Annual Budget Message to the Congress, Fiscal Year 1968.
To the Congress of the United States:
A Federal budget lays out a two-part plan of action:
It proposes particular programs, military and civilian, designed to promote national security, international cooperation, and domestic progress.
It proposes total expenditures and revenues designed to help maintain stable economic prosperity and growth.
This budget for fiscal year 1968 reflects three basic considerations:
• In Vietnam, as throughout the world, we seek peace but will provide all the resources needed to combat aggression.
• In our urgent domestic programs we will continue to press ahead, at a controlled and reasoned pace.
• In our domestic economy we seek to achieve a 7th year of uninterrupted growth, adopting the fiscal measures needed to finance our expenditures responsibly, permit lower interest rates, and achieve a more balanced economy.
In recent years, the American economy has performed superbly. Since 1963, our Nation's output has risen at an average rate of 5.5% a year. 5.3 million more people are employed and 1.2 million fewer unemployed. Industrial capacity has grown by 18%, and far less of it is idle than was the case 3 years ago.
During this past calendar year alone:
• Our Nation's gross national product-apart from price changes--has grown by nearly 5.4%.
• The unemployment rate has remained at or below 4% for the first time in 13 years.
• More than 3 million additional jobs were found in nonagricultural employment, the largest yearly gain experienced since 1942.
• Corporate profits and personal income have each grown about 8% to record levels.
We have at the same time become engaged in a major effort to deter aggression in Southeast Asia. Some $19.9 billion of the Nation's resources will go to support that effort in the current fiscal year and $22.4 billion in 1968. This past year our economy met these requirements with minimum strain and disruption.
We have also embarked upon a series of new programs to lift the quality of American life in the fields of health, education, urban development, pollution control, and the war on poverty. Yet the productivity and vitality of our economy is such that the total Federal budget in 1968, including the full costs of the Vietnam conflict, the new programs, and all of the various Federal trust funds, will account for only 1 1/2% more of our gross national product than it did 3 years ago. Since the gross national product rose sharply over these 3 years, we have been able to meet our increased commitments abroad, move forward with urgent social programs at home, and still provide a massive expansion in goods and services available for private consumption and investment.
During the year and a half since the decision to send troops to Vietnam, consumer prices have risen 4.5% in spite of efforts to hold them down. We have, nevertheless, had considerably better success than in similar periods during World War II and the Korean conflict. Then, prices rose 13.5% and 11% respectively, even with the imposition of price and wage controls which we have avoided.
The economic performance of the past 3 years did not just happen. It grew out of the ingenuity, hard work, and imagination of all parts of American society. But the one element which provided a catalyst for all the rest was the imaginative and flexible use of Federal fiscal policy.
In 1964, and again in 1965, tax reductions were enacted which gave a strong stimulus to the economy. Idle capacity came into operation, new capacity was built, and both the numbers and productivity of the Nation's workforce rose sharply.
In late 1965 and early 1966, however, as the economy rapidly approached full operation, inflationary pressures add to develop.
On two occasions, I proposed, and the Congress promptly enacted, tax changes aimed at dampening those pressuree. At the same time I made every effort to postpone, stretch out, or eliminate all but the most essential Federal expenditures. Cutbacks totaling over $5 billion in program levels and $3 billion in expenditures are being undertaken by Federal agencies during the current year. These actions contributed to a welcome moderation of inflationary pressures in the latter part of 1966.
FISCAL PROGRAM FOR 1968
In the budget for 1968, I am again proposing a fiscal program tailored to meet responsibly the needs of an expanding economy. This program will require a measure of sacrifice as well as continued work and resourcefulness.
In the year ahead, defense expenditures will continue to rise as we carry out our obligations in Vietnam. After a rigorous review of civilian programs and a sharp paring of spending requests, a modest increase in domestic expenditures will be required as we press forward to meet our obligations at home. Equity also demands that we increase substantially social security benefits for our older citizens so that they share in the Nation's growing income which their own past work and investment helped to bring about. And finally, during the coming year, we must take every reasonable step to permit a continuation of the move toward easier monetary conditions and lower interest rates which is now clearly under way.
Under these circumstances, I am proposing a temporary 6% surcharge on both corporate and individual income taxes. I also ask that individuals in the lower income brackets be exempt from the surcharge. The tax should remain in effect for two years, or for such period as may be warranted by our unusual expenditures in Vietnam. I will not hesitate to recommend an earlier expiration date, however, if the fiscal requirements of our commitments in Vietnam permit such action. In addition, I recommend legislation to provide a further acceleration of certain corporate tax payments.
With these new measures, and the expenditures I am proposing, the Federal budget deficit as measured in the national income accounts will be $2.1 billion in fiscal year 1968, compared to $3.8 billion in fiscal year 1967.
The national income accounts budget is the measure developed and used for over three decades by economists and fiscal experts to judge the impact of the Federal budget on the flow of income and production in the economy. Its measures of total Federal receipts and expenditures are the same as those used in recording the receipts and expenditures of business firms and individuals. Together with data on business and individuals, the national income accounts budget is used to build up official statistics on gross national product and national income.
Unlike the more traditional administrative budget, the national income budget: • includes the large expenditures and receipts of the Federal Government's trust funds, but excludes Federal loans and receipts from the sale of loans, since these are not recorded as income or expenditures in the accounts of business firms or individuals. I am emphasizing the national income accounts as a measure of Federal fiscal activity because the traditional administrative budget is becoming an increasingly less complete and less reliable measure of the Government's activities and their economic impact. For example, trust fund-financed activities not reflected in the administrative budget now approximate one-third of that budget. More specifically, the fiscal year 1968 administrative budget excludes $48.1 billion of trust fund receipts and $44.5 billion of trust fund expenditures.
In addition, the treatment of lending as equivalent to spending in both the administrative and cash budgets is not suitable for an analysis of the budget's impact on the flow of national production and income.
To permit a higher 1968 budget deficit than the $2.1 billion involved in my fiscal recommendations would, I believe, be unacceptable. We would run substantial risks of:
• choking off the much-desired move toward lower interest rates by placing too much of our stabilization effort on the shoulders of monetary policy, and
• renewing inflationary pressures, particularly in the latter half of this year. On the other hand, to seek a lower deficit or a surplus through a more restrictive fiscal program would be unwarranted and sell defeating under present economic conditions. Such a fiscal policy could depress economic activity, reduce the incomes of individuals and corporations, and thereby fail to secure the revenues it was designed to achieve.
The economy, the budget, and the aims of our society would be jeopardized by either a larger tax increase or by large slashes in military or civilian programs. I have re. viewed these programs carefully. Waste and nonessentials have been cut out. Reductions or postponements have been made wherever possible. The increases that are proposed have been carefully selected on the basis of urgent national requirements.
The Congress through the process, will, of course, subject these grams to a searching examination. I welcome that examination. But it is my judgement that major cuts cannot be made without serious impairment to vital national objectives--in defense, in education, in health, in the rebuilding of our cities, and in the attack on poverty.
SUMMARY OF FEDERAL RECEIPTS AND PAYMENTS
[Fiscal years. In billions]
1966 1967 1968
EXCESS OF RECEIPTS (+) OR PAYMENTS (--)
This Nation is healthy and growing. It can--and, I believe, must--continue to move forward:
• in the defense of freedom against agression;
• in the search for international peace and cooperation; and
• in the effort to improve the quality of American life.
At this juncture in our history we have two choices:
• to stand still and mark time; or
• to press ahead responsibly and confidently.
For my part, I have chosen the latter course. That choice is reflected in my budgetary and fiscal proposals.
Federal expenditures, as measured in the national income accounts will rise from $153.6 billion in fiscal year 1967 to $169.2 billion in 1968. That increase is composed of four major elements:
• $5.8 billion for Vietnam and other national defense outlays;
• $6.2 billion in benefits under the Federal Government's social security and other trust funds, two-thirds of which results from the new social security legislation I am proposing;
• $1 billion for the cost of military and civilian pay increases, to keep abreast of rising salaries in private industry; and
• $2.6 billion for all other programs of the Federal Government.
Federal revenues will increase more rapidly than expenditures, from $149.8 billion in fiscal year 1967 to $167. 1 billion in 1968, reflecting both the growth in the etonomy and the effect of the tax legislation I am recommending. The Federal deficit, as measured in the national income accounts will, therefore, decline between 1967 and 1968 from $3.8 billion to $2.1 billion.
While the national income accounts budget is the most appropriate measure of the overall economic impact of the Federal budget, a discussion of individual Federal programs is best carried out in terms of the more conventional administrative budget and the various Federal trust funds.
Administrative budget expenditures will amount to $126.7 billion in 1967 and $135.0 billion in 1968. In these 2 years, revenues in the administrative budget are estimated to rise from $117.0 billion to $126.9 billion. As a result, the budget deficit will fall from $9.7 billion in the current fiscal year to $8.1 billion in 1968.
Administrative budget expenditures in fiscal year 1967 are $13.9 billion higher than the expenditures I estimated in my budget message a year ago. $9.6 billion of the increase is accounted for by the enlarged military program. Another $3.0 billion results from the impact of tight money on the Federal budget, and $1.3 billion from expenditure re-estimates, as workloads increased in such programs as public assistance, Medicare, and the postal service. Potential further expenditures of $2.6 billion, from Congressional additions to my 1967 authorization and appropriation recommendations, were roughly offset by the budget reductions I instituted last fall. Of the $3 billion expenditure reductions, $2.6 billion will occur in administrative budget programs and about $0.4 billion in the trust funds.
In 1968, defense outlays will account for $75.5 billion, or 56%, of the total budget. Of the remaining expenditures, some $29.4 billion, or 22%, are spent on programs under which payments are fixed by law or are otherwise uncontrollable--interest on the public debt, veterans compensation and pensions, public assistance, Federal general revenue contributions to Medicare, and the like. Another $15.3 billion or 11% will be spent in 1968 to complete contracts or obligations entered into in prior years--the purchase of mortgages under earlier commit, ments, the completion of construction begun in 1966 or 1967, and so forth.
ADMINISTRATIVE BUGET EXPENDITURES
[Fiscal years. In billions]
1966 1967 1968
National defense $57.7 $70.2 $75.5
Total administrative budget expenditures 107.0 126.7 135.0
The remaining $14.9 billion, or 11% of the budget, may be considered as "controllable" expenditures in 1968. And even these include such indispensable programs as law enforcement, the collection of taxes and customs, the upkeep of our national parks, and the operation of the Nation's air navigation facilities.
In the 1968 budget I have sought to recommend increases only where these are vitally necessary to meet the needs of a growing society. I have given particular, but selective, attention to programs designed to bring into the mainstream of American life those to whom opportunities are now denied.
At the same time, my 1968 budget incorporates substantial economies in tions. New projects under many construction programs will be held to a modest level, well below the average of prior years and below the level to which they can rise when our fiscal problems are less urgent
By 1966, Federal civilian agencies had achieved improvements in operations which! netted a saving in that year of $1.7 billion compared to their level of efficiency 2 years earlier. The Defense Department's Cost Reduction Program begun in 1961 yielded savings of $4.5 billion in 1966. Those efforts will continue in fiscal years 1967 and 1968.
The effect on the Federal budget of selective expansions in high priority programs combined with economies in operation are summarized in the accompanying table.
In the 1968 budget I am proposing to sell $5 billion in participation certificates. These certificates are a means by which Federal credit programs can be financed, and point up the role of the Federal Government as an intermediary, assisting borrowers to find sources of credit. The sale of these certificates also has the advantage of making the cash and administrative budgets more closely akin to the national income accounts budget since, in effect, it removes the impact o£ new lending from the cash and administrative budget totals.
CIVILIAN ADMINISTRATIVE EXPENDITURES
1966 1967 1968 Change,
Total civilian $49.3 $56.5 $59.5 +$3.0
My detailed budget plans provide for the possible sale of $5,750 million of these certificates. The overall budget totals, however, make an allowance for a possible shortfall of $750 million in the actual sales of these certificates. While this tends to raise the reported deficit in the administrative budget, I have made such an allowance in order to present more conservative estimates to the Congress, taking into account the uncertainty of future conditions.
NEW OBLIGATIONAL AUTHORITY
New obligational authority recommended for fiscal year 1968 in the administrative budget totals $144.0 billion, This is an increase of $4.4 billion over the current estimate for fiscal year 1967, of which $2.5 billion is for the Department of Defense and the military assistance program combined.
Of the total new obligational authority estimated for 1968, the Congress will have to act this year on $126.5 billion. The remaining $17.5 billion will become available under "permanent" authorizations without further congressional action; interest on the public debt represents 80% of this amount. Most of the $50.2 billion in new obligational authority estimated for 1968 for trust funds represents revenues from special taxes which are also appropriated automatically.
Apart from Defense and military assistance, the 1968 new obligational authority recommended for Congressional action in the administrative budget will amount to $51.3 billion. The proposed amounts result from a thorough evaluation and review of program levels and needs and have been held to the mimimum that will assure orderly progress in meeting national program objectives.
Major increases in new obligational authority, other than for the Department of Defense, include:
NEW OBLIGATIONAL AUTHORITY
[Fiscal years. In billions]
1966 1967 1968
Total authorizations requiring current action by Congress:
• $1.2 billion for the Department of Housing and Urban Development, including the newly-enacted model cities program.
• $1.0 billion for proposed civilian and military pay increases.
• $0.9 billion for the Department of Health, Education, and Welfare, mainly for public assistance, education, Medicaid, and various other health activities.
• $0.6 billion for the permanent appropriation for interest on the public debt.
Major decreases include:
• $1.8 billion for the Department of Agriculture, largely due to the reduced capital needs of the Commodity Credit Corporation and the proposal to establish revolving funds for the Rural Electrification Administration.
• $1 billion for the Tennessee Valley Authority since its needs for bond-issuing authority for the next several years were met by an increase of this amount granted in fiscal year 1967.
• $0.6 billion for the Post Office, reflecting proposed postal rate increases.
The 1967 estimate in the administrative budget includes $14.3 billion in recommended supplemental appropriations which the Congress is being requested to enact this year. Of this total, $12.3 billion is for support of military operations in Southeast Asia. The remaining supplemental amounts are needed mainly (1) to provide adequate financing for certain relatively uncontrollable costs which are based on eligibility and demand for services under provisions of existing law--such as for public assistance grants, postal services, and veterans' compensation and pensions and (2) to cover part of the cost of military and civilian pay increases and new programs which were enacted last year but for which appropriations were not provided. The estimates presented in this budget reflect fully this additional new obligational authority for the current year and the related expenditures.
FEDERAL PROGRAMS AND EXPENDITURES
Military forces able to defend the cause of freedom in Vietnam and to counter other threats to national security require substantial resources.
Yet we cannot permit the defense of freedom abroad to sidetrack the struggle for individual growth and dignity at home. Under my budget proposals, we will move forward at a reasonable rate the programs to broaden opportunities for the poor or disadvantaged and continue the steady advance in their effectiveness achieved in the last 3 years.
To assure that the budget fully covers all the costs which we might reasonably expect in the coming year, the total includes $2.2 billion in special allowances to provide for (1) proposed increases in the pay of military and civilian personnel, including postal employees, (a) the possibility of some shortfall in planned sales of financial assets, and (3) unforeseen contingencies and the possible costs of programs on which definite decisions have not yet been made, such as the development of a prototype supersonic air transport and a nuclear space rocket.
PAYMENTS TO THE PUBLIC
[Fiscal years. In billions]
1966 1967 1968
Administrative budget expenditures:
Total, administrative budget expenditures 107.0 126.7 135.0
Trust fund expenditures:
Total trust fund expenditures 34.9 40.9 44.5
Intragovernmental transactions and other adjustments
Total payments to the public 137.8 160.9 172.4
The highlights of the proposed Government program for 1968 follow:
NATIONAL DEFENSE.--Today, our military requirements are dictated by two fundamental realities. We must continue to counter aggression in South Vietnam. We must also continue to enhance our ability to meet changing threats to our freedom and security elsewhere. The 1968 budget will insure that our forces remain equal to both these tasks.
Though small in relation to the Nation's total economic activity, the cost of honoring our commitment to South Vietnam is nevertheless substantial. Expenditures necessary to support military operations in Southeast Asia will total $21.9 billion in 1968, about three-tenths of budget expenditures for national defense. A year ago we were in the midst of a rapid buildup of our forces in Vietnam. Rather than submit a budget to the Congress based on highly uncertain estimates, I requested funds sufficient to finance the conflict through fiscal year 1967. At the present time the situation is different. While unforeseen events can upset the most careful estimate, we are in a much better position to determine our future requirements in Vietnam. As a consequence, my 1968 budget provides for those requirements on a continuing basis, including the possibility of an extension of combat beyond the end of the fiscal year.
In 1968, we will:
• Continue intensive development of Nike-X but take no action now to deploy an anti-ballistic missile (ABM) defense; initiate discussions with the Soviet Union on the limitation of ABM deployments; in the event these discussions prove unsuccessful, we will reconsider our deployment decision. To provide for actions that may be required at that time, approximately $375 million has been included in the 1968 budget for the production of Nike-X for such purposes as defense of our offensive weapon systems.
• Maintain our decisive strategic superiority by initiating procurement of the advanced Poseidon submarine-launched missile, improving our present strategic missiles, and further safeguarding our capacity to direct our forces in the event of attack.
• Provide our forces in Vietnam with all the weapons and supplies they need and add to our war reserves at the same time.
• Add to the mobility and effectiveness of our general purpose forces by increasing the firepower of our ground forces, enlarging our helicopter strength, pursuing a vigorous shipbuilding and conversion program, and purchasing additional modern tactical aircraft.
• Increase our airlift and sealift capabilities by further procurement of the giant C-5A transport plane, and procurement of 5 fast-deployment logistics ships.
• Continue the vigorous research and development programs vital to maintaining the most modern, versatile, and potent forces in the world.
These sizable increases in our capabilities for nuclear, conventional, or countersubversive conflict are necessary and prudent. Nevertheless, security needs will continue to be met without waste or extravagance. Our defense programs must be conducted as efficiently and economically as possible. In 1968, the Defense Cost Reduction Program will continue to produce significant savings.
INTERNATIONAL AFFAIRS AND FINANCE.--In the long run, greater opportunities and security for our own citizens will be possible only if other peoples also share in progress toward a better and more secure life. To this end, our international programs in the coming year will emphasize helping the less developed nations to increase their food production, expand their educational opportunities, and improve the health of their citizens.
Based on a thorough review of our economic assistance objectives and programs, I will recommend new legislation and specific actions to:
• Require more effective self-help measures by recipient countries as a condition for U.S. aid;
• Increase the amount of assistance for the key sectors of agriculture, health, and education;
• Support regional arrangements and make greater use of multilateral channels through which other nations cooperatively share the costs of economic development;
• Encourage greater participation by private enterprise in the development process; and
• Concentrate our aid in those countries where successful development is most probable.
We are gratified by the achievements of the Alliance for Progress and shall continue to work closely with our hemispheric neighbors to help build schools and homes, create new jobs, and improve health and nutrition. But much remains to be done. I shall be meeting shortly with the chief executives of the other American governments to review the goals and progress of the Alliance. At that time we will consider new cooperative programs to accelerate growth in critical areas.
In South Vietnam, we will increase our economic assistance for projects directly aiding people in the villages and hamlets. This stepped-up effort is urgently needed to help these people construct their farms and houses in safety and build the foundations for a better life in that strife-torn country.
To pursue the War on Hunger more effectively, our assistance to agriculture and our Food for Freedom shipments will encourage and support efforts by the developing nations to increase their own food production. In cooperation with other nations, we will also carry out a pioneer program to find ways to utilize the vast unexploited food resources of the sea.
The International Development Association, which is managed by the World Bank, has proven an effective means of international cooperation to promote economic development. Its current resources, however, will soon be exhausted. Following the successful conclusion of negotiations between the IDA and the developed nations of the world, I will request authorization for the United States to pledge its fair share towards an additional contribution to this organization in ways consistent with our balance of payments policy. I also intend to propose legislation which will permit us to join other members in a replenishment of the Inter-American Development Bank's Fund for Special Operations.
To enable the Export-Import Bank to fulfill its role of assisting our export trade, which is so vital to our balance of payments, I am recommending that its lending authority be increased and its life extended for another five years.
SPACE RESEARCH AND TECHNOLOGY.--In 1961, this Nation resolved to send a manned expedition to the moon in this decade. Much hard work remains and many obstacles must still be overcome before that goal is met. Yet, in the last few years we have progressed far enough that we must now look beyond our original objective and set our course for the more distant future. Indeed, we have no alternative unless we wish to abandon the manned space capability we have created.
This budget provides for the initiation of an effective follow-on to the manned lunar landing. We will explore the moon. We will learn to live in space for months at a time. Our astronauts will conduct scientific and engineering experiments in space to enhance man's mastery of that environment.
The Surveyor and Orbiter projects, in photographing the moon, have demonstrated dramatically the value of unmanned spacecraft in investigating other objects in the solar system. Accordingly, we are proceeding with the development of the Voyager system for an unmanned landing on Mars in 1973. We will also continue other unmanned investigations nearer the earth.
In recent years the National Aeronautics and Space Administration and the Atomic Energy Commission have jointly undertaken the development of nuclear rocket propulsion technology. We are now considering whether that effort should be expanded to the development of the rocket itself. The overall budget totals allow for the possibility of proceeding if an affirmative decision is reached.
These new ventures are the result of careful planning and selectivity. We are not doing everything in space that we are technologically capable of doing. Rather, we are choosing those projects that give us the greatest return on our investment.
To support these new projects and to maintain our existing programs, an increase of $82 million is requested in new obligational authority for the National Aeronautics and Space Administration for 1968. Expenditures, however, will decline by $300 million in the coming year, primarily because of reduced requirements for the manned lunar landing program.
AGRICULTURE AND AGRICULTURAL RESOURCES.--Rising domestic and foreign demands have highlighted the importance of maintaining a healthy and productive agricultural economy. During the past year our surplus commodity stocks have been substantially reduced. As a result, restrictions on the production of wheat and feed grains have been eased in order to allow the Nation to maintain adequate reserves.
The increasing demand for agricultural commodities provides a favorable outlook for many of our commercial farmers. However, a large number of rural people cannot achieve an adequate income even with a prosperous agriculture. Labor requirements on the Nation's farms have declined drastically in the last quarter of a century. Unemployment and underemployment in rural areas have resulted. Consequently, rural communities are often unable to provide and maintain essential public servicesgood schools, modern hospitals, and other necessary community facilities--to meet today's needs.
I have directed the Secretary of Agriculture to take the lead in helping rural people achieve a quality of living comparable to other segments of our population. To this end, the Department of Agriculture will work with State and Federal agencies and with local groups to help rural communities make the best use of all existing governmental programs. In addition, legislation is needed to encourage establishment of pilot multi-county development districts.
To assure modern and efficient electric and telephone services for rural people, legislation should be enacted promptly to provide new sources of private financing for Rural Electrification Administration borrowers, while minimizing Federal outlays.
NATURAL RESOURCES--My recommendations in this budget for natural resource conservation and development will help meet the most urgent needs of our people and the requirements for economic growth. Action must be taken now to:
• Reduce water pollution in our lakes, rivers, and estuaries.
• Insure an adequate supply of pure water.
• preserve scenic areas of irreplaceable natural beauty--scenic rivers, the Redwoods, North Cascades in the State of Washington, and the historic Potomac Valley.
• Forestall the escalation of land prices in the acquisition of Federal lands for recreational use.
The continued pollution of our rivers, lakes, and estuaries is one of the major resource problems facing this Nation. The transfer last year of the Federal Water Pollution Control Administration to the Department of the Interior now permits a major attack on the problems of water pollution in entire river basins. In 1968, the Department will also give major emphasis to reviewing and approving State standards required by the Water Quality Act of 1965.
Many regions of the country are facing increasingly critical problems of adequate supply and efficient use of water. I urge prompt enactment of legislation to establish a National Water Commission to assess our major water problems and develop guidelines for the most effective use of available water resources.
I also recommend legislation to enable the Department of the Interior to participate with the Metropolitan Water District of Southern California and the Atomic Energy Commission in developing and constructing a large prototype power and desalting plant. This will be a major step toward the development of economical projects for con-. version of seawater to fresh water.
This budget provides for continued investment in the development and improvement of our vital water resources. Last fall, however, in order to help relieve inflationary pressures on the economy, I directed Federal agencies to slow down or defer construction projects wherever possible in fiscal year 1967. For 1968, I am recommending that a small number of new water resources projects be started. Advance planning will begin on a number of projects to be constructed in later years.
Authorized recreation areas must be acquired as promptly as possible to avoid speculative increases in land prices. Accordingly, I propose that an advance appropriation be made to the Land and Water Conservation Fund for this purpose.
A significant advance in research on the fundamental structure of matter will be made possible with the construction of a 200 billion electron volt accelerator by the Atomic Energy Commission. This research machine, to be located near Chicago, Illinois 1 is expected to provide U.S. physicists with the world's highest energy proton beam. Design funds are provided in the 1968 budget.
1 Wheaton, Illinois.
COMMERCE AND TRANSPORTATION.--A strong and balanced national economy requires:
• Accurate and timely information;
• Efficient transportation facilities;
• Rapid communications; and
• Special aids to lagging regions and sectors of the Nation.
Accordingly, the Federal Government will augment significantly its investment in commerce and transportation programs in the year ahead. The 1968 budget provides funds to:
• Increase technical services and other aids to business;
• Undertake a special sample survey to pinpoint the social and economic needs of our people;
• Give added impetus to our efforts to encourage travel to the U.S. and our export promotion programs to improve our balance of payments;
• Support a World Weather Watch to improve long-range weather forecasting;
• Explore means for modifying the weather, and examine the implications of this new science;
• Strengthen our effort to encourage regional economic development; and
• Improve our transportation facilities and services under the leadership of the new Department of Transportation.
Our transportation programs in 1968 wall include an all-out attack to reduce the alarming carnage on the Nation's highways, using the tools made available in the highway safety legislation enacted last year. We are currently considering the construction of a prototype civil supersonic transport. The allowance for contingencies is adequate to cover the possible costs of this effort, should an affirmative decision be made to proceed.
Special emphasis will be placed on improved management and acquisition of modern facilities and equipment to increase the efficiency of our postal system, one of the largest business operations in the world. To provide improved services, to cover proposed pay increases for postal workers and largely offset the remaining postal deficit, a postal rate increase is both necessary and desirable. As required by law, I am proposing such an increase. The budget reflects $700 million in postal revenues from this source.
HOUSING AND COMMUNITY DEVELOPMENT.-- The problems of the American city are great and vexing. They involve the entire physical and social fabric of deteriorating central cities and rapidly growing suburbs. Trapped in the declining centers of our cities are the poor and the victims of discrimination--who lack the resources to solve their problems without outside help.
This budget provides funds to help meet these needs. Outlays for grants and loans for programs directed specifically at community development will total an estimated $1.3 billion in 1968, triple the level in 1963. Moreover, other programs providing aid to urban areas will make substantial additional amounts available.
I have directed that community development programs emphasize aids for the poor. The recently-enacted program of rent supplements is an essential element in helping the needy obtain adequate housing facilities and increasing their freedom of choice as to where they can live. To carry on this important program, I am requesting the full amount authorized for rent supplements for 1968, and urge the Congress to act favorably on this request.
To be effective, concerted attacks on city problems must be planned by the cities themselves. The new model cities program is now the primary incentive provided by the Federal Government to accomplish this objective. Special grants will be made to help transform entire blighted areas into attractive and useful neighborhoods. To receive these grants, cities must:
• Develop imaginative and comprehensive plans of action; and
• Enlist Federal, State, local, and private resources in a concerted effort to bring their plans to fruition.
Many cities are now planning their programs. It is essential that the funds I am requesting for these special grants be available in 1968 when these cities are ready to begin the task.
Under a new program enacted last year, further encouragement will be given to the planned development of entire metropolitan areas. Supplementary Federal grants will be made under 10 Federal aid programs in those metropolitan areas which demonstrate that they are carrying out through joint planning efforts all activities which affect metropolitan development. I urge enactment of the appropriations requested for this program.
One of the most serious difficulties in solving city problems is our inadequate knowledge about the roots and nature of these problems. I urge that sufficient funds be provided the Department of Housing and Urban Development to start a systematic research effort to acquire needed information on the causes and possible solutions for the housing and urban problems which we face today.
To be effective, our aids for community development must be put to use by competent, well-trained local employees. I am therefore requesting the appropriation of funds to initiate the authorized program for grants to States to help them provide training for State and local employees in community development programs.
The problems of the city are many; the resources, limited. More resources are essential if we are to build better cities for the future. We must start now to provide them.
HEALTH, LABOR, AND WELFARE.--The 89th Congress enacted a far-reaching series of programs to improve the health and wellbeing of American citizens--particularly the less fortunate.
In the year ahead we must proceed to carry out these programs effectively, and seek the revisions and additions needed to maintain our progress. This budget so provides.
Health .--The specter of inadequate health care is being removed from the aged and needy as we move ahead with the new Medicare and Medicaid programs, and with other activities aimed at bringing comprehensive modern treatment to all. With expanded Federal aid, more medical resources will become available, including medical facilities and qualified health personnel. The Nation's system for providing health care-public and private--will be improved to make it more efficient and to insure use of the latest advances of medical science. In 1968, we will:
• Strengthen our partnership with the States in health planning and in using broader and more flexible grants to fill gaps in health services.
• Begin operating the new regional medical programs which will narrow the gap between the advanced methods used at university hospitals and day-to-day medical practice in the community.
• Continue research and development to prevent or control diseases.
• Expand programs to increase efficiency in hospitals, clinics, nursing homes, and neighborhood health centers.
Additional measures are needed and will be proposed to:
• Extend Medicare to disabled workers.
• Expand child health services, including dental care.
• Reduce the menace of air pollution which is a threat to the health and safety of our citizens.
Labor and manpower.--My budget proposals provide increased opportunity for the disadvantaged to participate in and contribute productively to our expanding economy.
• I am recommending funds for 280,000 trainees under the Manpower Development and Training Act, an increase of 30,000 over the current year.
• Programs under that Act and those of the United States Employment Service will continue to emphasize serving the severely disadvantaged.
In addition, under programs financed by the Office of Economic Opportunity, 355,000 jobs and training will be made available for youths in the Neighborhood Youth Corps. An estimated $328 million will be provided for expanded work-training programs, primarily for adults, with special emphasis on reaching the hard-core unemployed and underemployed in slum areas.
Economic opportunity programs.--Poverty remains an ugly scar on the Nation's conscience. The war against it will be long, difficult, and costly. But we are making headway.
The $2.1 billion of new obligational authority included in the 1968 budget for the Office of Economic Opportunity will enable us to expand programs which help people rise out of poverty. The increase of $448 million over the 1967 level will be used largely for community action programs, for training programs, and for new Head Start follow-up efforts.
In addition to those helped by the worktraining programs described above, the budget will provide for:
• 737,000 children in Head Start.
• $135 million for improving primary school services as a follow-up to Head Start.
• 38,000 enrollees in the Job Corps.
• 6.5 million persons to be served through other activities by 1,100 community action programs.
Benefits and services which aid the poor are being provided by a number of Federal agencies. In total, 10 agencies will devote $25.6 billion in 1968 to help the more than 31 million poor people in our Nation. This represents an increase of $3.6 billion or 16% from the current year, of which $2.0 billion will be from trust funds.
Social security and public assistance programs.--More than a third of our citizens receiving social security exist on incomes below the poverty level. Cash assistance to welfare recipients generally fails to meet even State standards of need, which are often unrealistically low. And many of the poor are not even eligible for this meager assistance. As a step toward correcting these inequities, I will propose legislation to:
• Provide an overall 20% increase in Social Security benefits for retired workers and their survivors with a 59% increase at the bottom of the scale;
• Assure that the public assistance gram provides incentives for work training and more nearly meets nomic need;
• Assure public assistance support and work training opportunities for unemployed fathers in impoverished families with dependent children.
FEDERAL AID TO THE POOR
[Fiscal years. In billions]
1960 1963 1967 1968
Education and training $0.3 $0.3 $3.1 $3.8
EDUCATION.--OUR Nation's greatness depends upon the full development of the talents and abilities of its citizens.
The 89th Congress wrote a memorable record in education legislation. The Elementary and Secondary Education Act of 1965 and the Higher Education Act of 1965 marked a significant advance in Federal support to help improve and enlarge educational opportunities at all levels. Our task now is to use this authority in an imaginative, creative, and responsible way.
New obligational authority for education will total $5.2 billion in 1968, $622 million more than in 1967. These funds will be used to:
• Assist the disadvantaged by increasing grants to improve elementary and secondary education for about 8 1/2 million less fortunate children from low-income families and by providing new grants for education of handicapped children;
• Encourage creative change through an increase of almost 80% in grants for supplementary centers and other special projects designed to introduce better teaching and innovation in our educational programs.
• Widen higher educational opportunities by providing more than $1.1 billion in scholarships, loans, and part-time work for students, a 22% increase over 1967; and
• lrnprove teacher training through additional funding and amendments providing for a more flexible use of legislative authority. I will propose legislation to:
• Extend and enlarge the Teacher Corps;
• Initiate experimental projects to im-prove vocational education, particularly for the disadvantaged and those not planning to attend college;
• Extend and expand Federal support for educational television; and
• Strengthen education program planning and evaluation by State governments and localities.
VETERANS BENEFITS AND SERVIES.--This Nation continues to recognize a particular obligation to those who have served in the Armed Forces. Special programs have long been available to aid the veteran and his dependents in the event of disability, death, ill health, or old age.
More recently, following World War II and the Korean conflict, extensive programs were enacted to assist the veteran in his readjustment to civilian life. In the second session of the 89th Congress, this type of assistance was again provided, through enactment of the third major veterans readjustment benefit program or "GI bill." Upon leaving the Armed Forces, young men of recent military service will find their readjustment made easier through the availability of substantial education, training, medical, and home loan benefits.
In addition, the 1968 budget continues the improvements of the past few years in hospital staffing and the provision of new medical services and facilities. The objective is to provide both a higher quality of care and to reduce the duration of hospitalization, enabling the veteran to return sooner to iris home and job.
Certain gaps currently exist in the benefits available to veterans of service in Vietnam relative to those for veterans of previous active military operations. I will propose legislation to fill these gaps so that fair and equitable treatment is provided for those who bear the brunt of the struggle in Southeast Asia. I will also submit proposals to the Congress to remove or modify certain longstanding but outmoded or inequitable provisions of law governing veterans programs.
GENERAL GOVERNMENT.--THIS Administration is determined to help our States and cities reduce crime in America. Significant strides have already been taken. The Law Enforcement Act of 1965, the Bail Reform Act of 1966, and the Prisoner Rehabilitation Act of 1965 have helped to strengthen law enforcement agencies, establish more equitable bail procedures in Federal courts, and improve the effectiveness of prisoner rehabilltation programs.
However, still greater efforts must be made. In 1965, I appointed a Commission of prominent citizens to study law enforcement and the administration of justice. With the aid of its findings, I will propose legislation for a major new program to help strengthen State and local government law enforcement and criminal justice systems.
District of Columbia citizens should have a voice in their own affairs. Our commitment to democracy demands no less. I again urge the Congress to grant home rule to the Nation's capital.
On the basis of the receipts and expenditures estimated in this budget, the public debt on June 30, 1967, will be $327.3 billion, and will increase to $335.4 billion on June 30, 1968.
The temporary limit of $330 billion on the public debt under present law will expire on June 30, 1967. If no action is taken, the limit will revert on that date to the permanent ceiling of $285 billion.
The present temporary debt limit, enacted last June, was based on an estimated administrative budget deficit for fiscal year 1967 of $1.8 billion. The request then made to the Congress was for a temporary debt limit of $332 billion. In reducing this request by $2 billion, the Congress indicated that if increased costs for Vietnam or other contingencies required reappraisal of this tight limit, the Congress would take whatever action is necessary.
The increase in the 1967 deficit, coupled with the tightness of the current limit on the outstanding debt, make an immediate increase imperative. Without such an increase, management of debt operations and other fiscal policies will be seriously hampered.
Later this year, when the fiscal requirements for 1968 are more precisely known, specific recommendations will be presented for modifications in the temporary limit for that year. The exact amounts of the revisions in the temporary limit will depend not only on the specific outlook for the fiscal year as a whole, but also on the time pattern of receipts and expenditures in prospect.
Both for 1967 and 1968 the debt limits requested will provide the margin of flexibility necessary to manage the debt most prudently--to permit the Treasury to take full advantage of the most favorable market conditions and thus avoid unnecessary interest costs or adverse effects on the economy.
PUBLIC DEBT AT END OF YEAR
[Fiscal years. In billions]
1963 1966 1967 1968
Owned by Federal agencies and trust funds $63.0 $66.5 $74.9 $80.0
Total 317.9 320.4 327.3 335.4
IMPROVING GOVERNMENT MANAGEMENT
In the past few years, the Federal Government has undertaken an unprecedented number of forward-looking programs which promise to enrich the quality, the justice, and the opportunity of American society to an extent no one would have dared hope only a few short years ago.
But our responsibilities to the American people are not discharged with the enactment of new programs which meet the needs of the Nation. There exist two other closely related obligations of equal gravity:
First, we are obligated to assure effective and economical management of governmental programs--both old and new. Effective management of government activities enhances the benefits of those programs. Economical management releases resources for the people's use.
Second, we are obligated to maintain close and harmonious working relationships with State, county, and local governments--our partners in a new and creative federalism.
GOVERNMENT ORGANIZATION.--We have made significant strides in the last two years to improve Government organization-
• By creating the Departments of Transportation and of Homing and Urban Development.
• By transferring the Community Relations Service to the Department of Justice and the Federal Water Pollution Control Administration to the Department of the Interior.
• By reorganizing the Public Health Service of the Department of Health, Education, and Welfare, the scientific programs of the Department of Commerce, and the Bureau of Customs. But additional action to improve the management of the Federal Government is necessary. One of the Government's major objectives is the promotion of a vigorous and growing economy. While there are many ways in which the Government pursues this objective, there are a number of highly interrelated activities now carried on separately by the Departments of Labor and Commerce and several other agencies:
• Planning and execution of manpower programs designed to increase the skills and productivity of the labor force;
• Promotion of the economic development of depressed areas and regions, to help them achieve balanced economic growth;
• Provision of technical and other services to business and labor;
• Collection, dissemination, and analysis of data about economic conditions of the Nation, its various industries, and its geographic areas;
• Advising the President and carrying out national policies for improved labormanagement relations.
The Secretaries of Commerce and Labor have recommended to me, and I strongly agree, that the President, the Congress and the Nation will best be served by bringing together these closely related operations into one institution headed by a single responsible official of Cabinet rank. I will, therefore, propose legislation to merge the Departments of Labor and Commerce and the functions of several related agencies into a new Department of Business and Labor.
FEDERAL-STATE-LOCAL COOPERATION.--our agenda must give high priority to a stronger and more effective federal system of government in the United States. To meet urgent and growing needs, the Federal Government is providing a wide range of programs to assist State and local governments. Now the chief task is to manage these programs efficiently at every level of government to assure the most effective public services. This effort will require support and action by the Congress.
At the national level the Federal Government has a responsibility to examine and improve the grant-in-aid system, making it more flexible and responsive to State and local fiscal realities. Last year we began a new partnership in health program through which numerous separate grant programs are being brought together. The model cities legislation enacted last year will also help to integrate the wide range of Federal aids available to communities. In the coming year we will examine other areas of Federal aid to determine whether additional categorical grants can be combined to form a more effective tool for intergovernmental cooperation.
Another aspect of the problem of intergovernmental cooperation has been the process of consultation with elected officials of State and local governments on matters concerning the development and administration of Federal assistance programs. Governors and local chief executives are responsible for the management of their units of government. The Federal Government should take all practical steps to increase the role of these executives in the administration of federally aided programs. I recently instructed Federal officials to work directly with State and local chief executives to accomplish this objective.
The Federal Government has a vital stake in the workings of our federal system. Federalism is not a one-sided partnership, and the States and local governments do not exist simply to carry out programs on behalf of the National Government. When we lose sight of these facts the federal system suffers, governments work at cross purposes, and the programs fail to achieve objectives. Our task now is to improve Federal programs and administration, while we do more to help State and local governments strength. en their machinery for planning and management.
At the same time, State and local governments must help themselves. Serious problems of modernization in State and local government can be solved only by the people directly concerned. The Federal Government cannot and should not seek to remedy their internal deficiencies of organization or obsolete restraints on financing and executive direction. The Federal Government can, however, increase its technical assistance to general units of government. As one example, we can work with State and local executives to improve budgeting and management. In a similar way, the Federal government stands ready to cooperate with the States in developing more adeqate systems of comparative statistics-an area where State governments have great needs.
Capable personnel are essential for effective service to the public at the State and local level no less than at the national level. I am recommending legislation to broaden educational and training opportunities for students planning careers in the public service and for public employees who desire to improve their skills. Provision will also be made for financial and technical to strengthen State and local personnel management and to permit interchange of personnel between the Federal Government and State and local governments.
Some States have created special offices concerned with community development, which focus their organizational and financial resources on urban problems within their borders. The work of these offices can be made more effective, and other States can be encouraged to make similar efforts, by the new program authorized last year for grants by the Department of Housing and Urban Development to States to support technical assistance and information services to their local communities. I urge the Congress to stimulate such improvements by providing the funds I am requesting for this new program-
BUDGETARY CONCEPTS.--AS I have already made clear in this Message, some of our traditional budget concepts do not adequately portray the Federal Government's activities. The conventional administrative budget, for example, excludes the expenditures and receipts of the trust funds. Both the administrative and cash budgets treat repayable loans in the same way as nonrepayable grants or purchases. While the national income accounts budget has been carefully formulated to measure Federal activities in relation to the flow of income and production in the economy, it is not now well suited for an analysis of individual Federal programs.
For many years--under many Administrations-particular aspects of the overall budget presentation, or the treatment of individual accounts, have been questioned on one ground or another.
In the light of these facts, I believe a thorough and objective review of budgetary concepts is warranted. I therefore intend to seek advice on this subject from a bipartisan group of informed individuals with a background in budgetary matters. It is my hope that this group can undertake a thorough review of the budget and recommend an approach to budgetary presentation which will assist both public and congressional understanding of this vital document.
Our most comprehensive effort to improve the effectiveness of Government programs is taking place through the Planning-Programing-Budgeting system. This system, which was initiated throughout the executive branch a little over a year ago, requires all agencies to:
• Make explicit the objectives of their programs and relate them carefully to national needs;
• Set out specific proposed plans of work to attain those objectives; and
• Analyze and compare the probable costs and benefits of these plans against those of alternative methods of accomplishing the same results.
This system is primarily a means of encouraging careful and explicit analysis of Federal programs. It will substantially improve our ability to decide among competing proposals for funds and to evaluate actual performance. The full effects of this effort will not be felt until next year and later, as the necessary data are gathered and analyses now in progress are completed.
A few examples of the kind of work which is in progress indicate the wide range of matters to which organized analysis and programing can be applied.
Disease control.--The Department of Health, Education, and Welfare has completed an analysis of the relative cost and effectiveness of selected disease control programs. Cost per life saved and other criteria of relative effectiveness were developed. These programs are being reviewed and funding priorities are being re-examined in light of these findings.
Child health .--The Department of Health, Education, and Welfare completed an analysis of alternative programs aimed at reducing infant mortality and improving child health. This analysis led to the legislative program focused on early identification and treatment of needy handicapped children and experimental projects aimed at improving delivery of medical care to children.
Urban planning.--Experimental projects in urban planning designed to link planning with budgeting are underway at the local level. These efforts should produce a more effective allocation not only of Federal outlays but also of local resources.
Agricultural research.--On the basis of a long-range study conducted by the Department of Agriculture and the land grant universities, a new set of priorities for agricultural research has been established. Increasing emphasis is being given to research on improvement of nutrition and health, efficient low-cost housing, improved community services, and other means which can help directly in raising the level of rural living.
Tax administration.--As a result of intensive analyses of the tax administration system, Internal Revenue Service programs have been steadily improved to produce higher tax collections per dollar of cost, while strengthening the emphasis on equity and voluntary compliance on which our tax administration is based.
With its emphasis on developing better methods of accomplishing program objectives, the new planning-programing-budgeting system is also helping our Government-wide cost reduction program. We will continue to offset a significant part of increased costs of important new programs by increasing efficiency throughout the Federal Government. Savings from this source have been substantial during the past year under our drive for cost reduction. I have made it clear to the heads of all Departments and agencies that they are to continue their emphasis on cost reduction in the coming year. The careful research and analysis which is required under the planning-programing budgeting system does not just happen. It requires the efforts of intelligent and dedicated men and women. The number of analysts required is not large--but the need for them is great. I urge the Congress to improve the funds requested in the budgets of the various Federal agencies to make possible this improvement in the management of Federal resources.
Our Nation is stronger today than ever before. We need not, indeed we dare not, forsake our basic goals of peace, prosperity, and progress.
• The pursuit of peace is essential for the continued advancement of our Nation and all mankind.
• Prosperity and progress will lead us toward a society where all can share in the bounty of nature and the products of man's ingenuity and creativity.
At various times in the past, democracies have been criticized for their seeming inability to make hard choices--for seeking soft, easy answers to critical problems. This Nation has proven the doubters wrong time and again, and will not fall prey to such weakness now.
We can afford to achieve our goals. Let us not retreat from the task, no matter how demanding it may be.
This budget represents a careful balance of our abundant resources and our awesome responsibilities. As President, I have weighed the alternatives and made the hard choices as best I could. The responsibility for similar action now rests with the Congress. I urge your support for the goals and programs embodied in this budget for the coming fiscal year.
LYNDON B. JOHNSON
January 24, 1967
Note: As printed above, illustrative diagrams and references to the budget document have been deleted.
Lyndon B. Johnson, Annual Budget Message to the Congress, Fiscal Year 1968. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/237857