomic energy.

In the light of our offer to suspend tests of nuclear weapons for a 1-year period starting October 31, 1958, and in view of the negotiations for further suspension, the budget does not provide for any weapons tests in the fiscal year 1960. Under the circumstances, testing grounds in Nevada and the Pacific will be kept on a standby basis.

A satisfactory test suspension agreement, of course, is but a first step toward reducing the grave threat of nuclear warfare. This administration intends to explore all possible means of attaining armament control under adequate inspection guaranties despite the recent suspension of negotiations on means of avoiding surprise attack. I hope that we shall succeed. Until an acceptable agreement is reached, however, financial authorizations must be provided to continue development and production of nuclear weapons at current high levels to meet a variety of military needs.

Programs for the development of nuclear reactors for a variety of military propulsion and power applications will be continued at or above the high levels already attained.

Peaceful uses of atomic energy.--At the second Conference on the Peaceful Uses of Atomic Energy in Geneva during September 1958, the United States demonstrated the range and scope of its atomic research and development in the peaceful applications of this new energy source.

We plan to pursue energetically the promising technical approaches to civilian power reactors. We will emphasize efforts to reduce the cost of the reactor fuel cycle; such a reduction is basic to the attainment of economic atomic power. This budget provides for continuation of construction and for development, modification, and operation of a number of experimental and prototype power reactors owned by the Government, including operation of the atomic power station at Shippingport, Pa., the world's first nuclear power plant devoted primarily to the production of electric energy. We will also continue substantial support of power reactor projects undertaken by groups outside of the Atomic Energy Commission.

The Commission in exercising its responsibility for direction of the civilian nuclear power development program will identify desirable projects to advance that program. In carrying out these projects the Commission will continue to work with the Nation's electric power producers, both privately and publicly owned, and will continue to seek cooperation from industry in order to utilize its experience and resources. In addition, exchange of technical information with foreign countries will be expanded through participation in international undertakings, especially the European Atomic Energy Community (Euratom) and the International Atomic Energy Agency.

Further investigations into the possible use of nuclear explosions for such peaceful purposes as mining and earth moving, known as Project Plowshare, will be conducted.

Legislation will be proposed in this session to carry out the recommendations of the Joint Federal-State Action Committee in the field of atomic energy, which would recognize certain State responsibilities for the protection of public health and safety.

The budget provides for a higher level of research in the physical and life sciences. Three large particle accelerators in the multibillion electron volt range will be put in operation in 1960. These new accelerators, together with two already completed, will produce valuable new information on the basic structure of the atomic nucleus. More advanced experimental devices will be fabricated and operated to explore the control of thermonuclear reactions. Also, as part of the life science program, the budget includes funds for the operation of the new Brookhaven Medical Center, where the first nuclear reactor designed primarily for medical research purposes is located.

STOCKPILING AND DEFENSE PRODUCTION EXPANSION.--Most Of the objectives for the stockpile of strategic and critical materials have been substantially reduced as a result of new studies, and most of these reduced objectives have been met. Consequently, the need for new procurement has been sharply decreased. At the same time deliveries under contracts made during the Korean conflict to encourage expanded production of defense materials are declining. Substantial reduction in the Government's purchase commitments has also been achieved through negotiation with contractors.

For these reasons, expenditures for stockpiling and expansion of defense production are estimated to decline from $378 million in fiscal 1959 to $265 million in 1960. However, because the present authority is inadequate, legislation will be needed in 1959 to authorize an additional $325 million to finance probable deliveries in the next 2 years under existing contracts for expanding defense production.

MUTUAL SECURITY PROGRAM.--The mutual security program is designed to help strengthen the defense and bolster the political and economic stability of the free world. Through it the United States shares in worldwide efforts to meet the Communist threat and to help improve the standard of living of people in less developed nations. For the fiscal year 1960, I am recommending new obligational authority of $3,930 million for the mutual security program. Expenditures are estimated to be $3,498 million, which is $383 million less than in fiscal 1959.

The military assistance portion of the mutual security program, which is primarily related to our military defense effort, is discussed in this section of the message. The other portions of the mutual security program are directed primarily toward promoting stability and economic growth in less developed countries. They are discussed in the International Affairs and Finance section of this message.

The accomplishments, future needs, techniques, and interrelationships of military and economic assistance need to be reassessed in the light of continuing change in military technology and strategy and in economic and political conditions, and with consideration of new Communist techniques in waging the cold war. Therefore, I recently appointed a committee of outstanding citizens, with experience in government, the Armed Forces, and business, to appraise the military assistance program and the relative emphasis the United States should place on military and economic aid. Accordingly, in the present budget, provisions for the mutual security program are subject to whatever recommendations I may make in connection with my later transmission to the Congress of this program.

Military assistance.--In meeting the threats of Communist military aggression, the United States relies on two sources of strength, our own defense forces and the forces of more than 40 free-world nations, to many of whom we provide military assistance. Three of these, Korea, China, and Vietnam, are divided nations facing aggressive Communist-dominated forces across uneasy boundaries. Other recipients border on hostile Communist states, face potentially dangerous internal Communist movements, or are defenders of the great industrial communities of the free world.

Our primary concern is to insure the free world's ability to deter war and to retaliate against attack if deterrence fails. This we do through our own military capability and by providing intermediate and short-range missiles and other weapons to a number of our allies.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

actual estimate estimate for 1960

Function and program

Major national security:

Military assistance $2,187 $2,312 $1,850 $1,600

International affairs and finance:

Development Loan Fund 2 125 200 700

Defense support 874 815 780 835

Technical cooperation 140 159 170 211

Contingencies and other assistance 408 470 498 584

Subtotal 1,424 1,569 1,648 2,330

Total, mutual security 3,611 3,881 3,498 1 3,930

1 Compares with new obligational authority of $2,764 million enacted for 1958 and $3,516 million (including $225 million of anticipated supplemental appropriations for the Development Loan Fund) estimated for 1959.

But the free world also faces the Communist threat of local aggression and military subversion. This danger is best met by conventional forces of the threatened countries. If necessary, the United States and other free-world nations would send reinforcements under the terms of regional pacts and bilateral agreements. Our allies, through their own efforts, are covering the bulk of the costs of operating and maintaining their forces. The United States supplies the critical military equipment that our partners cannot supply themselves and assists in the training of their officers and men.

The estimate of new obligational authority for military assistance in the fiscal year 1960 is $1,600 million. Expenditures in 1960, which will be made primarily from obligational authority enacted in previous years, are estimated to be $1,850 million, a reduction of $462 million from the amount estimated for 1959.

NONMILITARY DEFENSE.--Closely allied to our military preparedness are the nonmilitary civil defense and mobilization programs. These were reorganized last year under a new Office of Civil and Defense Mobilization, for which increased appropriations are recommended for 1960. These programs are discussed with other programs concerned with industry and community facilities in the Commerce and Housing section of this message, under which these expenditures are classified.


The United States is directing its diplomacy and devoting a substantial share of its economic resources to maintaining world peace and the security of free nations. In a world which still contains much want and suffering, it is a goal of our foreign policy to promote the economic stability and growth of less developed countries. This is as vital to us as it is to the countries concerned in the present world situation.

Although military danger persists, a strengthened free-world defense system enables less developed countries to concentrate much of their effort on needed economic progress. Increased international trade, private investment, public programs of lending, and technical assistance are essential to these efforts.

Expenditures for international affairs and finance are estimated to be $2.1 billion in the fiscal year 1960. This amount is $1.6 billion less than the expenditure estimate for 1959, mainly because of an additional and nonrecurring subscription of $1,375 million to the International Monetary Fund for which I am requesting authority for 1959.

Further expansion of trade was made possible when the Congress last year extended the reciprocal trade agreements legislation for 4 years. Under the authority of this act, we will seek additional agreements with friendly countries for mutually beneficial reductions of trade barriers.

The greater share of investment capital and technical ability in the United States and other highly developed countries is to be found in private hands. Less developed countries could benefit in greater measure from this large private reservoir by making investment more attractive to firms from other countries. The United States on its part invites negotiation of tax treaties designed to encourage its citizens to invest abroad. I will request legislation to expand the Mutual Security investment guaranty program, which offers guaranties to American private investors against losses on foreign investment that are caused by inconvertibility of currencies, expropriation, or war. The Export-Import Bank is actively seeking more private participation in its loans and is selling part of its portfolio to private investors, with the expectation of financing all of its operations in fiscal 1960 from receipts. The United States subscription to the capital of the International Bank for Reconstruction and Development helps that agency in channeling private capital into public loans to less developed countries.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

Economic and technical development:

International Monetary Fund subscrip-

tion (proposed legislation) $1,375

Export-Import Bank $340 243 --$6

Mutual security, economic:

Development Loan Fund:

Present program 2 125 180

Proposed legislation 20 $700

Defense support:

Present program 874 815 515

Proposed legislation 265 835

Technical cooperation:

Present program 140 159 85

Proposed legislation 85 211

Contingencies and other assistance:

Present program 408 470 272

Proposed legislation 226 584

Other (primarily Department of Agriculture

emergency famine relief abroad) 146 135 126 115

Conduct of foreign affairs:

Department of State 175 242 212 204

Other 2 4 4 2

Foreign information and exchange activities:

United States Information Agency 109 107 114 127

Department of State, exchange of persons 24 25 24 24

President's special international program 16 9 7 7

Total 2,234 3,708 2,129 1 2,809

1 Compares with new obligational authority of $3,983 million enacted for 1958 and $7,070 million (including $4,945 million of anticipated supplemental authorizations) estimated for 1959. The 1959 supplementals include proposed additional U.S. subscriptions to the International Bank for Reconstruction and Development of $3,175 million and to the International Monetary Fund of $1,375 million.

In addition, studies are being conducted by the Department of State and the Business Advisory Council of the Department of Commerce on ways to increase the role of private investment, management, and technical training abroad.

International financial organizations.--To assist in economic development and in the sound expansion of trade, the United States participates with other countries in international financial organizations and also makes loans and grants directly to other nations. The multilateral and bilateral approaches complement each other and both are essential to the achievement of our objectives.

The International Bank for Reconstruction and Development extends loans for capital investment, and the International Monetary Fund promotes sound foreign exchange policies and encourages trade by assisting countries to overcome short-term foreign exchange problems. Both institutions have proved their worth as instruments of international financial cooperation. However, they cannot continue with the same effectiveness unless their present resources are supplemented. The executive directors of each institution have recommended an increase in member country subscriptions of 100% for the Bank and 50% for the Fund. I request that the Congress promptly approve the United States share of these recommended increases. Early approval will assure the other member countries that the increase in capitalization can be achieved quickly, and thus encourage prompt action by them.

For the additional United States quota in the International Monetary Fund, this budget includes $1,375 million as supplemental new obligational authority and as estimated expenditures in 1959. Of this amount, $344 million is to be paid in gold and the balance of $1,031 million is to be paid in the form of non-interest-bearing Treasury notes. The anticipated subscription to the International Bank of $3,175 million in the fiscal year 1959 is included in the budget as new obligational authority but not as an expenditure because it will be in the nature of a guaranty fund. On the strength of guaranties from all its members, the Bank is able to sell its bonds to private investors.

We are now negotiating with our Latin American neighbors concerning the establishment of an inter-American development banking institution which would facilitate the flow of public and private capital to economic development projects in this hemisphere and would supplement existing lending arrangements. This negotiation may result in a later request for legislation permitting United States participation in such an institution.

The administration is also currently studying the feasibility of establishing an international development association which would be affiliated with the International Bank for Reconstruction and Development and would make loans repayable wholly or partially in the borrower's currency.

Development Loan Fund.--In 1957, the United States established the Development Loan Fund to provide capital on terms more favorable than are normally available from other sources, including repayment in foreign currencies. The Development Loan Fund finances both public and private projects that clearly contribute to the basic development of a country but do not qualify for private loans or for financing by the International Bank for Reconstruction and Development or the Export-Import Bank.

The Development Loan Fund is now making loans in substantial numbers, and will have an increasing impact in assisting less developed economies. The Fund will have committed virtually its entire capital by the end of this month. Because of the vital importance to our foreign economic objectives of continuing this type of lending, a supplemental appropriation for fiscal 1959 of $225 million is recommended. This amount has already been authorized but not appropriated by the Congress. New obligational authority of $700 million is requested for fiscal 1960.

Defense support.--Many of our allies among the less developed countries maintain large military forces required for the common defense despite the added strain placed on their national economies by the continuing cost of these forces. To help prevent the living conditions and political stability of these countries from deteriorating because of the economic burden of their military forces, the United States provides economic aid through appropriations for defense support. This aid takes the form of food, textiles and other consumer goods, machinery, and raw materials. For fiscal 1960, new obligational authority of $835 million is requested for defense support.

Technical cooperation.--Through technical cooperation under the mutual security program the United States assists less developed countries to acquire technical, administrative, and managerial skills. This improvement of skills must go hand in hand with the financial and material resources made available for development. For 1960 an increase of approximately $40 million in new obligational authority is requested. This will enable the United States to train more foreign technicians and provide more American experts and demonstrational equipment, with emphasis on expanding programs in Africa. The increase will also permit the United States to pay its share of the expected greater contributions by member nations to the new United Nations special fund for technical assistance projects.

Contingencies and other assistance.--The mutual security program for 1960 includes a request for $200 million to be available for unforeseen contingencies and emergencies that may arise. In addition, appropriations will be requested for special assistance needed for the stability and progress of a number of countries not covered by other categories of aid and for such programs as our contributions to the worldwide malaria eradication program. Other special activities covered by the mutual security program are the United States contributions to the United Nations Children's Fund (UNICEF) and to refugee programs.

Legislation will be recommended to revise requirements on eligibility of countries for aid and thus provide the necessary additional flexibility to help nations that are resisting Soviet domination.

Conduct of foreign affairs.--The Department of State plans to open several new diplomatic and consular posts and to increase its staff dealing with problems of eastern Europe and international communism. Legislation will again be recommended to clarify the authority of the Secretary of State with regard to the issuance of passports. Legislation will also be recommended to reimburse Americans for certain property damage in Europe and the Far East during World War II for which compensation has not previously been authorized.

Foreign information and exchange activities.--The United States Information Agency will continue the major rebuilding of its radio facilities begun in fiscal 1959 to improve the reception overseas of the Voice of America. The cultural content of our information programs will be increased, more American books will be distributed abroad, and greater emphasis will be given to English-language teaching.


Over the past 6 years this administration has fostered major advances in the programs of the Federal Government for aviation, highways, urban renewal, the postal service, and aid to small business.

Expenditures for all commerce and housing programs in the fiscal year 1960 are estimated at $2.2 billion, which is $1.3 billion less than the estimated expenditures for 1959. The estimated reduction occurs primarily in the Federal National Mortgage Association and the Post Office Department. Reduced purchases of low-cost housing mortgages and administrative steps to increase receipts will enable the Association to finance its 1960 operations entirely from its current collections. The proposed legislation to provide more adequate postal rates and the absence of the large retroactive 1959 payments for pay and transportation will sharply reduce net budget expenditures for the postal service.

TRANSPORTATION AND COMMUNICATION.--In recent years, the Federal Government has had to take actions to meet emergency problems which have arisen in highways, railways, and aviation. These actions have sometimes been taken on a partial and piecemeal basis, without full consideration of the impact on other transportation programs. The Secretary of Commerce, at my request, is undertaking a comprehensive study of national transportation to identify emerging problems, redefine the appropriate Federal role, and recommend any legislation or administrative actions needed to assure the balanced development of our transportation system.

Space flight.--The National Aeronautics and Space Administration, organized in 1958, is initiating extensive scientific investigations with satellites and probes to increase our understanding of the earth's outer atmosphere; the moon and the planets; the earth's gravitational, magnetic, and electric fields; radiation from space; and other phenomena. Programs in the field of meteorology will look toward the ultimate establishment of a worldwide system of satellite weather observation, and in the field of communications will continue to experiment with the use of satellites to serve as relays for the intercontinental transmission of messages, voice, and television. Projects to increase our ability to place heavy objects in space include development of high energy fuel rockets, a million-pound thrust engine, and a nuclear rocket engine.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

actual estimate estimate for 1960

Program or agency

promotion of aviation and space flight:

National Aeronautics and Space Administration:

Present program $89 $146 $130

Proposed legislation 7 150 $485

Federal Aviation Agency:

Present program 277 466 560 537

Proposed legislation 65

Civil Aeronautics Board 38 58 63 63

Promotion of water transportation:

Department of Commerce 174 212 232 279

Coast Guard 219 238 250 260

Panama Canal --1 13 5

Provision of highways 31 36 1 3 ( 1 )

Postal service:

Present program 674 752 459 522

Proposed legislation -- 350 -- 350

Community development and facilities:

Urban Renewal Administration:

Present program 58 80 104 1

Proposed legislation 252

Other 21 39 40 7

Public housing programs 51 93 93 137

Other aids to housing:

Federal Housing Administration -- 63 -- 62 --113

Federal National Mortgage Association -- 32 678

College housing loans 164 236 186

Veterans Administration:

Present program 159 144 133 150

Proposed legislation --33

Other -- 1 29 -- 24 10

Other aids to business:

Small Business Administration 71 157 164 201

Proposed legislation, area assistance 10 55

Other 44 48 40 52

Regulation of commerce and finance 49 58 60 61

Disaster insurance, loans, and relief 21 20 16 5

Civil and defense mobilization 66 60 65 87

Total 2,109 3,509 2,243 2 2,880

1 Reflects proposed financing of Federal-aid highways in national forests and public lands from highway trust fund.

2Compares with new obligational authority of $5,863 million enacted for 1958 and $3,210 million (including $715 million of anticipated supplemental authorizations) estimated for 1959.

To promote rapid advancement of space technology, a supplemental appropriation of $45 million is requested for 1959. Of this amount $21 million is for accelerating development of the technology of manned space flight and $24 million is for equipment and facilities for propulsion development and tracking. For 1960, I am requesting new obligational authority of $485 million, an increase of $135 million over the 1959 total; this includes the agency's aeronautical programs as well as its outer space activities.

Aviation.--Under the new Federal Aviation Agency, traffic control activities, both civil and military, are now being combined into a single system more capable of handling safely and efficiently the increasing number of planes of varying speeds. Expenditures for construction and operation of needed new facilities for the Federal airways system are accelerating as programs authorized in earlier years move from plans to performance. A newly established program to augment civilian facilities with existing air defense radar is now in effect and is being accelerated. At the same time, the extensive research underway will help us to resolve the even more difficult air traffic control problems of the future.

Legislation for Federal grants to aid local airport construction expires at the end of fiscal 1959. As I stated last year in disapproving legislation greatly expanding this program, the Federal Government should now begin an orderly withdrawal from the airport grant program. Legislation will therefore be recommended to authorize a transitional program of Federal grants to share the costs of basic facilities, such as runways and control towers. One-half--instead of three-fourths as in the expiring law--of the funds appropriated would continue to be available to the States on the basis of the existing apportionment formula. The other one-half would be available for expenditure on a discretionary basis. Revenue-producing facilities, such as terminals and hangars, should be financed locally. This program will require $65 million of new obligational authority in fiscal 1960, with somewhat smaller amounts in each of the following 3 years.

For the Federal Aviation Agency as a whole, including direct programs and airport grants, I recommend that the Congress provide new obligational authority of $602 million in 1960. Expenditures are estimated to be $560 million, which is $94 million more than in 1959 and almost four times the amount spent for these purposes in 1956.

Subsidy payments by the Civil Aeronautics Board to commercial air carriers are continuing to rise, primarily because of the increasing service to small communities. Practically all of the $63 million in payments estimated for 1960 will go to local service carriers including helicopter operators. The loan-guaranty program administered by the Board, by helping local service carriers to finance new equipment, should in the long run reduce the need for subsidy. Moreover, the Board has announced its intention to suspend service at any point where adequate traffic has not developed after a fair trial. This "use it or lose it" policy should help to prevent permanent certification of uneconomic service.

Airway user charges.--The magnitude of the burden on the general taxpayers for rising airway expenditures makes it essential that users of the facilities pay a greater share of the cost. To this end, legislation will be transmitted to raise the effective tax on aviation gasoline from 2 cents to 4 1/2 cents in 1960 and to levy the same tax on jet fuels, which are now tax-free. These increased costs should be includible, along with other airline costs, in determining the rates charged the ultimate users of air transportation. Receipts from taxes on aviation gasoline should not be used for highways; they should be retained in the general fund instead of being transferred to the highway trust fund. These changes in revenue laws will increase general fund receipts by an estimated $85 million in fiscal 1960 and by somewhat larger amounts in subsequent years.

Promotion of water transportation.--The national maritime policies under which we now operate were laid down 23 years ago in the Merchant Marine Act of 1936. It is increasingly apparent that both the adequacy of and the need for those policies require reappraisal by the executive branch and the Congress. Accordingly, as a part of the general transportation study referred to earlier, the Secretary of Commerce will review the major problems of the shipping industry. As soon as his report is available, I hope the Congress will hold comprehensive hearings. We need new national policies and guidelines which can become effective at the earliest possible date.

At present, the bulk of our Merchant Marine consists of ships built during the years 1942 to 1946. Since existing law normally requires replacement of vessels at the age of 20 years, we must establish definitive policies on such questions as the realistic life span of merchant ships, the number of ships actually needed in our Merchant Marine, the extent to which their construction and operation should continue to be subsidized by the Government, and the pattern of trade routes that should be served by subsidized ships. There should also be an examination of present policies on such matters as foreign flag registration and the competition of foreign shipping.

In the meantime, the 1960 budget provides for a substantial ship construction program. New obligational authority of $129 million is recommended for construction subsidies and related programs in 1960. This appropriation will be used for replacing 14 needed cargo and combination passenger and cargo ships. It is not contemplated that any of it will be used for the passenger superliners authorized last year. I request that the Congress reconsider its action requiring that these superliners be built under direct Federal loans, which under present law would be made at an interest rate below that paid by the Government itself for comparable borrowed money.

The first nuclear powered merchant ship, the N.S. Savannah, is expected to be completed in January 1960. Research on improved nuclear propulsion of merchant ships is continuing. Legislation should be enacted to assure that nuclear materials may be distributed for use as fuel on United States merchant ships.

Some savings in maintenance costs will be realized by the Maritime Administration through disposal of surplus shipyards which it owns and through reducing preservation work on over 1,000 Liberty ships no longer suitable for mobilization.

Expenditures for operating subsidies to shipowners, estimated at $130 million, will be unchanged from 1959. A maximum of 330 ships are expected to be eligible for operating subsidies, including a limited number for new Great Lakes routes.

Urgently needed repair and modernization of Coast Guard equipment and facilities are provided for in the increase of $20 million in new obligational authority over the 1959 amount. This will not only improve the protection given life and property but will also save operating and maintenance costs in the future.

Highways.--The comprehensive highway program enacted in 1956 established the principle that highway users, rather than the general taxpayers, should pay the cost of Federal-aid highways. The larger contract authority enacted in 1958, however, will create a cumulative deficit in the highway trust fund under present law of $241 million by the end of the fiscal year 1960, and about $2.2 billion by the end of 1962.

To maintain the trust fund on a self-supporting basis, I am recommending a temporary increase of 1 ½ cents in highway fuel taxes, to become effective July 1, 1959, and to remain in effect through the fiscal year 1964. This increase is necessary to assure availability of the entire 1961 and 1962 Federal-aid highway authorizations without waiving provisions in the basic legislation which limit expenditures to the amounts available in the trust fund.


[In millions]

Expenditures Receipts Year-end balance

Fiscal year

Under existing legislation:

1957 $966 $1,482 $516

1958 1,602 2,134 1,049

1959 estimate 2,553 2,143 639

1960 estimate 3,102 2,222 --241

1961 estimate 3,109 2,291 --1,059

1962 estimate 3,484 2,377 --2,166

After enactment of proposed legislation:

1960 estimate 3,136 2,912 415

1961 estimate 3,180 3,175 410

1962 estimate 3,558 3,296 148

In addition, as I have previously recommended, the forest and public land highways, which are an integral part of the Federal-aid system but are now financed from general budget funds, should be transferred to trust fund financing, and the revenues from aviation gasoline taxes which are now allocated to highway construction should be retained in the general fund. The net effect of these changes is that all Federal expenditures for Federal-aid highways will be paid from the highway trust fund and the fund itself will be financed by highway users.

Postal service.--Since 1953 this administration has been using every available method to improve the efficiency of the postal service, and to place its operations on a self-supporting basis, except for a few subsidized uses authorized by law.

In the last session the Congress took an important step by enacting the first comprehensive increases in postal rates in a quarter century. The increases, however, were considerably short of the minimum necessary amounts which I had requested and were made more inadequate by pay increases for postal employees for which no additional financing was provided. As a result, new obligational authority of $522 million would be required next year, under existing legislation, to finance the postal deficit and the subsidized public services.

The Postal Policy Act of 1958 established, for the first time on a statutory basis, the principle that postal rates should be adequate to cover all costs of operating the postal establishment with certain exceptions. Consistent with this requirement, further revisions in rates should be enacted adequate to provide at least $350 million of additional revenues in 1960. Legislation for this purpose will be proposed in the near future.

An appropriation of $172 million is requested to reimburse the Post Office Department for public service costs not required to be covered by postal revenues. However, the concept of public services as defined in the act requires excessive costs to be charged against general Treasury revenues. Therefore, the Congress should correct this situation by amending the Postal Policy Act of 1958 to prevent these excessive charges and to assure a more equitable sharing of postal operating costs between mail users and the general public.

These increases in rates, together with the appropriations for public service items, should provide adequate funds, not only to meet the expanded requirements for postal service in 1960, but also to carry forward the research and capital programs already underway. As a result we can make needed progress in acquiring modern facilities and equipment adequate to take care of the steadily increasing mail volume in later years.

HOUSING AND COMMUNITY DEVELOPMENT.--A year ago I presented to the Congress a carefully considered program for revision and extension of the basic statutes governing several major housing and community development programs. Adjournment of the Congress without enactment of these recommendations has made it necessary to adopt temporary expedients to handle continuing applications for urban renewal capital grants and college housing loans until new authorizations can be made available. Emergency legislation has already been proposed to the Congress to provide the funds necessary for these programs and to increase the mortgage insurance authority available for the remainder of the fiscal year. In this message I shall emphasize comprehensive long-run changes needed in this important area.

Urban renewal. The Federal Government is providing major assistance to communities in halting urban deterioration and replacing it with orderly redevelopment. Approximately 650 urban renewal projects are now underway or completed in more than 380 cities. These will involve an ultimate net cost estimated at about $2 billion, of which over $1.3 billion will be supplied by Federal capital grants. The Federal Government also has outstanding loans and loan guaranty commitments totaling about $700 million for temporary financing of these projects.

When urban renewal legislation was not enacted by the Congress last year, authority subject to the President's discretion had to be used to make available $100 million for capital grants. Since this authorization will soon be exhausted, the emergency legislation already proposed contains an additional $100 million for 1959 and also $100 million to restore the discretionary authority for future emergencies.

The Congress should act promptly upon four major revisions in the urban renewal laws:

(a) Assure the States and cities of continuing Federal support for urban renewal by authorizing capital grants of $1,350 million for the next 6 years. For each of the first 3 years, 1960-62, $250 million should be authorized, with $200 million annually for 1963-65. This forward authorization, together with administrative steps already taken to allocate the available funds equitably, should enable each community to develop a long-term community-wide plan which may then be financed in realistic annual installments.

(b) In accordance with the predominantly local benefits received, require States and cities to assume a gradually increasing share of the expense of buying and improving the land and of other net project costs. On projects initiated in fiscal 1960, the Federal Government should continue to pay two-thirds of the net cost and the State and local community one-third. In succeeding fiscal years the State and local share should increase by steps to 40, 45, and finally 50% in 1963-65. The increased non-Federal share should not prove onerous, since much of this contribution normally is provided through construction of improvements otherwise necessary and the increased property values in the completed projects will usually permit the local costs to be recovered in increased tax receipts, often within 10 years or less.

(c) Encourage more careful planning by requiring the States or communities to assume their share of the cost of planning from the start. At present the Federal Government advances the full amount for planning and the local share is paid only if the project actually goes forward.

(d) Aid nonresidential urban renewal projects by authorizing $150 million in loan commitments to assist local agencies to obtain financing from private sources. Projects of this type often can yield such substantial increases in property tax revenues that local communities should be able to finance them without requiring Federal grants.

Public housing programs.--By the end of the fiscal year 1960, over 475,000 federally aided public housing units will be occupied by about 9 million people, and the additional 110,000 units already authorized will be under contract for Federal contributions but will not yet be constructed. These 585,000 units should meet most of the demand for such housing by low-income families displaced by highway construction, urban renewal, or similar governmental action in the next few years. I shall not ask for authorization for any additional units.

Insurance of private mortgages.--Through the mortgage insurance programs of the Federal Housing Administration and the loan guaranty program of the Veterans Administration, the Federal Government is underwriting private credit for a substantial share of all houses built and purchased. Twice during the past calendar year, however, orderly planning and financing of home building have been jeopardized when increases in applications for mortgage insurance exhausted or threatened to exhaust the maximum amount of insurance authorized by law. The emergency housing legislation already recommended to the Congress would increase the existing limitation by $6 billion. I urge that the limitation be completely removed in general legislation so that this self-supporting program will be available at all times to insure adequate financing of housing.

Several other major legislative actions should be taken to permit insurance programs of the Federal Housing Administration to meet demonstrated needs:

(a) Enact permanent authority to insure property improvement loans;

(b) Authorize interest rates for insured armed services and other rental and cooperative housing mortgages adequate to assure private financing of such loans;

(c) Establish a new insurance program for mortgages on rental housing for elderly persons to replace the present limited program;

(d) Broaden the special mortgage insurance for families displaced by urban renewal and other Government programs to include more effective aids for rental housing;

(e) Extend for another year the authority to insure mortgages for military housing;

(f) Increase the maximum amounts of mortgages on sales housing eligible for insurance.

Veterans' housing loans.--The direct housing loan program of the Veterans Administration was extended and liberalized last spring as an antirecession measure. Requests for direct loans now exceed available funds in large part because the law does not permit interest rates that are adequate to attract private financing of guaranteed loans. I urge the Congress to act promptly to authorize the same flexibility in interest rates for the Veterans Administration as the Federal Housing Administration already has for comparable programs, and to extend the voluntary home mortgage credit program. These two actions should enable private lenders to meet a large share of the unsatisfied demand by veterans for Government loans, and will also reduce budget expenditures.

Mortgage purchases.--Under its special assistance programs, the Federal National Mortgage Association purchases certain types of insured or guaranteed mortgages. From 1956 through 1958 expenditures for these purchases have been exceeded by receipts from repayments and from sales of mortgages acquired under earlier purchase programs. In 1959, however, mortgage purchases will exceed repayments and sales, and net expenditures will jump to an estimated $678 million, as a result of the billion-dollar program authorized last spring by the Congress to purchase mortgages on low-cost housing at terms favorable to the borrowers.

For the fiscal year 1960, the Association will endeavor to cover its expenditures for mortgage purchases by receipts from mortgage sales and other sources. To make this possible without diverting the flow of new funds from the mortgage market, an estimated $335 million in Government-owned mortgages will be offered to investors in exchange for certain Government bonds which then will be retired.

To avoid unnecessary budget outlays in future years the Housing and Home Finance Agency is increasing its efforts to obtain private financing for programs now largely financed with special assistance funds. These efforts, aided by those of the Department of Defense, have already proved successful in obtaining adequate private credit for the armed services family housing program which, until last spring, had been financed mainly from Government funds. New commitments of over $400 million are anticipated for 1960, mainly for the purchase of mortgages on housing in urban renewal areas and housing for the relocation of families displaced by governmental actions. Since the agency is now permitted to control the prices at which it purchases such mortgages, the rapidly growing financing requirements can and should be met in substantial degree from private sources.

College housing.--No additional authorizations were provided for college housing loans by the Congress last year. Accordingly, while processing of loan applications has continued, only limited new commitments have been made. The emergency legislation already before the Congress would provide $200 million in new lending authority at once. This should be adequate to meet the needs for loans for at least the remainder of the fiscal year 1959.

For the fiscal year 1960, no. additional new obligational authority is requested for college housing loans. However, an estimated $50 million in obligations owned by the Government will be offered to investors in exchange for certain Government bonds which then will be retired. This amount will be available for loans to take care of unusual cases during a transitional period from direct Government loans to other means of financing college housing needs.

About 60% of the demand for college housing loans in recent years has come from State universities and other public institutions. Such institutions normally can borrow privately on relatively favorable terms because of Federal tax exemptions on the income from their obligations. Nevertheless, they have been encouraged to borrow from the Federal Government by the low subsidized interest rates required by law since 1955. For the remainder of the present direct loan program, the law should be amended to remove this incentive to Federal borrowing by (a) denying eligibility for loans to any institution qualified to issue tax exempt securities and (b) placing in the law a requirement that interest rates cover costs on loans to all remaining eligible borrowers.

For the future, and in order that there may be no hiatus in providing Federal assistance where it is most needed, this budget suggests that the Congress include in general housing legislation provisions relating to college housing which would authorize a limited loan guaranty program. However, it seems to me that the continued needs of colleges and universities for housing should be considered within the framework of the general problems of education. The Department of Health, Education, and Welfare is now concluding its studies of these problems.

SMALL BUSINESS.--Recent enactment of the Small Business Investment Act and of legislation making the Small Business Administration a permanent agency is substantially strengthening Federal assistance to small businesses. New loan commitments to State and local development corporations and to newly authorized small business investment companies are estimated at $73 million in 1960, thereby putting to work a much larger amount of private capital. Efforts will be continued to assist small businesses in obtaining a fair share of Federal procurement, to advise them on Government property disposals, and to provide them with technical and management assistance. The new program of grants for research or small-business problems and counseling for small firms is getting underway. The expansion in loans can be financed largely by increased receipts anticipated from loans made in prior years, so that net expenditures of $164 million for the agency's business-aid programs will be only $7 million greater than in 1959.

AREA ASSISTANCE.--In disapproving the area redevelopment legislation enacted in the closing days of the last Congress, I expressed the hope that the next Congress would promptly pass a more soundly conceived program. The revised legislation which this administration is proposing would:

(a) Place the major responsibility on local citizens;

(b) Authorize loans to areas where unemployment has been well above the national average for 2 or more years;

(c) Authorize grants for technical assistance to these areas and to localities dependent upon a single industry or situated in rural low-income areas;

(d) Place leadership in the Department of Commerce, with the assistance of other Federal agencies.

To finance this program, I recommend initial appropriations in fiscal 1960 of $55 million. Based on the successful, comparable programs conducted by certain States, these appropriations should be adequate to meet the Federal share for redevelopment of all areas expected to qualify under the proposed legislation.

CIVIL AND DEFENSE MOBILIZATION.--Reorganization Plan No. 1 of 1958 merged the former Office of Defense Mobilization and the Federal Civil Defense Administration into the new Office of Civil and Defense Mobilization. This merger is now substantially completed and permits improved coordination of our nonmilitary defense. New obligational authority of 987 million is recommended for 1960.

Methods for formalizing the means by which the Office of Civil and Defense Mobilization utilizes appropriate resources of other departments and agencies are now being studied. The OCDM budget includes million for financing the assigned responsibilities of such agencies in civil defense and mobilization programs.

It also includes $21 million to carry out legislation enacted last year for sharing with the States the cost of civil defense personnel and administration, and for providing radiological monitoring devices to States and cities for training and operational use.

During the past year the administration accelerated a program of public education on the effects of fallout with the aim of stimulating preparations for fallout protection. The new obligational authority for OCDM includes $11 million for the continuing support of this program and for research and demonstration on shelters.


Expenditures for agriculture and agricultural resources are surpassed in magnitude in the budget only by outlays for national security and for interest on the public debt. The continuing heavy impact of agricultural programs on the budget is mainly the result of the continued high volume of agricultural production and our long established and now largely outmoded system of farm price supports. This system of price supports is not suited to the technically more efficient agriculture that has been rapidly developing in this country. The system provides production incentives that impede needed adjustments and encourages the production of surpluses which, in turn, result in increased Government outlays for commodity loans and purchases, and for storage and interest costs.

Legislation is urgently needed, therefore, to make further revisions in the price support program. Recommendations will be sent to the Congress in a special message on agriculture. In this budget I am recommending extension of the Agricultural Trade Development and Assistance Act of 1954 (Public Law 480) and the Sugar Act, major changes in the rural credit programs, and a reduction in the advance authorization for the agricultural conservation program.

Estimated expenditures for agricultural programs in fiscal year 1960 are $6 billion, which is 9779 million less than the estimate for the current year, but $1.6 billion more than was actually spent in 1958. The main part of the decrease expected in 1960 is in the soil bank program, because the acreage reserve portion terminated at the end of the 1958 crop year.

Total new authority to incur obligations requested for agriculture and agricultural resources in 1960 is $5.1 billion. This amount includes, among others, $2 billion to restore the capital impairment of the Commodity Credit Corporation resulting from price support losses, and billion to reimburse the Corporation for estimated costs and losses under other programs financed through that agency. All of these Commodity Credit Corporation costs and losses are reflected in budget expenditures of 1959 and prior years.

Price supports and related programs.--Expenditures for price supports and other programs to stabilize farm prices and farm income will comprise about 75% of total expenditures for agriculture and agricultural resources in 1960.

Because of the many uncertainties with respect to future production, consumption, and exports of farm commodities, it is difficult to estimate the expenditures required for price supports. The budget assumes that crop yields in 1959 will be lower on the average than the record yields of 1958, but that a part of the land that was in the acreage reserve of the soft bank will .be used to produce additional price-supported crops in the 1959 crop year. The shift of this idle land to crops will be a factor contributing to continued heavy Commodity Credit Corporation expenditures under existing laws.

Because of the technological revolution that is still increasing productivity in agriculture, farmers continue to produce more than can be marketed at home and abroad. Under our present open-end price support system, this excess production results in increased Federal loans and purchases and increased carryover inventories. Total loans and commodity inventories of the Commodity Credit Corporation on June 30, 1958, amounted to $7.1 billion. This accumulation is expected to rise to $9.1 billion by June 30, 1959, and still further to nearly $10.5 billion by June 30, 1960. To prevent continuation of huge Federal outlays, legislation will be proposed to make badly needed changes in the price support system.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

Stabilization of farm prices and farm income:

Commodity Credit Corporation: 1

Price support, supply, and purchase programs $987 $3,118 $2,880 $2,044

Public Law 480:

Present program 1,073 1,049 983 968

Proposed legislation 50

National Wool Act 57 21 81 48

Other 177 233 224 193

Soil bank--acreage reserve 620 713 1 1

Removal of surplus agricultural commodities 125 150 150 239

Sugar Act 70 68 75 72

Other 42 35 46 46

Subtotal 3,151 5,386 4,490 3,609

Financing rural electrification and rural

telephones 297 395 335 225

Financing farm ownership and operation:

Farm Credit Administration --3 4 2 2

Farmers' Home Administration 242 247 194 204

Conservation of agricultural land and

water resources:

Agricultural conservation program (including

CCC loan) 233 240 197 242

Soil bank--conservation reserve 113 141 343 360

Soil Conservation Service, watershed

protection, Great Plains program, and other 102 133 135 129

Research and other agricultural services 255 299 301 294

Total, agriculture and agricultural resources 4,389 6,775 5,996 2 5,065

1 Certain expenditures for agriculture and agricultural resources which are shown elsewhere in this document under CCC are shown in this table under the soil bank programs for which the CCC serves as disbursing agent.

2Compares with new obligational authority of $6,257 million enacted for 1958 and $5,414 million (including $1,241 million for anticipated supplemental authorizations) estimated for 1959.

Titles I and II of the Agricultural Trade Development and Assistance Act of 1954 expire on December 31, 1959. Sales of farm commodities for foreign currencies under title I of this act and donations of commodities for relief purposes under title II have provided a temporary method of coping with some of the continuing excess production of farm commodities. This budget proposes extension of titles I and II of this act for 1 additional year, with an increase from $6,250 million to $7,750 million in the authorization for the Commodity Credit Corporation to incur costs and losses under title I.

The International Wheat Agreement between wheat importing and wheat exporting countries expires on July 31, 1959. The desirability of extending this agreement is currently being studied.

Although the Sugar Act, which serves to stabilize domestic sugar prices and assure adequate domestic supplies, does not expire until December 31, 1960, it is recommended that the act be extended at this time in order to give sugar producers needed time for production planning.

Agricultural credit programs.--The Rural Electrification Administration has made a major contribution to the development of rural America. Over 95% of our farms now have central station electric service compared with 11% in 1935. Expanding use of power in the areas served by electric cooperatives, however, requires substantial amounts of new capital every year to provide additional generating capacity and heavier transmission and distribution facilities. Rural industrial and nonfarm residential consumers, which already account for about one-half of total power sales by the REA system, are increasing their power consumption much faster than are farm consumers and comprise about 75% of the new customers being added. The prospective size of new capital requirements, together with the present state of development of the rural electric cooperatives, emphasizes the need to broaden the sources of capital from which the REA system may obtain the funds to finance needed expansion.

I am again proposing that legislation be enacted to assist both electric and telephone borrowers to obtain financing from private sources.

A reduction in the levels of the direct loan programs of the Farmers' Home Administration is recommended in this budget. Direct loans for farm ownership and for soil and water conservation are supplemented with private loans insured by the Federal Government. In order to attract additional private credit, the Secretary of Agriculture, under authority of present law, has raised the interest rate to be paid on insured farm ownership and soil and water loans from 4 ½ to 5%.

Legislation will also be proposed to place the Farmers' Home Administration on a revolving fund basis of operation. Under such legislation funds received in repayment of previous loans would be available for new loans and administrative expenses.

Conservation of agricultural resources.--Payments to farmers representing a sharing of the costs of conservation practices performed during the 1959 crop year will require $197 million in expenditures and $242 million in new obligational authority for fiscal 1960. These amounts are needed to pay for the advance authorization in the 1959 agricultural appropriation act, which exceeded my recommendation. For the 1960 crop year a reduced advance authorization of $100 million is recommended. This amount, along with other public programs in support of soil and water conservation, will provide substantial incentives for farmers to continue the soil and water conservation practices required to maintain our agricultural resource base.

With termination of the acreage reserve, many farm owners are expected to place larger acreage in the soil bank conservation reserve. This shift, together with an increase in rental payments, will result in an increase in expenditures from $141 million in fiscal 1959 to $343 million in 1960. The budget provides for an upper limit of $375 million on payments in the 1960 calendar year, which is the same as was provided for 1959.

No additional funds are recommended for 1960 to initiate construction on watershed projects under the Watershed Protection and Flood Prevention Act. However, funds available from the 1959 appropriation will permit starting construction on 60 projects in 1959 and 40 more in 1960.

Research and other agricultural services.--Expenditures for research, education, and other agricultural services financed from direct appropriations will be about the same in the fiscal year 1960 as in 1959, more than double the amount spent for these purposes in 1954. Research in foreign countries to increase industrial uses of agricultural commodities will be strengthened through the use of foreign currencies obtained from the sale of farm commodities abroad.


Expenditures for the development and conservation of natural resources are estimated at $1.7 billion in 1960, approximately the same as in 1959, which itself will be higher than any previous year. About two-thirds of the expenditures in 1960 will be for the development of water resources.

Work on many resource development projects underway was accelerated in the latter part of the fiscal year 1958 to aid in economic recovery, and the higher rate of construction has continued into 1959. To carry forward projects started in 1959 and earlier years will require some increases in appropriations for 1960. In view of this record program, no funds are provided in the 1960 budget for starting construction of new water resources projects. Further, the budget contemplates stretching out construction on some projects underway where this can be done without stopping work on the projects. Other programs will be continued at or below current levels. Even with these economies, total expenditures in 1960 for resources programs will remain at a record level.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

Land and water resources:

Corps of Engineers, civil functions $699 $725 $815 $865

Department of the Interior:

Bureau of Reclamation 226 270 250 256

Power marketing agencies 42 36 41 43

Indian lands resources 46 64 61 56

Public domain and other 29 34 32 33

Saint Lawrence Seaway Development

Corporation 48 17 4

Tennessee Valley Authority:

Present programs 38 46 8 15

Proposed legislation for revenue bond

financing 2 18

Federal Power Commission 6 7 7 7

Department of State and other 5 7 6 5

Forest resources 174 194 186 192

Fish and wildlife resources 60 69 70 70

Recreational resources 69 97 83 81

Mineral resources 59 78 78 68

General resource surveys and other 43 61 51 52

Total 1,543 1,708 1,710 1 1,744

1 Compares with new obligational authority of $1,456 million enacted for 1958 and $1,943 million (including $243 million of anticipated supplemental authorizations) estimated for 1959.

Water resources.--Flood control, navigation, irrigation, and related activities of the Corps of Engineers and the Bureau of Reclamation are expected to require expenditures of $1.1 billion in 1960--an all-time high. Of this amount, an estimated $869 million will be spent on construction.

In the years after 1960, an amount of $5 billion will be required to complete going projects, and annual expenditures in 1961 and 1962 will be even higher than in 1960. In view of this extremely high level of commitments and expenditures, the budget contemplates that in some cases work on new starts, for which appropriations were made for 1959, will be limited in that year largely to pre-construction activities, including land acquisition. No additional funds are requested to start new projects in 1960.

In the interest of sound water resources programs in future years, funds are recommended to continue investigations and advance planning and to assemble basic data for future projects. I continue to believe that, as part of sound advance planning, the Fryingpan-Arkansas project in Colorado should again be considered for authorization, but no appropriation to start construction should be enacted until the overall budgetary situation is more favorable.

Research will continue on processes for converting sea water and brackish water to fresh water. Design work and site selection for demonstration plants, initiated in fiscal 1959 under legislation enacted during the past session of the Congress, will be advanced in 1960.

One of the most pressing needs for achieving a sound water resources policy is the establishment of a consistent basis for cost sharing on flood control projects. Several distinguished commissions have emphasized the disruptive effects of requiring the Federal agencies responsible for flood protection works to operate under different and confusing cost-sharing standards. Legislation will be proposed to set a uniform basis of cost sharing for all projects not yet under construction that produce identifiable flood protection benefits to local areas. Under such legislation, nonfederal interests would bear at least 30% of the cost, with the value of lands, easements, and rights-of-way contributed locally counted as part of the non-Federal share. Operation and maintenance would be a State or local responsibility.

I again urge the Congress to take action early in this session to authorize the sale of revenue bonds by the Tennessee Valley Authority in order that the Authority may meet its needs for new generating facilities. Under such legislation the Congress would retain budgetary control of the program. This budget includes a supplemental authorization for fiscal 1959 of $200 million under the proposed revenue bond legislation.

To help improve financial management, legislation will be recommended for the establishment of revolving funds for the Bonneville, Southeastern, and Southwestern Power Administrations in the Department of the Interior. These Administrations market hydroelectric power generated at certain dams constructed by the Corps of Engineers and the Bureau of Reclamation. With this legislation, part of the receipts from these power sales would be used directly, subject to such limitations as may be included in appropriation acts, for financing the operation and maintenance expenses of the marketing agencies, thus reflecting the results of these business-type operations in the budget on a net basis.

Other resource programs.--In 1960, expenditures for conserving and developing the resources of the national forests, public domain lands, and Indian lands will be somewhat lower than in 1959. Receipts from management of these lands are estimated at $300 million in 1960, an increase of $22 million over the 1959 estimate. In accordance with this administration's policy to obtain a fair return for use of federally owned resources, legislation will be proposed to revise the fee schedule for noncompetitive oil and gas leases on lands in the public domain.

Scheduled construction on Indian reservations will permit progress in providing roads, irrigation and water systems, and buildings and utilities. The major share of building construction will go for schools for Indian children who reside on lands held in trust by the United States.

Expenditures in 1960 for fish and wildlife resources will be at about the present level. An increase is recommended to acquire lands for additional wildlife areas in 1960. Also, to aid the fishing industry, the fishery loan fund will be augmented by $3 million and mortgages for fishing vessels will be insured by the Bureau of Commercial Fisheries in the Department of the Interior.

This budget provides for the continued improvement of our national parks and the development of the national forests for recreational use. A supplemental 1959 appropriation is recommended to enable the recently established Outdoor Recreation Resources Review Commission to undertake the first comprehensive survey of outdoor recreational resources and needs. It is anticipated that the Commission's findings and recommendations will provide guides for Federal, State, local, and private interests in considering how to meet the increasing demands for outdoor recreation.

Under present methods of utilizing natural gas, helium is largely being dissipated into the atmosphere. This unique gas is needed for atomic energy and missile programs as well as industrial welding and certain types of aircraft. Legislation is recommended to conserve for future use the Nation's vital helium. Maximum private participation and financing in accomplishing this objective are contemplated.


The Federal Government's labor and welfare services have grown significantly in the last decade as new programs have been enacted and old ones broadened and expanded. Budget expenditures for labor and welfare will have doubled between 1950 and 1960. Including payments from trust funds as well as budget funds, there is an almost fourfold increase, from $5.3 billion in 1950 to an estimated $19.1 billion in 1960. Much of the increase in budget outlays has been for grants-in-aid to States and local governments, which in 1960 will comprise three-fourths of budget expenditures for labor and welfare programs.

Total expenditures for these programs are estimated at $4.1 billion. This is $682 million more than was spent for these programs in 1958 but $251 million less than the estimate for the current year. The decrease from 1959 to 1960 occurs chiefly because of the expiration on April 1, 1959, of the antirecession legislation for temporary Federal unemployment compensation payments. Excluding these temporary payments, estimated expenditures in fiscal 1960 are $161 million greater than in 1959. Significant increases are provided in 1960 for the defense education program initiated in fiscal 1959 and for higher public assistance grants as required by legislation enacted by the last Congress.

While continuing to support programs necessary to stimulate greater State and local effort in areas of critical national concern, this administration has consistently endeavored to strengthen our system of government by encouraging State and local governments to assume responsibility for many public needs which they can provide well without relying on Federal aid at all, or by financing a larger share from their own revenue sources. Therefore, toward this objective, legislation is again recommended to:


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

promotion of science, research, libraries

and museums:

National Science Foundation: Basic

research $35 $60 $80 $94

Department of Commerce: Bureaus

of Census and of Standards 16 41 105 120

Other 21 32 42 26

Promotion of education:

National Science Foundation: Science

education 15 51 60 67

Department of Health, Education, and Welfare:

Defense education program 65 110 150

Assistance for schools in federally

affected areas 189 198 188 181

Vocational education and other 57 62 63 63

Department of the Interior: Indian activities 54 60 57 59

Labor and manpower:

Temporary extended unemployment

compensation 48 412

Grants for administration of employment

service and unemployment

compensation 295 322 324 329

Other 115 92 101 103

Promotion of public health:

National Institutes of Health:

Research grants and activities 187 251 254 294

Grants for health research facilities

and direct construction 14 24 27 20

Hospital construction grants 106 124 129 101

Grants for construction of waste treatment

facilities 17 30 30 20

Other 222 240 238 229

Public assistance 1,797 1,987 2,022 2,038

Correctional and penal institutions 34 41 45 59

Other welfare services 225 287 251 243

Total 3,447 4,380 4,129 1 4,196

1 Compares with new obligational authority of $4,161 million enacted for 1958 and $4,158 million (including $273 million of anticipated supplemental authorizations) estimated for 1959.

(a) Discontinue Federal grants for vocational education and for waste treatment works construction and adjust Federal revenue laws as recommended by the Joint Federal-State Action Committee so the States can assume full responsibility for these programs starting in the fiscal year 1961;

(b) Modify the provisions for aid to schools in areas affected by Federal activities;

(c) Increase State and local participation in the financing of public assistance programs.

Specific proposals will be transmitted to the Congress during this session on each of these matters and I urge the Congress to speed their enactment.

The rapid growth in our population, when added to the increasing complexity of our economy as a result of rapid technological advances, brings us face-to-face with increasingly difficult problems in the fields of health, education, and welfare. We cannot continue to deal with these problems on a year-to-year basis. We must, as a Nation, arrive at an understanding on long-term goals. At the same time we must endeavor to reach an understanding on the respective contributions that should be made by government at all levels and by private groups in order to achieve these goals. I have announced in my state of the Union message a series of studies designed to facilitate the reaching of such consensus.

Science, research, and education.--Expenditures for basic research, which provide the foundation for advancements in applied research and technology and assist in the support of our universities, will continue upward in 1960. Expenditures for the program of research grants by the National Science Foundation are expected to reach $80 million, an increase of $20 million above 1959 and more than double the 1958 amount. Basic research in other departments and agencies will continue to increase over past years. For all agencies combined, it is estimated that Federal expenditures for basic research will be about $500 million in the fiscal year 1960.

In the field of education, primarily in science and mathematics, this budget provides for increased expenditures by the National Science Foundation and the Department of Health, Education, and Welfare for programs initiated or enlarged in fiscal 1959.

The National Science Foundation programs are carried out through fellowships to individuals and grants to institutions of higher learning. They are chiefly directed toward providing encouragement and opportunity for capable students to undertake careers in science, improving courses of instruction in sciences, and providing advanced training for scientists and science teachers. For example, in 1960, 28,000 teachers-including one out of every six science and mathematics teachers in our high schools--will have the opportunity to attend institutes devoted to the improvement of teaching in these fields. Expenditures for the science education programs of the Foundation in the fiscal year 1960 are estimated at $60 million, an increase of $9 million above the 1959 level, and four times the expenditures in 1958.

The Department of Health, Education, and Welfare, under the National Defense Education Act of 1958, is initiating a program of repayable contributions to loan funds for college students and of grants-in-aid to States. The grants, which will run for 4 years, will help pay for the testing and counseling of high school students, the equipping of laboratories in the secondary schools, and related activities. The budget includes a supplemental appropriation for 1959 of $75 million to augment the $40 million already available in fiscal 1959 for the defense education program and provides $150 million in new obligational authority for fiscal 1960 pending further experience with the program.

Schools in federally affected areas.--Although education is primarily a responsibility of State and local governments, the Federal Government has an obligation to assist communities where large numbers of children of persons engaged in Federal activities impose an extraordinary burden on local school districts.

Programs to provide financial assistance to districts thus affected have been extended and liberalized several times since they were first started in 1950, despite the fact that they should be modified to assure greater and more equitable local responsibility. The Federal Government's responsibility is clear for those children whose parents both work and live on Federal property, and do not, therefore, pay local property taxes. On the other hand, it is only proper for the communities to bear the cost of educating children of those Federal personnel who, like all other residents, pay local taxes directly or indirectly for the support of public schools. In accordance with these principles, legislation will be recommended to place these aid programs on a more sound and equitable basis.

This budget includes appropriations of $181 million for these programs for the fiscal year 1960, the same amount as the appropriations provided by the Congress for fiscal 1959.

Government statistical and economic services.--The rapid growth of our economy and the effective operation of markets for goods and services requires prompt and accurate national statistical information, as well as improved organization in the Government for its analysis.

This budget recommends a major increase in funds for obtaining fundamental economic and demographic data through the 18th decennial census. It also provides for improvements in the compilation of regular price, construction, manpower, and related data to help produce more sensitive and useful information on which many private and Government policies are based. Additional price data will be collected for the Consumer Price Index by the Department of Labor, and a start will be made toward a revision of the index, which is to be completed in 5 years. Preparation of statistics on construction activities will be consolidated in the Department of Commerce. The responsibility for planning and publication of current comprehensive employment and unemployment statistics will be centralized in the Department of Labor, where the work on labor requirements will be strengthened.

Labor and manpower.--The growth of our economy depends in large measure upon the full use of our manpower resources and the effective operation of the free labor market. The Federal-State employment security system, with an estimated 54,000 State employees in 1,800 local offices, makes an important contribution to the functioning of that market. This budget provides $329 million of appropriations for grants to States for administration of employment service and unemployment insurance offices.

These grants are presently financed from an earmarked Federal tax which flows through the general budget even though it is not available for general Government purposes. Legislation is proposed to place an amount equal to the proceeds from this tax directly in a trust fund from which the necessary grants can be appropriated, and any balance used as a reserve for employment security and unemployment purposes. The administration of this program would then be financed in the same way as other social insurance programs.

Our unemployment compensation system has again demonstrated its importance in providing income for the unemployed and thereby supporting the economy while alleviating hardship. Temporary assistance of the kind provided by the Temporary Unemployment Compensation Act of 1958 is in no sense a substitute for widening the coverage of unemployment compensation and extending the duration of benefits and increasing benefit amounts under the Federal-State system. I have many times urged such action. I urge it again now with added conviction as a result of last year's experience.

I am again urging prompt enactment of effective statutory protection for workers and the public from the racketeering, corruption, and abuse of democratic processes which have been disclosed in the affairs of certain labor unions. Additional statutory protection in the field of labor-management relations will likewise be proposed to promote equity and stability in the relations among workers, unions, and employers. I shall make specific proposals in a special message on labor affairs.

Legislation is also recommended to provide equal pay for equal work, to revise the laws relating to hours of work on Federal construction projects, and to extend the coverage of the Fair Labor Standards Act so that several million more workers can receive its protection.

Last year Congress enacted legislation requiring regular reports and public disclosure of the provisions and finances of welfare and pension plans. Every effort is being made in administering the law to protect potential beneficiaries, and amendments to strengthen the basic authority will also be sought. In addition, the Administration recommended and the Congress authorized enforcement of safety codes for longshoremen and harbor workers to overcome certain hazardous conditions in the maritime industry. Supplemental appropriations for administering these new laws are recommended for 1959.

Public health.--Expenditures by the Department of Health, Education, and Welfare for health programs, including those for research and construction of health facilities in fiscal 1960 are estimated at $675 million--more than double the amount 5 years earlier.

Large and rapid increases in outlays for medical research and training by the National Institutes of Health have occurred simultaneously with expansion in related research by other agencies. In 1960, expenditures for such purposes are estimated to increase to $254 million, which is more than three times the amount 5 years ago. The impact of this expanded effort on medical schools and research institutions, as well as its implications for broader policy in education and health programs, requires careful appraisal. The Secretary of Health, Education, and Welfare is completing a review of our long-term objectives in the field of medical research and training. The results of this study in terms of program and costs, including indirect costs, will be made available to the Congress.

Another large component of the health programs consists of construction of hospitals and waste treatment works through grants, and of health research facilities through grants and direct financing. Expenditures in the fiscal year 1960 for these programs are estimated at $186 million, which is $8 million more than in the previous peak year 1959. Proposed new obligational authority has been reduced in a manner consistent with the policy outlined earlier in this message relative to public works. For hospital construction, the Congress provided a sharply increased 1959 appropriation for antirecession purposes, a sizable portion of which will be available for obligation in 1960.

The future of our health programs depends on an adequate supply of qualified personnel. Legislation is recommended to extend the programs, which expire on June 30, 1959, for training of professional nurses and for graduate training of public health personnel.

Social security and public assistance.--The Federal Government's responsibility for income maintenance should be mainly discharged through contributory, self-supporting social insurance. Today we have social insurance programs which help protect nearly all our people from loss of income due to old age, permanent disability, or death of the wage earner. The Federal old-age, survivors, and disability insurance system provides basic protection for nearly all workers; military personnel and railroad workers are covered in addition by special Federal systems; and Federal civilian employees are protected by special laws. The growth of the social security program since World War II is indicated below:


[Fiscal years]

1946 1960

actual estimate

Percent of workers covered 60% 90%

Total annual benefits paid out (in millions) $321 10,510

Average monthly number of beneficiaries (in millions ) 1.3 13.7

Despite this tremendous growth, and despite the primary responsibility of State and local governments for the economic security needs not met by social insurance, Federal expenditures for public assistance grants to States will continue to rise in 1960--chiefly because of the 1958 amendments to the Social Security Act. Legislation raising the Federal matching share or extending Federal participation to new groups has been enacted five times in the last six Congresses. The following table shows the growth in this program in the period since 1946:


[Fiscal years]

1946 1960

actual estimate

Federal expenditures (in millions) $446 $2,018

Federal share in total expenditures 44% 57%

Average monthly number of recipients (in millions) 2.8 5.7

Under the authority of recent legislation, an advisory council is being appointed by the Secretary of Health, Education, and Welfare to study the whole structure and financing of our public assistance programs. I have asked the Secretary to present to this council, at the earliest possible time, the issue of what constitutes an appropriate Federal share in these programs. I have also requested him to develop recommendations, after consulting the council, which can be presented to the Congress to increase State and local participation in the cost of the public assistance programs beginning in 1961. In this connection, I believe we must keep in mind the fact that the Federal share of such expenditures has increased to more than 57% on an overall basis and runs as high as 80% in many cases. I believe that this trend is inconsistent with our American system of government. If it continues, the control of these programs will shift from our State and local governments to the Federal Government. We must keep the financing and control of these programs as close as we possibly can to the people who pay the necessary taxes and see them in daily operation.

A basic problem in the public assistance programs is achieving the goal of helping people to help themselves return to self-support. Solution of this problem requires studies into the causes of dependency and its prevention. It also requires better training of local case workers. This budget provides for cooperative work with the States in these two areas.

Other welfare services. The rehabilitation of disabled people is rewarding in human as well as economic terms. This budget provides additional funds in 1960 for the Federal-State vocational rehabilitation program. It is estimated that services will be provided to 314,000 persons during 1960 and that the number rehabilitated will increase to 90,000.

Additional funds are included for the White House Conference on Children and Youth which I have called for 1960 so that the States, localities, private organizations, and Federal agencies can pool their knowledge of the best ways to meet the needs of our youth. Funds are also included in this budget for the 1961 White House Conference on Aging, which will provide an opportunity for all levels of Government and our many private organizations to find means through which they can contribute to a better life for our 15 million elderly citizens.

Railroad retirement insurance.--The railroad retirement system is a combination social insurance and industrial retirement program operated by the Government but self-financed from employment taxes on railroad workers and carriers. Several legislative steps should be taken to improve this system:

First, it should be placed on a sound actuarial basis. Although it is generally accepted that railroad retirement should be fully self-financed, studies made in recent years show that the system is incurring a substantial actuarial deficit. Therefore, taxes on railroad employment should be increased at the earliest possible time, without changing the status of such contributions for Federal income tax purposes.

Second, the wages covered for railroad retirement should be raised from $4,200 to $4,800 annually in line with the 1958 amendments for Federal old-age, survivors, and disability insurance. These two systems have been increasingly coordinated, particularly through the 1946 and 1951 amendments, but were not equally strengthened last year.

Finally, revisions should be made in the law governing Federal payments to the railroad retirement account for time spent by railroad workers in military service. According to the Comptroller General, the Government has already paid to the railroad retirement account an estimated $350 million more than will ever be required for the added cost of benefits resulting from military service previously rendered by railroad workers. Furthermore, the law requires Government contributions of several hundred million dollars on a I o-year installment basis to the oldage, survivors, and disability insurance trust funds for past military service, including the service of railroad workers for whom contributions have already been paid to the railroad retirement fund.

Legislation should be enacted to make the actual added cost of military service credits the basis of payment to the railroad account. This is the method already incorporated in law for military service by railroad workers before 1937 and is also the method specified for noncontributory service credits for old-age, survivors, and disability insurance purposes. Payment on this basis will save taxpayers an estimated $95 million in future appropriations for military service between 1948 and 1954. The past Government overpayments to the railroad system should be transferred to the old-age, survivors, and disability insurance trust funds as the annual installments of Government contributions to those funds become due. By providing the first such installment for 1960, this legislation will make unnecessary an $80 million appropriation from the general fund for that year.


The upward trend of expenditures in veterans' programs is expected to halt temporarily in the fiscal year 1960, mainly because declining workloads result in a decrease of $163 million for readjustment programs which have helped so many veterans of World War II and the Korean conflict to become reestablished in civilian life. Expenditures for disability and death compensation, which have increased in the last several years because higher rates were enacted, are expected to decrease somewhat in 1960 as the number of beneficiaries declines. However, expenditures for other permanent programs are continuing to increase, primarily because more veterans with disabilities not resulting from their military service are receiving hospital and medical care or pensions. The estimated total expenditures for veterans in 1960 of $5.1 billion are $110 million less than in 1959, and $62 million more than in 1958.

Most of the expenditures for veterans' benefits and services cannot be controlled by ordinary appropriation processes because the eligibility conditions and benefit rates are set by basic legislation, and payments must be made if eligible veterans apply.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

Readjustment benefits:

Education and training $699 $619 $490 $481

Loan guaranty and other benefits 92 105 107 107

Unemployment compensation (Department

of Labor) 75 44 8 8

Compensation and pensions:

Service-connected compensation 2,024 2,065 2,043 2,043

Non-service-connected pension 1,036 1,135 1,203 1,203

Burial expenses and other 44 57 61 61

Hospital and medical care, except construction 823 885 891 896

Hospital construction 33 45 55 20

Insurance and servicemen's indemnities 43 44 49 54

Other services and administration (Veterans

Administration and others):

Present program 156 199 176 177

Proposed legislation 5 5

Total 5,026 5,198 5,088 1 5,054

1 Compares with new obligational authority of $5,071 million enacted for 1958 and $5,125 million (including $122 million for anticipated supplemental authorizations) estimated for 1959.

This Nation has always shown deep gratitude and provided special benefits and privileges for its war veterans and their dependents, particularly for those veterans killed or disabled as a result of their service and for their widows and children. I am convinced that we will always continue compensation programs which reflect this policy. However, I believe that certain of our national policies and legislation governing other veterans programs should be modified. This is particularly true of the benefits provided to veterans and their families for disability or deaths not resulting from or related to military service. With veterans and their families constituting nearly half of our population, the cost of these veterans' benefits is high, and will continue to increase as our veterans advance in age.

Pensions.--We must continue veterans' pensions and increase pension rates for those who are without other resources, particularly if they have families. However, eligibility should be determined according to effective tests of need, both as to income and as to net worth, so that payments will no longer be made where the veteran or his family has adequate resources for basic necessities from other sources. Properly applied, I believe this approach can better serve those who are now in need and at the same time minimize the burden placed on taxpayers by present laws. I have, accordingly, asked the Administrator of Veterans Affairs to present to the Congress legislation both to provide more equitable treatment of needy veterans and to modernize the veterans' pension program in the light of social developments and changes.

Compensation.--Other veterans programs also merit dose continuing attention. The Veterans Administrator will expedite and broaden the work underway in the Veterans Administration on revising standards for rating of disabilities. For some of the seriously disabled veterans, whose activities are greatly restricted, increases in compensation rates are warranted. Likewise, improved rehabilitation services should be provided for those few peacetime ex-servicemen with substantial service-connected disabilities.

Hospital and medical care.--This budget includes $891 million of expenditures for hospital and medical care for veterans in 1960. The increase of $6 million from 1959 is provided to improve the staffing and quality of service in the hospitals. Provision is made for hospital and domiciliary care for an average of 140,800 beneficiaries per day.

More than 2 million outpatient treatments or examinations for serviceconnected disabilities will be provided in 1960.

An appropriation of $20 million is recommended for modernization of hospital and domiciliary facilities; with balances from prior years, this appropriation will permit expenditures of $55 million for construction and modernization.

Administration.--Administrative expenditures associated with veterans programs will be lower in 1960 than in the current year because of declining workloads and increasing efficiency. Funds are provided for improving the top management and evaluation activities of the Veterans Administration. The application of modern high-speed automatic equipment to the large volume record-breaking and clerical operations will be extended. This will produce significant administrative savings in future years.


Interest payments are estimated to rise $495 million to $8. I billion in the fiscal year 1960. These payments, almost entirely for interest on the public debt, represent more than 10% of budget expenditures.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Item actual estimate estimate for 1960

Interest on public debt $7,607 $7,500 $8,000 $8,000

Interest on refunds of receipts 74 92 87 87

Interest on uninvested funds 8 9 9 9

Total 7,689 7,601 8,096 8,096

Since the spring of 1958, market rates of interest have increased, reflecting the strong recovery of the economy. The rise in market rates requires the Treasury to pay higher interest on securities issued to refinance the heavy volume of maturing Government obligations, a large part of which were issued when interest rates were lower.

In addition to higher interest rates, the amount of interest payments depends on the size and composition of the public debt. It is anticipated that the public debt will reach $285 billion by the end of the fiscal year 1959. On the basis of the balanced budget I am presenting, the debt will be no higher at the end of 1960, although there will be a substantial temporary increase during the year.


Expenditures for general government activities are estimated at $1.7 billion in 1960, an increase of $62 million from 1959, primarily because of the volume of construction of Government office buildings started in earlier years, including the new office building for the House of Representatives.

General property and records management.--Initiation of new construction is being deferred in the fiscal year 1960 and no funds are recommended for starting new general office buildings. In 1959, a total of $208 million new obligational authority was enacted for this purpose. Hence, expenditures in 1960 for Government office buildings started in prior years will increase sharply.


[Fiscal years. In millions]


Budget expenditures new obligational

1958 1959 1960 authority

Program or agency actual estimate estimate for 1960

Legislative functions $88 $104 $136 $92

Judicial functions 44 49 51 51

Executive direction 10 13 13 13

Federal financial management 502 566 563 566

General property and records management 239 43 373 258

Central personnel management and

employment costs 140 215 211 215

Civilian weather services 39 49 51 52

Protective services and alien control 199 217 219 221

Territories and possessions and the District

of Columbia 73 94 98 128

Other general government:

Present programs 20 25 9 9

Proposed legislation for Alaska 10 10

Total 1,356 1,673 1,735 1 1,617

1Compares with new obligational authority of $1,417 million enacted for 1958 and $1,799 million (including $157 million for anticipated supplemental authorizations) estimated for 1959.

Central personnel management.--The public interest requires a comprehensive analysis and modernization of Federal pay policies and systems. The salary and benefit systems for Federal civilian employees should combine the best practices of progressive private employers with the special needs of the Government. Government policy should promote efficiency, maintain a clear relationship at all levels between pay and work performed, and assure compensation reasonably comparable with that in private employment. Although some progress has been made in recent years, the present system falls far short of meeting these objectives. Accordingly, I again urge the Congress to establish a Joint Commission on Civilian Employee Compensation in the Federal Government.

Statehood for Hawaii and home rule [or District of Columbia.--I again recommend that the Congress enact legislation to admit Hawaii into the Union as a State, and to grant home rule to the District of Columbia. It would be unconscionable if either of these actions were delayed any longer.

Alaska.--I am highly gratified to be the first President in 47 years to have had the privilege of welcoming a new State into the Union. Alaska takes its place as the equal of the other 48 States with both the privileges and the responsibilities that go with statehood. Recommendations will be transmitted to the Congress concerning certain changes needed in Federal law as a result of Alaska's admission to the Union in order to apply to Alaska the same general laws, rules, and policies as are applicable to other States.

The size of the new State, its geographic location, present Federal ownership of 99% of the land area, and Federal administration of services provided elsewhere by private enterprise and State and local governments create problems not previously encountered when new States were admitted into the Union. Furthermore, some time will elapse before Alaska can benefit fully from the revenues to be derived from public lands and other resources to be made available to the State by the Statehood Act. The Federal Government is cooperating with Alaska in developing constructive solutions to these transitional problems.

In the long-run interest of both the State and the Nation, the Federal Government should not continue special programs in Alaska which, in other States, are the responsibility of State and local governments or of private enterprise. The Federal Government should provide such financial assistance as is necessary to facilitate transfer to the State of such programs as highway construction and maintenance, airport operations, and public health services. Therefore, legislation will be proposed to authorize the payment of transitional grants to the State of Alaska in an amount not to exceed $10.5 million for the fiscal year 1960 and in declining amounts for the subsequent four years. Under the proposed legislation Alaska could choose between receiving the entire transitional grant or requesting that a portion be used for financing continued Federal operations during an interim period.

Expenditures for the transitional grants to Alaska will be largely offset by the elimination of existing special Federal programs in Alaska. Alaska will, of course, be eligible to participate in regular Federal grant-in-aid programs on a comparable basis with the other States.

Other recommendations for legislation.--The last Congress enacted legislation to cover some of my most urgent proposals for amending the immigration laws. Legislation on the remaining proposals should be promptly enacted, and the expiring authority to issue visas to certain orphans and to aliens afflicted with tuberculosis should be extended.

I also recommend that the Congress direct special attention to the creation of additional Federal judgeships as proposed by the Judicial Conference, and the strengthening of Federal laws against organized crime.

To permit further timely improvements in the structure of the executive branch of the Government, I recommend that the Congress extend the Reorganization Act of 1949, as amended, which is effective only until June 1, 1959.

I again recommend that the President be authorized to make awards for distinguished civilian achievement.


This budget charts the course our Government should take as we embark on the decade of the 1960's. Since the end of World War II, the pace of achievement and universal change has quickened with each successive year, sharpening the need for adjustments in the relations of peoples and nations to each other. In the decade facing us, the challenges to representative government will be no less than in the past; indeed, the tasks which are certain to be laid upon the executive, legislative, and judicial branches will require from each increasing vision, understanding, and wisdom.

This budget is designed to serve the needs of the Nation as a whole as effectively as possible. It rejects the philosophy that the national welfare is best served by satisfying every demand for Federal expenditures.

Our objective, as a free Nation, must be to prepare for the momentous decade ahead by entering the fiscal year 1960 with a world at peace, and with a strong and free economy as the prerequisite for healthy growth in the years to follow. This can be achieved through Government actions which help foster private economic recovery and development, and which restrain the forces that would drive prices higher, and thereby cheapen our money and erode our personal savings. The first step is to avoid a budget deficit by having the Government live within its means, especially during prosperous, peacetime periods.

The 1960 budget reflects our determination to do this.


Note: As printed above, the following have been deleted: (1) illustrative diagrams and highlight summaries; (2) references to special analyses appearing in the budget document.

Dwight D. Eisenhower, Annual Budget Message to the Congress: Fiscal Year 1960. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/234819

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