Lyndon B. Johnson photo

Annual Budget Message to the Congress, Fiscal Year 1969.

January 29, 1968

To the Congress of the United States:

The budget I send you today reflects a series of difficult choices. They are choices we cannot avoid. How we make the choices will affect our future as a strong, responsible, and compassionate people.

We now possess the strongest military capability that any nation has ever had. Domestically, we have enjoyed an unparalleled period of economic advance. Nevertheless, we are confronted by a number of problems which demand our energies and determination.

Abroad we face the challenge of an obstinate foe, who is testing our resolve and the worth of our commitment. While we maintain our unremitting search for a just and reasonable peace, we must also continue a determined defense against aggression. This budget provides the funds needed for that defense, and for the maintenance and improvement of our total defense forces. The costs of that defense-even after a thorough review and screening--remain very large.

At home we face equally stubborn foes-poverty, slums and substandard housing, urban blight, polluted air and water, excessively high infant mortality, rising crime rates, and inferior education for too many of our citizens. In recent years, we have come to recognize that these are conquerable ills. We have used our ingenuity to develop means to attack them, and have devoted increasing resources to that effort. We would be derelict in our responsibilities as a great nation if we shrank from pressing forward toward solutions to these problems.

But faced with a costly war abroad and urgent requirements at home, we have had to set priorities. And "priority" is but another word for "choice." We cannot do everything we would wish to do. And so we must choose carefully among the many competing demands on our resources.

After carefully weighing priorities, I am proposing three kinds of actions:

• First, I have carefully examined the broad range of defense and civilian needs, and am proposing the selective expansion of existing programs or the inauguration of new programs only as necessary to meet those urgent requirements whose fulfillment we cannot delay.

• Second, I am proposing delays and deferments in existing programs, wherever this can be done without sacrificing vital national objectives.

• Third, I am proposing basic changes, reforms, or reductions designed to lower the budgetary cost of a number of Federal programs which, in their present form, no longer effectively meet the needs of today.

Federal programs bring important benefits to all segments of the Nation. This is why they were proposed and enacted in the first place. Setting priorities among them, proposing reductions in some places and fundamental reforms in others, is a difficult and a painful task. But it is also a duty. I ask the Congress and the American people to help me carry out that duty.

Even after a rigorous screening of priorities, however, the cost of meeting our most pressing defense and civilian requirements cannot be responsibly financed without a temporary tax increase. I requested such an increase a year ago. On the basis of changed fiscal conditions, I revised my request in a special message to the Congress last August. I am renewing that request now.

There is no question that as a nation we are strong enough, we are intelligent enough, we are productive enough to carry out our responsibilities and take advantage of our opportunities. Our ability to act as a great nation is not at issue. It is our will that is being tested.

Are we willing to tax our incomes an additional penny on the dollar to finance the cost of Vietnam responsibly? Are we willing to take the necessary steps to preserve a stable economy at home and the soundness of the dollar abroad?

One way or the other we will be taxed. We can choose to accept the arbitrary and capricious tax levied by inflation, and high interest rates, and the likelihood of a deteriorating balance of payments, and the threat of an economic bust at the end of the boom.

Or, we can choose the path of responsibility. We can adopt a reasoned and moderate approach to our fiscal needs. We can apportion the fiscal burden equitably and rationally through the tax measures I am proposing.

The question, in short, is whether we can match our will and determination to our responsibilities and our capacity.


I am presenting my 1969 budget under the new unified budget concept unanimously recommended by the bipartisan Commission on Budget Concepts I appointed last year. Among the many changes recommended by the Commission and incorporated in this year's budget presentation, two stand out:

• First, the total budget includes the receipts and expenditures of the trust funds, which were excluded from the traditional "administrative budget" concept. Because some $47 billion of trust funds are included in the new budget concept, its totals are much larger than those in the old administrative budget.

• Second, when the Federal Government makes a repayable loan, the effect on the economy is very different than when it spends money for a missile, a dam, or a grant program. A loan is an exchange of financial assets. Unlike other outlays, it does not directly add to the income of the recipient. Consequently, the Commission on Budget Concepts recommended that the budget identify and distinguish "expenditures" from "lending," and, for purposes of evaluating economic impact, show a separate calculation of the surplus or deficit based on expenditure totals alone. My budget presentation follows this significant recommendation.

This budget carries a special section showing the relationship between the new and the old concepts. The 1969 budget proposes outlays of $186.1 billion, of which:

• $182.8 billion is spending.

• $3.3 billion is net lending

Including the effects of the tax increase I am proposing, revenues in fiscal year 1969 are estimated at $178.1 billion.

On the new budget basis, the overall deficit of $8.0 billion anticipated in 1969 compares with an estimated deficit of $19.8 billion in 1968. Thus, the reduction in the deficit is estimated to be $11.8 billion.

A better measure of the direct impact of the Federal budget on the Nation's income and output is given by the expenditure account (which excludes the lending programs of the Federal Government). The expenditure deficit in fiscal year 1969 is estimated at $4.7 billion, a reduction of $9.3 billion from 1968.


[Fiscal years. In billions]

1967 1968 1969

Description actual estimate estimate

Budget authority (largely appropriations):

previously enacted $135.4 $125.1

Proposed for current action by Congress 3.3 $141.5

Becoming available without current

action by Congress 58. 7 69.9 73.1

Deductions for interfund and

intragovernmental transactions and

applicable receipts --11.5 --11.8 --12.9

Total, budget authority 182. 6 186.5 201.7

Receipts, expenditures, and net lending:

Expenditure account:

Receipts 149.6 155.8 178.1

Expenditures (excludes net lending) 153.2 169.9 182.8

Expenditure deficit (--) --3.6 --14.0 --4.7

Loan account.

Loan disbursements 17.8 20.9 20.4

Loan repayments --12.6 --15.1 --17.1

Net lending 5.2 5.8 3.3

Total budget:

Receipts 149.6 155.8 178.1

Outlays (expenditures and net lending) 158.4 175.6 186.1

Budget deficit(--) --8.8 --19.8 --8.0

Budget financing:

Borrowing from the public 3.6 20.8 8.0

Reduction of cash balances, etc 5.3 --1.0 *

Total, budget financing 8.8 19.8 8.0


Outstanding debt, end of year: actual

Gross amount outstanding $329.5 341.3 370.0 387.2

Held by the public 265.6 269.2 290.0 298.0

* Less than $50 million.

Between 1968 and 1969 the normal growth in revenues--associated with rising incomes and business activity--is expected to be $11.5 billion. This more than covers the rise in budget outlays between the two years---estimated at $10.4 billion. Consequently, all of the revenues from the proposed surcharge and the speedup in corporate tax payments will be applied towards reducing the budget deficit.

To carry forward the proposals in the budget, I am requesting new budget authority of $201.7 billion for 1969, of which $141.5 billion will have to be provided through appropriation bills or similar action during the current session of Congress. The remainder will become available under existing law without current congressional action, including the social insurance trust funds and interest on the public debt.


ECONOMIC BACKGROUND.--The overall fiscal policy for 1969 has been designed to achieve four major goals:

• Continuation of sustained growth in jobs and real income for the American people.

• Lessening of inflationary pressures.

• Improvement in the U.S. balance of payments.

• Reduction in Federal borrowing, aimed at reducing the upward pressure on interest rates.

In March, the American economy will achieve a new milestone as it enters its eighth year of sustained expansion. No prior period in our history has been marked by an expansion of such long duration. Each month that we continue to move ahead creates its own new record. And this record translates into jobs, incomes, and rising living standards for the American people.

During the past 4 years, the continued expansion has resulted in: • the creation of 7 and a half million new jobs;

• an increase of 21% in national output;

• a rise of 18.8% in per capita income after taxes and after adjustment for price change;

• a rise of 12% in output per man-hour in the private sector of the economy;

• a decline of 6 1/2 million in the number of people living in poverty; and

•a rate of unemployment which, for the past a years, has averaged less than 4% of the labor force and now stands at 3.7%.

Many factors contributed to this unparalleled achievement. But chief among them was the flexible use of fiscal policy--particularly the tax reductions and reforms of 1962, 1964, and 1965. A lagging economy was set in motion and sustained in expansion through these actions.

Between calendar years 1961 and 1965, economic growth was accompanied by a remarkable degree of price stability. Wholesale industrial prices rose by about one-half of 1% per year. The annual increase in consumer prices was about 1 1/3%.

Since 1965, however, our economic achievements have been marred by an accelerated rate of price increases. Although these increases have not been as great as those in many other industrial countries, the consumer price index in the past 2 years has risen at an annual rate of 2.9%, and wholesale industrial prices at an annual rate of 1.8%.

Interest rates on loans and securities of all types have advanced sharply, first in 1966, and then after a short period of decline, again in 1967. Our balance of payments deficit-which had been reduced from $3.9 billion in 1960 to $1.4 billion in 1966--took a sharp turn for the worse in 1967.

The problems of rising prices and interest rates, and a worsening balance of payments, arise from many causes. And their correction will require a variety of measures. But central to any attack upon them is a fiscal policy which--through a combination of expenditure control and tax increase--sharply reduces the inappropriate stimulus of a large Federal budget deficit in today's vigorous economy.


[Fiscal years]


1958- 1968 1969

1960 1965 esti- esti-

actual actual mate mate

Total outlays:

Vietnam * 3.1% 3.0

Social insurance trust funds 3.0% 3.4% 4. 2 4.4

Other outlays 16.0 14.6 14.2 13.9* Less than 0.05 %

We are now spending approximately $25 billion annually to support our efforts in Vietnam--in the 4 fiscal years, 1966 through 1969 combined, we will have spent more than $75 billion. Our annual expenditure for this purpose amounts to about 3% of gross national product. Other outlays, exclusive of social insurance trust funds, have been declining as a share of the Nation's income and output in recent years. It is not the rise in regular budget outlays which requires a tax increase, but the cost of Vietnam.

The tax increase I am requesting is in the same form as the one I recommended last year--a temporary 10% surcharge on individual and corporation income taxes. I again strongly urge its early approval by the Congress, with an effective date of January 1, 1968, for corporations and April 1, 1968, for individuals.

With enactment of the tax measures proposed in this budget--the surcharge, extension of excises, and the acceleration of corporate tax collections--the total budget deficit can be cut by more than half between 1968 and 1969. Without the tax measures, the deficit in 1969 would remain close to $20 billion for the second year in a row. In an economy already moving strongly upward, such a deficit in 1969 would clearly add sharply to inflationary pressures.

Inflation robs the purchasing power of those living on fixed incomes. It is a regressive tax which strikes hardest at those least able to afford it--the poor and the elderly.

By raising the price at which we must sell in foreign markets, inflation also causes our export industries to suffer and our imports to increase more rapidly. Perhaps even more importantly, failure to take decisive fiscal action to reduce our budget deficit would raise strong doubts throughout the world about America's willingness to keep its financial house in order.

Finally, unless we take action to reduce the budget deficit significantly, Federal borrowing is likely to be so large as to drive up interest rates and reduce the availability of credit, especially to home buyers, small businessmen, and State and local governments.

REVENUES.--The 178.1 billion in estimated revenues for fiscal year 1969 includes $12.9 billion from the tax measures I am proposing-the temporary income tax surcharge, the extension of present excise tax rates, and the speedup in corporation tax payments.

As I have repeatedly noted, the temporary surcharge represents a modest addition to our current tax bills. It would spread most equitably and fairly the cost of the commitments we must meet. It would exempt entirely from increased taxation about 17 million Americans whose low incomes place them within the first two tax brackets. It would not be haphazard and capricious like the tax of inflation. In terms of the income of individuals subject to the surcharge the tax increase would average about one additional penny on the dollar. And, unlike inflation, it can be removed promptly if no longer warranted by our unusual outlays in Southeast Asia.


[Fiscal years. In billions]

1967 1968 1969

Source actual estimate estimate

Individual income taxes $61.5 $67.7 $80.9

Corporation income taxes 34.0 31.3 34.3

Excise taxes 13.7 13.8 14.7

Employment taxes 27.8 29.7 34.2

All other receipts 12.6 13.3 14.1

Total 149.6 155.8 178.1

Under existing law 149.6 152.8 165.0

Under proposed legislation:

Tax measures 3.0 12.9

User charges .3

I am also proposing that the telephone excise tax of 10% and the automobile excise tax of 7% be extended at these rates beyond April 1, 1968, instead of dropping to 1% and 2%, respectively, as provided in present law. In addition, the Congress should enact the proposals made last year to modify the provisions for current payment of the corporate income tax so that they correspond to the current payment provisions applicable to individuals.

An estimated $4.4 billion of the increase in revenues in 1969 will come from employment taxes which finance social security and other trust fund programs. Under the recent amendments to the Social Security Act, the annual wages on which each employee's social security taxes are paid rose from $6,600 to $7,800 as of January 1, 1968, and the combined employer-employee payroll tax will increase from 8.8% to 9.6% on January 1, 1969.

I am also recommending a number of new and increased user charges for programs in which the services provided by the Federal Government yield direct benefits to specific individuals and businesses. These charges-notably in the field of transportation--will, and should, shift the burden of financing from the general taxpayer to those who benefit directly, and make the provision of these services dependent upon the willingness of the user to pay for them.

OUTLAYS.--The $186.1 billion in total budget outlays for 1969 represents an increase of $10.4 billion from the current fiscal year. Almost all of this increase is accounted for by rising outlays for defense and for relatively fixed charges under present laws.

Of the total $10.4 billion increase:

• $3.3 billion is for national defense;

• $4.2 billion is for the Federal Government's social insurance programs (chiefly social security and Medicare);

• $1.6 billion is for the second step of the civilian and military pay increase enacted last year; and

• $1.3 billion is for other relatively fixed charges (interest, public assistance, veterans pensions, etc.).

Outlays in relatively controllable civilian programs are estimated to rise by $0.5 billion froth 1968 to 1969. This rise is more than accounted for by an increase of $1 1/2 to $2 billion in payments on prior contracts and obligations. On the other hand, budget outlays by the Federal National Mortgage Association trust fund are scheduled to decline. All other outlays in relatively controllable civilian programs will be essentially unchanged from 1968 to 1969.


[Fiscal years. In billions]


1967 1968 1969 1968 to

Type of controllability actual estimate estimate 1969

National defense $70.1 $76.5 $79. 8 + $3.3

Relatively uncontrollable civilian programs:

Open-ended programs and fixed costs:

Social security, Medicare, and other

social insurance trust funds 30.3 34.3 38.5 +4.2

Interest 12.5 13.5 14.4 +. 9

Civilian and military pay increase 1.6 +1.6

Veterans pensions, compensation,

and insurance 4.9 5.1 5.2 +.1

Public assistance grants 4.2 5.2 5.7 +.5

Farm price supports

(Commodity Credit Corporation) 1. 7 2. 8 2. 9 +. 1

Postal operations 8 .7 .3 -.4

Legislative and judiciary .3 . 4 .4 *

Other 2.4 2.7 2. 8 +.1

Subtotal, relatively uncontrollable

civilian programs 57.1 64.7 71. 8 + 7.1

Relatively controllable civilian programs,

including outlays from prior year

contracts and obligations 35.2 39.0 39. 5 +.5

Undistributed intragovernmental payments (--) -4.0 -4.6 -5.0 -.5

Total budget outlays 158.4 175.6 186. 1 + 10.4

Less than $50 million.

Within this relatively stable total, however, there are a large number of individual increases and decreases. Tight budgeting does not mean an indiscriminate "hold-the-line" on all programs. Rather, it implies a rigorous application of priorities, providing increases where needs are urgent and returns high, slowing the growth of programs with less urgent priority, and reducing outlays where requirements have decreased or programs have become outmoded.

In the application of this priority system, my budget provides selective increases for a number of urgent domestic programs, particularly:

• manpower training;

• Model Cities;

• programs to control the rising crime rate;

• family planning and health care for mothers and infants;

• air and water pollution control; and

• research in better methods of education, and assistance in increasing the supply of qualified teachers.

These and the other selected programs for which I am recommending increases, respond to the most urgent needs of our Nation today--the basic problems of poverty, crime, and the quality of our environment. I urge the Congress to give them the most careful consideration. We can ignore these problems only at grave risk of harm to the fabric of our society.


[Fiscal years. In billions]

1968 1969 Change,

1967 esti- esti- 1968 to

Description actual mate mate 1969

National defense $70.1 $76. 5 $79.8 +$3.3.

Social security, Medicare, and other

social insurance trust funds 30.3 34.3 38. 5 + 4. 2

Other major social programs:

Education 4.0 4.5 4. 7 +. 2

Health (excluding Medicare) 3.4 4.4 4. 9 +. 5

Labor and manpower 1.1 1.3 1.5 +.2

Economic opportunity programs 1. 5 1. 9 2.0 +.1

Welfare 3.9 4.6 4.9 +.3

Urban community development, and low

and moderate income housing 1.1 2.0 2.3 +.4

Regional development .2 .4 .5 +. 1

Interest 12. 5 13.5 14.4 +.9

Civilian and military pay increase 1. 6 + 1. 6

All other 34.2 36. 9 36.0 --.8

Undistributed intragovernmental

payments (--) --4.0 -- 4.6 --5.0 --.5

Total budget outlays 158.4 175.6 186.1 + 10. 4

At the same time as I propose selected increases, I have taken other steps to hold budget totals to the minimum consistent with the national security and well-being. My budget provides for:

• the cutback of controllable programs in 1968 which the Congress enacted upon my recommendation;

• reductions, deferrals, and program reforms, which would reduce program levels in a variety of Federal activities by $2.9 billion in 1969;

• a determined effort to slow the pace of federally financed construction programs as much as possible consistent with orderly government and sound practices;

• a careful review of all budget requests to insure that increases are recommended only in case of high priority programs.

BUDGET AUTHORITY.--Before Federal agencies can spend or lend funds, the Congress must enact authority for them to incur financial obligations and make the payments required to meet these obligations. Most of this authority is provided in the form of appropriations.

For fiscal year 1969, a total of $201.7 billion of such authority is proposed:

• New obligational authority of $197.1 billion for expenditure account and

• Lending authority of $4.6 billion loan account programs.

Not all of this authority will be fully obligated or spent in 1969; some of it is needed to provide the authority for major procurement, construction, loan contracts, and other large-scale activities in which obligations made in one year result in outlays over a period of years.

Of the total budget authority recommended for 1969, the Congress would have to act on $141.5 billion during the current session. The remaining authority will become available under existing law without further action by the Congress. Such authority consists chiefly of trust fund programs (under which the revenues of the special taxes and other specific receipts financing the programs are automatically appropriated) and interest on the public debt.

The authority for 1969 which the Congress is being asked to enact is $13.1 billion greater than the current estimate for 1968, but only $6.1 billion higher than the amount enacted a years ago. Current action by the Congress to provide budget authority varies widely from year to year because in several large programs--highways, TVA electric power construction, and the special assistance functions of the Department of Housing and Urban Development, for example-budget authority is provided in 1 year to cover a number of succeeding years. In fiscal year 1968, there is a considerable decline in the amount of such multiyear authority.

Of the $15.2 billion increase in total budget authority in 1969, $6.2 billion is for the Department of Defense and military assistance program, $3.9 billion is available for trust funds, $0.9 billion is for interest on the public debt, and $1.6 billion for the military and civilian pay raises effective July 1, 1968.

The remaining increase in budget authority totals $2.6 billion.

Major increases in this remainder are:

• $586 million for public assistance and payments to the Medicare trust fund.

• $597 million for foreign economic assistance, to meet minimal development needs, primarily in Latin America and Asia, following the reductions in this program last year.


[Fiscal years. In billions]

1967 1968 1969

Description actual estimate estimate

Available through current action by the Congress:

Previously enacted $135.4 $125.1

Proposed in this budget $138.4

To be requested separately:

For supplemental requirements under present law 3.0 *

Upon enactment of proposed legislation .2 .9


Civilian and military pay increase 1. 6

Contingencies .2 .6

Subtotal, available through current action

by the Congress 135.4 128.4 141.5

Available without current action by the

Congress (permanent authorizations):

Trust funds 41.7 50.1 54.0

Interest on the public debt 13.4 14. 4 15.2.

Other 3.6 5. 4 3.9

Interfund and intragovernmental transactions (-) -- 6.6 --7.4 -- 8. 2

Applicable receipts from the public (--) --4.9 --4.4 --4.6

Total budget authority 182.6 186.5 201.7

* Less than $50 million.

• $442 million for Federal manpower activities of civilian agencies.

• $163 million for the Office of Economic Opportunity (apart from its manpower activities).

• $245 million for the Atomic Energy Commission, largely associated with the new Sentinel antiballistic missile system.

• $688 million for the Model Cities program.

Major decreases from 1968 to 1969 include:

• $401 million for construction grant programs of the Office of Education.

• $254 million for the Post Office, reflecting the postal rate increase enacted in 1967.

• $204 million for health construction grants.

• $218 million for the National Aeronautics and Space Administration, because requirements for the Apollo program are declining.

• $81 million for certain Corps of Engineers construction activities.

This budget includes for fiscal year 1968 $3.4 billion in supplemental appropriations recommended for enactment this year, along with the related outlays. Of this total, $1.1 billion represents the current year's cost of the pay raise for Federal personnel, over and above amounts the agencies have been able to absorb. The other major supplemental requirement is $1.6 billion for the Department of Health, Education, and Welfare, largely for welfare payments and medical assistance, and for the Government's payments to the health insurance trust fund.


In this budget I am recommending two kinds of measures to reduce Federal outlays.

First, I am proposing certain reductions which primarily reflect the stringent nature of the 1969 budget. I am, for example, recommending a temporary reduction in certain construction programs, not because they have outlived their usefulness, but because a deferral of this construction is appropriate in a period when we must relieve inflationary pressures by reducing the deficit.

These reductions reflect a cut in existing program levels in terms of obligations, commitments, or contracts, which can be accomplished without substantially altering the character of the affected program. Such reductions are estimated to bring 1969 programs some $1.6 billion below 1968 appropriated levels.

Second, I am recommending long-run reforms and modifications to eliminate certain programs or make them more effective. As the economic and social profile of the Nation changes, Federal programs must also change--or run the risk of being inappropriate, ineffective, and irrelevant.

Under the reform proposals, the program level of older outmoded activities would be reduced, or, in certain cases, charges for benefits would be imposed or substantially increased. These proposed reforms are estimated to reduce the 1969 budgetary burden for these programs by $1.2 billion below the prior year's levels. The corresponding amount for 1970 is estimated at $1.4 billion.

Change will not be easy. Many revisions will require legislation, for which I seek congressional support and approval. Many of these programs have lived long lives and recipients have become accustomed to enjoying their benefits. Nevertheless, today's priorities demand change--no matter how difficult it may be.


[Fiscal years. In millions]



1968 pro-

Agency and program gram level,

as funded,




Farm operating loans --$50

Rural electrification loans --45

Forest roads and trails --29

Sewer and water loans --22

Water and sewer grants --3

Watershed protection program --17

Flood prevention program --11

Agricultural research --15

Forest protection and utilization --2

Great Plains conservation program --2

Other -- 1

Subtotal, Agriculture --197


Ship construction 156

Research--Maritime Administration --7

Subtotal, Commerce --163

Health, Education, and Welfare:

College facility grants 224

Books, equipment, guidance, and testing grants -- 120

Health research facilities construction --29

School aid to federally impacted areas --17

Medical library construction grants --10

Subtotal, Health, Education, and Welfare --400

Housing and Urban Development:

Grants for basic water and sewer facilities --25

Public facility loans -- 10

Special assistance for market rate mortgages

Federal National Mortgage Association --27

Subtotal, Housing and Urban Development --62


Reclamation program --27

Indian construction programs --22

Road programs -- 6

Sport fisheries construction --5

Commercial fisheries construction -- 1

Subtotal, Interior -- 61


AND REFORMS---Continued

[Fiscal years. In millions]

Cuts below

1968 pro-

gram level,

as funded, Agency and program 1969


Justice: Elimination of new prison construction --$1

State: Educational exchange --1

Atomic Energy Commission:

production of special nuclear materials -- 12

Nuclear rocket program -- 10

Space electric power --8

Civilian application of nuclear explosives (Plowshare) --6

Subtotal, Atomic Energy Commission --36

General Services Administration: Construction -- 143

National Aeronautics and Space Administration:

Manned and unmanned exploration and other programs --447

National Science Foundation: Institutional science programs --3

Small Business Administration:

Business loans --40

Economic opportunity loans --25

Investment company loans --25

Subtotal, Small Business Administration --90

Total, budget reductions -- 1,632


Agriculture: Agricultural conservation

program--limit to practices with

long-term benefits --$120 --$120

Health, Education, and Welfare: School aid

to federally impacted areas--tie pay-

ments more closely to Federal burden --100

Housing and Urban Development: Private housing--place

greater reliance on the private market

(requiring change in statutory interest rate ceilings) --669 --669

Labor: Institute user charges to recover expenses under

Longshoremen and Harbor Workers Compensation Act --3 --3


[Fiscal years. In millions]

Agency and program

1969 1970



Airway services--increase taxes on users --$40 --$55

Waterways--impose tax on users --7 --14

Highway trucking--increase tax on diesel fuels

and apply graduated use tax by weight --239 --250

Subtotal, Transportation --286 --319

Veterans Administration:

Compensation--eliminate statutory payments for cases

of arrested tuberculosis --54 --54

Burial benefits--eliminate duplication with social security --46 --46

Pensions-count railroad retirement benefits as part

of income in setting amount of veterans pension --7 -- 7

Subtotal, Veterans Administration -- 107 -- 107

Small Business Administration:Disaster loans-employ

more equitable and rigorous criteria -- 50 -- 50

Water Resources Projects of several agencies--raise

the interest rate used for evaluating projects (1) (1)

Total, program reforms -- 1,235 --1,368

Grand total, budget program reductions and reforms, 1969 --2,867

1 While no immediate savings are realized, the long-term effect could be substantial.

The expenditure savings from these reductions and reforms will not all occur in 1969, but will be spread over several years. These proposals, shown in the accompanying table, will touch nearly every major agency in the Federal Government.

There have been suggestions for a long-range study of Federal programs, evaluating their effectiveness and proposing reforms. Clearly, more study of potential program reforms is needed. My proposals this year represent a first step on which we can and should act now.

Throughout the years, it has been easier to discuss the need to restructure older Government programs, than actually to change them. I urge the Congress to take prompt and favorable action in support of these Proposals to cull out lower priority programs.


On the basis of all revenues and outlays included in the new unified budget, the Federal debt held by the public will increase to an estimated $298 billion on June 30, 1969, from $290 billion at the end of fiscal year 1968. A substantial amount of Federal debt is not held by the public but by Government agencies and trust funds. Federal gross debt--which is the sum of the amount held by the public and within the Government-is estimated at $387.2 billion at the end of fiscal year 1969.

During the past year the Congress substantially revised the permanent statutory debt limit, which applies to concepts used in previous budgets. It also provided for temporary further increases beginning with the fiscal year 1969, to take care of seasonal fluctuations. On the basis of the present fiscal outlook, and assuming enactment of the new tax measures which I have proposed, it should not be necessary to seek revision of the limit during this session of the Congress.


[End of fiscal years. In billions]

1967 1968 1969

Description actual estimate estimate

Federal debt held by the public $269.2 $290.0 $298.0

Plus: Debt held by Federal agencies and funds funds 72.2 80.0 89.2

Equals: Gross Federal debt 341.3 370.0 387.2

Of which:

Treasury debt 322.9 344.1 356.7

Other agency debt 18.5 25.9 30.5

Budget financing:

Borrowing from the public 3.6 20.8 8.0

Reduction of cash balances, etc 5.3 --1.0 *

Total budget financing 8.8 19.8 8.0

Total budget deficit --8.8 -- 19.8 -- 8.0

*Less than $50 million.

If and when it becomes necessary to revise the statutory limit, some modifications in the scope and nature of the limit may be appropriate, in line with the recommendations of the Commission on Budget Concepts.

Under the revised concepts presented in this budget, the Federal debt includes a wider range of Federal securities than the direct obligations of the Treasury Department, which have formerly been regarded as the public debt. Under the new concept, the debt includes:

• Direct obligations of the Treasury;

• Securities issued by other Federal agencies; and

• Certificates of participation in assets of Federal agencies issued by the Export-Import Bank and by the Federal National Mortgage Association for itself and as trustee for several other agencies.

In total, agency obligations other than Treasury securities will amount to an estimated $25.9 billion on June 30, 1968, and will increase to $30.5 billion by June 30, 1969.

Increases in borrowing from the public represent the primary means of financing the budget deficit. Lesser amounts are available from time to time by drawing down the Treasury's cash balances or from a portion of the seigniorage on the Government's minting operations.


The budget covers all the expenses which can be reasonably anticipated in the coming year. To assure that the total takes into account the inevitable uncertainties in estimating for a future period, $2.2 billion in new obligational authority and $2.0 billion in expenditures have been included as special allowances for 1969. These allowances provide for: (1) civilian and military pay increases required by law, and (2) unforeseen contingencies and the possible costs of new programs for which definite estimates cannot be made at the present time.

The Government's program and budget for 1969 are outlined briefly in the table and sections that follow.

NATIONAL DEFENSE.--In a world of shrinking distances, our own peace and security is bound up with the destiny of other nations. The defense budget for 1969 reflects our resolve to preserve the independence of Vietnam and to provide the forces essential for safeguarding our national security and international obligations.


[Fiscal years. In billions]

Function 1967 1968 1969

actual estimate estimate


National defense $70. 1 $76. 5 $79.8

Excluding special Vietnam (50.0) (52.0) (54.0)

International affairs and finance 4. 1 4. 3 4. 5

Excluding special Vietnam (3.7) (3.9) (4.0)

Space research and technology 5.4 4. 8 4.6

Agriculture and agricultural resources 3.2 4. 4 4. 5

Natural resources 2. 1 2.4 2.5

Commerce and transportation 7.3 7.7 8.0

Housing and community development .6 .7 1. 4

Health, labor, and welfare 39. 5 46. 4 5 1. 9

Education 3.6 4. 2 4. 4

Veterans benefits and services 6.4 6.8 7. 1

Interest 12. 5 13. 5 14.4

General government 2. 5 2.6 2.8


Civilian and military pay increase 1. 6

Contingencies 1 .4

Undistributed intragovernmental payments:

Government contribution for employee retirement (--) -- 1.7 -- 1.9 --2.0

Interest received by trust funds (--) --2.3 -- 2.7 --3.0

Total expenditures 153.2 169.9 182.8

Total expenditures, excluding special Vietnam (132.7) (144.9) (156.5)

Net Lending:

International affairs and finance 5 .7 .7

Agriculture and agricultural resources 1. 2 .9 1.1

Housing and community development 1.7 3.3 1.4

All other 1.7 .9 .1

Total net lending 5.2 5. 8 3.3

Total outlays 158.4 175.6 186. 1

Total outlays, excluding special Vietnam (137.9) (150.6) (159.8)

Since 1961, excluding those forces added because of operations in Vietnam, we have increased our military capability in every essential category. Our accomplishments include:

• A 45 % increase in the number of combat-assigned Army divisions--from 11 to 16;

• A 62 % increase in the funds for general ship construction and conversion to modernize the fleet;

• A 200 % increase in the number of guided-missile surface ships;

• A 200 % increase in the number of Air Force tactical fighter and attack aircraft, and a 100% increase in the total payload capability of all fighter and attack aircraft--Air Force, Navy, and Marine Corps;

• A 400% increase in our fixed-wing airlift capability--an increase which will reach 1,000% in the 1970's with the introduction of the mammoth C-5A transport; and

• A 185% increase in the number of nuclear weapons in the strategic alert forces.

While we stand ready to enter meaningful discussions with the Soviet Union on the limitation of strategic forces, it is necessary to assure that our defense capabilities remain equal to any challenge or threat. I am therefore recommending funds in this budget which will:

• Maintain our decisive strategic deterrent by: continuing to convert our strategic missile force to the more effective Minuteman III and Poseidon; equipping those missiles with multiple, independently targeted warheads and aids to help them penetrate enemy defenses; and modernizing our manned bomber force with additional FB-III aircraft and improved short range attack missiles.

• Proceed with procurement of the Sentinel missile defense system to meet the threat posed by the emerging Chinese nuclear capability. In addition, we will begin a revamping of our air defenses.

• Augment the firepower, mobility, and readiness of our general purpose forces by improving their air defenses, buying new fixed-wing aircraft and helicopters, and procuring other new weapon systems. We will also replenish munitions, supplies, and equipment consumed in Vietnam.

• Improve further our airlift-sealift capability by additional purchases of the giant C-5A aircraft and initial procurement of the fast deployment logistics ship.

• Continue the vigorous research and development effort which constitutes the Nation's investment in our future national security.

To accomplish these improvements, to meet all of our requirements in Vietnam, and to meet the full year's cost of the October 1967 civilian and military pay raise will require an increase of $3.3 billion in outlays for national defense in 1969.

We can and will meet all of our essential defense requirements. But we intend to insure that our defense dollars are spent as efficiently and effectively as possible. At my request, the Department of Defense will continue its searching review to reduce costs and to defer or stretch out all programs in which economies can be effected without reducing overall defense readiness.

INTERNATIONAL AFFAIRS AND FINANCE,-- Through its international programs, the United States seeks to promote a peaceful world community in which all nations can devote their energies toward improving the lives of their citizens. We share with all governments, particularly those of the developed nations, responsibility for making progress toward these goals.

The task is long, hard, and often frustrating. But we must not shrink from the work of peace. We must continue because we are a Nation founded on the ideals of humanitarian justice and liberty for all men. We must continue because we do not wish our children to inherit a world in which twothirds of the people are underfed, diseased, and poorly educated.

The $2.5 billion in new obligational authority requested for 1969 for the economic assistance program is essential to the success of our efforts. Most of our assistance is provided in concert with other industrialized nations, some of whom devote a larger proportion of their economic resources to this purpose than we do.

Our assistance, even when combined with the growing contribution of other industrial nations, cannot itself guarantee the economic growth of developing nations. But it can provide the crucial margin of difference between success and failure for those countries which are undertaking the arduous task of economic development. Since outside aid cannot substitute for effective self-help, we will continue to direct our economic assistance to those countries willing to help themselves.

The 1969 economic assistance program will continue the trend toward increasing concentration on improved agriculture, education, health, and family planning. The economic aid program I am proposing will:

• Accelerate growth in Latin America by modernizing agriculture and expanding education, and help lay the foundations for a Common Market, as agreed at Punta del Este last April.

• Support India's recovery from recession and drought, and assist Pakistan's drive toward self-sufficiency in food.

• Promote progress in the villages of Southeast Asia by helping them build schools, roads, and farms.

More than 90% of our AID expenditures in 1969 will be for purchases made in the United States, and I have directed intensified efforts to increase this percentage.

Upon completion of negotiations now in progress, I shall recommend legislation to authorize a U.S. contribution to a multilateral replenishment of the resources of the International Development Association, which is managed by the World Bank. I shall also request an increase in our subscription to the callable capital of the Inter-American Development Bank (IDB); this action will enlarge the borrowing and lending capacity of this vital Alliance for Progress institution without requiring expenditure of U.S. Government funds. These resources, together with our proposed contributions to the IDB's Fund for Special Operations and the Asian Development Bank, will permit us to provide effective support for sound development projects while we share the financial burden with other donors. Our contributions will include adequate balance of payments safeguards.

To assure sufficient food supplies for the developing countries, I am proposing extension of the Food for Freedom program beyond its expiration date of December 31, 1968.

The Export-Import Bank will continue to assist the growth of U.S. exports, so essential to our balance of payments. I will propose legislation to establish a new Export Expansion Program to guarantee, insure, and make direct loans for U.S. exports which do not qualify for Bank financing under existing criteria.

SPACE RESEARCH AND TECHNOLOGY.--This Nation's leadership in advanced technology was challenged 10 years ago by Sputnik and again 7 years ago by the first Soviet manned flight. We responded to these challenges with energy and imagination. We decided to create a national capability to operate in space. We established as a principal goal the development of launch vehicles and spacecraft large enough to transport men to the moon. We joined the strengths of our universities, industry, and government to accomplish this goal, to expand our knowledge of space, and to attain a leading position in aeronautics and space technology.

Our continuing stream of progress has been marked by many dramatic successes and by only a few tragic setbacks. The Mercury and Gemini programs have clearly demonstrated our progress in manned space flight. The recent, highly successful launch of the huge Saturn V rocket emphasizes the great strides we have made in creating a large launch vehicle capability. We will resume manned flight tests of the Apollo spacecraft this year, and proceed toward the manned lunar expedition.

To meet our most urgent national needs in some areas requires us to reduce spending in others. New obligational authority requested for the National Aeronautics and Space Administration in this budget is about $220 million below the 1968 amount. Expenditures will be $230 million below 1968, $850 million below 1967, and over $1.3 billion less than in 1966. This reduction reflects our progress beyond the costly research and development phases of the manned lunar mission, as well as the immediate need to postpone spending for new projects wherever possible.

Based on a careful examination of priorities, the 1969 budget provides increases in some areas to prepare for important advances in future years, while deferring other less urgent, new projects. The production of our large Saturn-class space boosters is continued but at a reduced rate. The development of a nuclear rocket engine to increase the capability of our Saturn V launch vehicle is also continued, but at a smaller size and thrust than originally planned, to reduce development cost.

We will not abandon the field of planetary exploration. I am recommending development of a new spacecraft for launch in 1973 to orbit and land on Mars. This new Mars mission will cost much less than half the Voyager program included in last year's budget. Although the scientific result of this new mission will be less than that of the Voyager, it will still provide extremely valuable data and serve as a building block for planetary exploration systems of the future.

AGRICULTURE AND AGRICULTURAL RESOURCES.--In recent years, Federal agricultural commodity programs have succeeded in adjusting farm production to domestic and export needs. Wheat acreage was increased in 1967 to permit additional food aid for developing countries faced with low crop production. Cotton acreage will be increased in 1968 since surplus cotton stocks have been eliminated.

The commodity programs have helped raise incomes for many of our farmers. However, many poorer families living in rural areas benefit little from these programs. The combination of rapidly rising farm productivity and more slowly growing demand for farm products has left many rural people with low incomes. The result has been a massive migration to the cities, limited job opportunities for people remaining in rural areas, and widespread rural poverty.

Rising farm income plays a major role in improving economic conditions in rural areas. But other measures are needed:

• The Secretary of Agriculture is working with other Federal agencies and local groups to help more rural people participate in Federal programs that provide increased economic opportunities and improved living conditions.

• Legislation now before the Congress should be enacted to aid the establishment of multicounty area development districts. These districts would provide a broad base for planning and coordinating the development of public services and facilities in rural areas.

• Capital needs of Rural Electrification Administration borrowers to provide necessary electric power and telephone facilities in rural areas continue to expand. Legislation should be enacted to establish a cooperative bank for the telephone loan program and to permit the use of revolving funds for both the electric and telephone programs.

The Wholesome Meat Act of 1967 provides a new guarantee of safety for the American consumer. Under this act it will be possible to bring the same assurance of wholesomeness for meat sold in intrastate commerce as for meat now inspected under the Federal system.

NATURAL RESOURCES.--Federal programs to protect and develop our natural resources help strengthen our economic base and provide recreational opportunity for an expanding population.

The 1969 budget calls for deferral of some lower priority resource activities. But adequate provision has been made to:

• Protect our forests, conserve our fish and wildlife, and develop our mineral resources;

• Acquire new recreation areas;

• Clean up the Nation's water; and

• Continue water resource development.

Construction costs have been rising sharply in recent years--by 5% in 1966 and 6% in 1967. To reduce the impact of Federal construction activities on the economy, I am recommending that ongoing water resource projects be continued at minimum rates. In many cases this will require a delay in present construction schedules. New water resource development projects of the Corps of Engineers, the Bureau of Reclamation, and the Department of Agriculture, which had been recommended for starting in 1968 or had been added by the Congress, will be started over the 2-year period, 1968 and 1969. A small number of additional projects will be proposed for starting in 1969.

The Water Resources Council is developing a more appropriate interest rate to be applied in formulating and evaluating water projects. The revised rate will be related to the average estimated current cost to the Treasury of long-term borrowing. It will be higher than the rate now in use for project evaluation. The new rate will be applied to future projects in order to assure the most effective use of Federal funds in the development of the Nation's water resources.

Legislation to establish a National Water Commission is already before the Congress and is essential if we are to deal more effectively with the Nation's critical water problems.

We must also take steps to safeguard our scenic and historic areas and anticipate the resource needs of future generations. Legislation has been proposed and should be enacted promptly to authorize:

• The Redwoods National Park in northern California;

• The North Cascades National Park and National Recreation Area in the State of Washington;

• The Apostle Islands National Lakeshore in Wisconsin;

• A National Scenic Rivers System;

• A Nationwide System of Trails; and

• The Central Arizona Project. I also recommend legislation to:

• Augment the revenues of the Land and Water Conservation Fund by use of part of the mineral leasing receipts from the Outer Continental Shelf; and

• Establish a Federal-State system for regulation of surface mining operations.

COMMERCE AND TRANSPORTATION.--Many Of the Nation's most urgent needs can be secured only with the dividends provided by continued economic growth. In addition to its overall fiscal policy, the Federal Government contributes to this growth in a variety of ways. For example, we:

• Provide aid to American businesses, and stimulate increased competition;

• Assist depressed areas of the Nation to share the fruits of prosperity; and

• Encourage safe and efficient systems of transportation and communication.

These are our long-standing goals, which require a slightly different emphasis each year to focus our efforts on the emerging needs of a rapidly changing society. The budget for 1969 is responsive to this need by:

• Encouraging private business to create job opportunities for those living in blighted urban areas;

• Enhancing the well-being of seriously depressed regions by helping selected communities take better advantage of existing Federal grant programs;

• Strengthening centers of potential economic growth within depressed regions to reduce excessive migration to larger urban centers where job opportunities often are not available;

• Improving our balance of payments, by increasing assistance to businesses to expand their exports and by attracting more tourists to the United States; and

• Providing improved statistics to aid business, labor, and government in sustaining economic growth.

Our economic growth and well-being rely heavily on fast, efficient movement of goods and people. The 1969 budget provides for continuing development of a prototype civil supersonic transport, for further tests of high-speed ground transportation, and for an expanded research program to stimulate innovation in our congested urban transportation systems.

I have directed the Secretary of Transportation to develop recommendations for providing and financing the facilities and services required to meet the long-term needs of the Nation's rapidly growing air transportation network.

I am also proposing a broad program of transportation user charges to apply the test of the marketplace to these activities, and to relieve the general taxpayer of some of the burden of financing special benefits for certain individuals and industries.

While we prepare for the future, we cannot overlook the urgent demands of the present. Safety will continue to receive high priority in the 1969 budget program. We must attack the tragic toll of traffic fatalities on the Nation's highways and equip our airways to handle increased air traffic safely and efficiently.

HOUSING AND COMMUNITY DEVELOPMENT.-Most Americans lead a comfortable life, in comfortable homes and comfortable surroundings. But millions of families are still crowded into housing unfit to live in, located in squalid surroundings, and burdened with worn-out facilities and inadequate services. Without some assistance and the development of new techniques, our private economy cannot now provide good housing at costs these families can afford. Our cities cannot afford all the essential facilities and services. The Federal Government must continue and expand its assistance.

I propose to the Congress that we launch a program, in cooperation with private industry and labor, to build 6 million new housing units for low- and middle-income families over the next 10 years.

Under existing legislation and the new measures I will propose, we can begin this program in fiscal year 1969 with 300,000 housing units.

Federal aids for State and local services, especially those for education, health, manpower training, and basic income support are, to a large extent, directed at needy families. In addition, housing and community development programs are aimed more specifically at improving their surroundings. This budget provides:

• $1 billion for the 63 Model Cities now planning their programs to concentrate assistance to some 3.7 million people living in the most blighted areas of these cities, and for approximately 70 cities expected to start their planning in the late spring.

• $1.4 billion of advance funding for the urban renewal program for 1970, allowing the communities to start planning their action programs now.

To provide decent housing for all Americans, the housing industry must be able to compete on equal terms with other sectors for needed resources. However, in the past 2 years, housing has been at a disadvantage in competing for investment funds. The tax increase I have proposed will help solve this problem. In addition, specific steps to overcome the competitive disadvantage are being proposed to the Congress, including:

• Authority to lift the ceiling on interest rates for FHA and VA mortgages, which currently discourages savers from investing in mortgages.

• An orderly transfer of ownership of the Government's activities in the secondary mortgage market to private hands, so that private capital can be raised and mortgages purchased as required by market conditions.

Despite substantial progress, our urban problems remain complex. Their solutions will be difficult. Our understanding of the basic nature of the problems and of the correct solutions is deficient. To remedy this deficiency, the 1969 budget provides for a doubling of the general research funds available to the Department of Housing and Urban Development.

Detailed recommendations to augment our efforts to solve housing and urban problems will be presented in a separate message to the Congress.

HEALTH, LABOR, AND WELFARE.--Programs that help develop our most valuable resource--our people--are essential to the long-run growth and vitality of the Nation. No society can flourish unless its people have opportunities for jobs and the skills to perform them, receive adequate health care, and are free from the fear of basic economic insecurity. The 1969 budget will permit us to further these objectives.

Outlays for these programs are estimated at $51.4 billion, of which over 75% will be provided through trust funds which are largely self-financed.

Health.--Since 1963, Federal outlays for health have increased sixfold--from $1.7 billion to $10.7 billion. Medicare has provided insurance coverage against hospital and doctors' bills for nearly all older Americans. Under Medicaid, medical assistance has been extended to 8.5 million needy individuals. The number of medical and dental schools has been significantly increased, new mental retardation clinics and mental health centers, are providing services, and infant mortality has been reduced.

But our job is far from complete. This budget will reinforce our partnership with State and local governments in attacking health problems; speed research findings to victims of heart, cancer, stroke, and related diseases; intensify the attack on air pollution: expand health care for mothers and children; and increase voluntary family planning services.

To broaden and supplement these efforts, I will propose legislation to:

• Attack the problem of infant mortality by providing, for families which cannot afford it, access to health services from prenatal care for the mother through the child's first year.

• Increase the supply of health manpower.

• Establish more effective leadership and an improved personnel system for the health activities of the Department of Health, Education, and Welfare.

Labor and manpower.--The opportunity to work in a meaningful job is a fundamental right in our society. This opportunity is denied those who are ill-equipped through lack of education and job skills, and those who are handicapped by the effects of discrimination and a slum environment.

The 1969 budget provides for a wide range of manpower programs which will enable 1.3 million Americans to start on the road to economic self-sufficiency and individual dignity. Another 230,000 disabled Americans will be restored to productive employment through the vocational rehabilitation program.

The Concentrated Employment Program, which brings together a wide range of manpower and related services in selected geographic areas, will be expanded to an additional 70 areas--35 of them rural. This will bring to 146 the number of the Nation's most severe unemployment areas which will be served by this intensive effort.

Major increases are also planned in programs to enlist private employers in training and employing the hard-core unemployed. State and local manpower planning will be strengthened, and manpower activities in the Department of Labor have been restructured to improve delivery of manpower services. Legislation will be proposed to:

• Update the unemployment insurance program by extending coverage, raising benefit levels for unemployed workers, increasing the length of benefits under certain circumstances, correcting abuses, and providing for services which would increase the workers' employability.

• Reduce threats to the health and safety of workers through a comprehensive Federal-State program and assure word men's compensation benefits to uranium miners who contract lung cancer.

Economic opportunity programs.--Poverty in the midst of plenty casts an ugly shadow on our society. We have a commitment to remove that shadow.

We know that poverty cannot be eradicated overnight. But we must persist in our efforts to help those oppressed by poverty-whether they live in blighted urban areas or in impoverished rural counties. Work and training programs are being expanded and increasingly aimed at helping the poor. In addition, this budget will enable the Office of Economic Opportunity to provide:

• Improve planning capability of local Community Action Agencies.

• Services for a full academic year to 202,000 children through Head Start and a summer program for 450,000 children to remove basic disadvantages suffered by poor children on entering school.

• Head Start Follow Through to help 79,000 children retain the gains provided by the Head Start program.

• Assistance to make a college education possible for 31,000 deprived but talented youths through the Upward Bound program.

• Comprehensive family health services for the poor through nearly 50 neighborhood health centers. New approaches are being tested through cooperation among Federal agencies in multipurpose neighborhood center demonstration projects in 14 cities. These centers will develop service systems to render assistance more effectively to those in need.


[Fiscal years. In billions]

1960 1963 1967 1968 1969

Category actual actual actual estimate estimate

Education $0.1 $0.1 $2.0 $2.3 $2.5

Work and training (2) (2) 1.0 1.2 1.6

Health 6 .9 3.2 4.1 4.7

Cash benefit payments 8.3 10.4 12.8 14.6 15.9

Other social welfare and

economic services. 5 1.0 2.0 2.4 2.9

Total 9.5 12.5 21.1 24.6 27.7

1Figures represent new obligational authority for Federal funds and expenditures in the case of trust funds. 2 Less than $50 million.

Although the task is great and the problem complex, we have, in recent years, made substantial strides in reducing poverty. Between 1963 and 1967, the number of people living in poverty fell from over 35 million to less than 29 million, and from 19% of our population to under 15%. But 29 million poor people are still far too many.

In addition to programs of the Office of Economic Opportunity, various other Federal programs provide assistance to help reduce the number of those living in poverty.

Social security and public assistance.--The 1967 Social Security Amendments represent a major stride toward improving the incomes of 24 million of our people--the aged, the permanently disabled, and survivors or dependents. These beneficiaries are fortunate enough to have been covered by social insurance.

Other, less fortunate members of our society must depend on welfare. To assist those welfare recipients who cannot find work because of a lack of training and responsibility for dependent children at home, this budget provides $100 million for training and $35 million for child care services.

The transition from welfare recipient to wage earner will also be eased by the recent amendments which provide an incentive to work by exempting a certain portion of earnings from consideration of continued eligibility for assistance.

Despite periodic revisions, much of the welfare system is outmoded and in need of change. Accordingly, I have appointed a commission to make a comprehensive review of existing welfare and related programs and to recommend whatever measures are necessary to provide a more equitable and effective system of assistance to needy people.

The budget includes funds under proposed legislation to expand the food stamp program of the Department of Agriculture. About three million low-income people will have better diets under this program by the end of fiscal year 1969.

EDUCATION.--As a nation we are committed to develop the skills and talents of all our citizens. The Federal Government is playing an increasingly important role in this effort.

The 90th Congress added the Education Professions Development Act of 1967 to the historic laws enacted in 1965 providing Federal aid to education--the Elementary and Secondary Education Act, the Higher Education Act, and the National Foundation on the Arts and Humanities Act. We now have basic legislation to improve education at all levels. Our task is to use these tools wisely and imaginatively, directing them to the areas of greatest need or potential.

For 1969, I propose that the Federal Government continue in its determination to help make high-quality education available to all of America's young people. The budget includes:

• $1.2 billion in grants for improving the elementary and secondary education of over 9 million children from low-income families;

• An expanded Teacher Corps;

• Increased grants for schooling of children with physical and mental handicaps which hinder learning for 1 child in 10;

• A new program to better the achievement of children whose native language is not English; and

• More than two million grants, loans, and part-time work opportunities for college students, including benefits under the GI bill.

America's children must be prepared for the challenges of the future. To help them meet these challenges, we must explore the ways students learn and improve the ways teachers teach through:

• Increases in education research, demonstrations, and curriculum development, including an experiment in model schools in the District of Columbia;

• A new $30 million program to prevent dropouts; and

• Innovations in training for the education profession through new patterns of operation and new ties among colleges and universities, States, and local schools.

In order to meet these urgent requirements within a stringent overall budget, several programs have been reduced or deferred, including grants for construction of academic facilities and purchase of school equipment. I intend to propose legislation this year to:

• Improve Federal support to higher education by providing greater flexibility in administering student aid, providing counseling and tutoring for disadvantaged students, and encouraging schools to share libraries, computers, and other resources.

• Support innovative projects in vocational education, particularly to aid the disadvantaged.

• Provide advance financing for the newly authorized Corporation for Public Broadcasting.

VETERANS BENEFITS AND SERVICES.--Historically, this Nation has provided special benefits for the men and women who have served in the Armed Forces in times of national danger.

In 1969, special emphasis will be given to programs designed to help newly discharged veterans find satisfactory employment or to improve their career opportunities through vocational or academic training programs. For men and women still on active military duty, the budget provides for legislation to increase protection under the Servicemen's Group Life Insurance program and for expanded counseling and civilian job-training opportunities in the closing months of military service.

In addition to assistance in the development of veterans' career potential, this budget will also permit the continuation and improvement of the traditional programs of compensation, pensions, and medical care. Veterans hospitals will receive new medical services and improved nursing staffing. Applied medical research and medical education will be expanded.

Legislation should be enacted to relate veterans pension payments more closely to individual needs and provide better protection against loss of income. Studies are now underway to seek improvements in other veteran benefit programs.

GENERAL GOVERNMENT.--Rising crime rates are a major concern of the American people.

I am determined that the Federal Government do everything properly within its power to assist our States and localities in controlling crime. I have directed Federal agencies to intensify their efforts to destroy organized crime. The budget reflects expansions in both direct Federal action and Federal assistance to State and local governments.

Although the main responsibility for combating crime must rest with our State and local governments, the Federal Government can effectively aid this effort by:

• Encouraging modernization of law enforcement, corrections, and court systems;

• Assisting law enforcement agencies throughout the country to improve and expand the exchange of information; and

• Assisting in recruiting and training law enforcement personnel.

With the Law Enforcement Assistance Act of 1965, a start was made toward more effective Federal-State-local cooperation. Last year I proposed the "Safe Streets and Crime Control Act" to expand on this promising beginning. We will renew our efforts to secure the enactment of this legislation so that an expanded effort against crime can go forward.

The Federal Government's ability to take direct action has been strengthened by the Prisoner Rehabilitation Act of 1965, the Bail Reform Act of 1966, and the Narcotic Addict Rehabilitation Act of 1966. The budget supports these and other measures in an accelerated drive against crime.

Legislation is also needed to provide support for efforts to prevent, treat, and control juvenile delinquency. Such legislation is now pending before the Congress and should be enacted promptly.

The efforts of this Administration to bring home rule to the District of Columbia are well known. I am confident that the Mayor and the Council, by their actions and with community support, will prepare the way toward the goal of local self-government. Voting representation in the Congress is an additional necessity if District citizens are to participate fully in our democratic processes. I am again recommending that the authorized Federal payment to the District of Columbia be established equal to 25% of District revenues, so that the Federal Government will be contributing its fair share toward the needs of the Nation's capital.


In my budget message last year, I called for a thorough and objective review of budgetary concepts by a bipartisan group of informed individuals with a background in budgetary matters. I stated my hope that this group would recommend an approach to budgetary presentation which would assist both public and congressional understanding of this vital document.

In March of 1967, a Commission on Budget Concepts was established to make such a review and report its recommendations to me. The Commission consisted of 16 distinguished Americans, including the chairmen and ranking minority members of the Appropriations Committees of the Congress, as well as top Government financial officials and eminently qualified private citizens.

This budget puts into effect most of the major recommendations in the Commission's report, which was presented to me on October 10, 1967. These include:

• A single unified budget statement to replace the three concepts previously used.

• Comprehensive coverage in the budget of all programs of the Federal Government and its agencies, including some $47 billion of trust funds as well as Federal funds.

• Division between an expenditure account and a loan account, using the former as a measure of economic impact for fiscal policy purposes.

• Offsetting against related expenditures those receipts of the Government which are market-oriented in character, rather than based on the Government's sovereign power to tax and regulate.

• Highlighting action required of the Congress on the budget and relating that action more closely to outlays.

• Treating sales of participation certificates, which had previously been considered as an offset to Government expenditures as a means of financing the deficit.

Several other changes recommended by the Commission for adoption in future years are now under preparation for later application.

It is my hope that the far-reaching proposals made by the Commission, and their adoption for this budget, will serve the desired purposes of improving public understanding of the Federal budget and overcoming many of the inadequacies of the concepts formerly used.


To improve the process by which Federal programs are planned and the Federal budget prepared, the Government is continuing to develop the Planning-Programing-Budgeting (PPB) system which has now completed its second year of operation. This system provides information and analysis to relate the programs we undertake to the ends they are to achieve, and to choose the most efficient ways of using our resources to reach our goals.

This year the program budgets developed under the system have been employed as the framework within which program costs and accomplishments were reviewed. As a result, the different programs now stand in a clearer relationship to each other and to their objectives.

The system is also providing comparisons of the cost and effectiveness of alternative ways to achieve our objectives. For example:

• The Department of Health, Education, and Welfare has analyzed the effectiveness of the cooperative Federal-State vocational rehabilitation program. This study indicated that the increase in lifetime incomes of participants is many times the rehabilitation cost, confirming previous judgments that this program merits high priority.

• In the area of non-service-connected veterans pensions, a series of studies was done to compare various benefit formulas from the point of view of their cost, the equity with which they treat beneficiaries, and the extent to which they protect beneficiaries against large loss of pensions from small increases in other income. These studies have shown the need for legislation, provided for in this budget, that would relate pension payments more closely to the needs of the beneficiaries.

• Through the program evaluation system in the Economic Development Administration of the Department of Commerce, the number of jobs expected to result from proposed development projects in depressed areas has been estimated in relation to the extent of poverty and unemployment prevailing in the areas and to the costs of creating the jobs. This has assisted EDA in judging the most effective distribution of its resources among proposed projects.

We will extend the application of PPB during the next year, and strengthen it where it has already been introduced. In particular, we will continue to improve measures of the effectiveness of programs and to develop better alternatives.


In recent years, the Federal Government has undertaken a number of vital new programs to improve America's urban and rural communities and enhance the way of life of all of our people.

To attain the full benefits of these programs, it is essential that they be made workable at the point of impact--whether it be the individual citizen, a State or local government, a university, or any of the other institutions involved in efforts to carry out our national goals. Effective and economical management is also essential to ensure that each tax dollar buys a full dollar's worth of essential services.

GOVERNMENT ORGANIZATION.--In the past 4 years, we have undertaken more fundamental reforms in managing the Government than, perhaps, at any other time in our history. We have witnessed such major advances as the creation of two new cabinet agencies--the Departments of Transportation and of Housing and Urban Development. Significant reorganizations have taken place in other programs, among them the Public Health Service, the Community Relations Service, the Federal Water Pollution Control Administration, and the Bureau of Customs.

New strides were made last year by:

• Providing the District of Columbia with a modern governmental organization, replacing the obsolete three-member Board of Commissioners with a single chief executive and a nine-member council to exercise quasi-legislative functions.

• Creating the Social and Rehabilitation Service in the Department of Health, Education, and Welfare to unify the administration of related income support and social service and rehabilitation programs.

• Reorganizing the Bureau of the Budget to enhance its ability to help coordinate Federal programs and provide additional staff services for the solution of interagency and intergovernmental problems.

A key tool in improving Government organization is the President's authority to transmit reorganization plans to the Congress. That authority is scheduled to expire on December 31, 1968. Legislation is being proposed to extend the authority for an additional 4 years to help ensure the continued ability of the President to reshape programs and organizational structures to meet changing needs and circumstances.

The problems we face in the administration of new, comprehensive attacks on social problems often involve a number of agencies-as in the new Model Cities program. These problems cannot be solved simply by shifting functions between agencies. Heavy emphasis is therefore being given to improving both the formal and informal methods used to ensure that agencies work together effectively on related programs.

An example of the efforts being made in interagency cooperation is the program involving the Office of Economic Opportunity and the Departments of Labor, Housing and Urban Development, and Health, Education, and Welfare to aid 14 cities in the establishment of pilot neighborhood centers to provide comprehensive services to residents in low-income neighborhoods.

FEDERAL-STATE-LOCAL COOPERATION.--The need for cooperation and coordination between the partners in our federal system has also increased. The problems of managing many of our most important new programs are intensified by their intergovernmental character.

At the Federal level we must do what we can to assist our partners. We must assure that our programs are designed and administered in such a way as to mesh with State and local patterns of organization and operation to the maximum extent possible. We must ensure that Federal programs promote State and local initiative and action. To that end, we have taken a number of actions in the past year alone:

• Developed and put into operation a system through which State and local chief executives have the opportunity-often not previously available to them-to have a voice in developing Federal regulations and administrative procedures.

• Established procedures to improve Federal-State coordination in the designation of development planning districts.

• Provided an opportunity for areawide planning agencies to comment on proposed applications for specific grants that would affect the orderly development of their metropolitan areas.

• Taken initial steps to shorten processing time on applications under many vital grant programs by 500 %

Improvement is a continuous process, as it must be to meet the needs of a dynamic and rapidly changing society. We must prepare now to meet the public service needs of our people in the seventies. One of the prerequisites to satisfying the awesome demands of the future is a corps of competent, well-trained public servants. Enactment of the pending Intergovernmental Manpower Act will provide a significant stride forward in filling the gap of trained manpower at the State and local levels of Government.

Two additional measures are needed to improve the funding and management of intergovernmental programs significantly:

• Joint Funding Simplification Act.--This measure, which was sent to the Congress last year, will simplify and streamline the application, processing, and administration of a number of related grants by managing them as a single, unified project.

• Funding improvements and consolidation efforts.--To overcome the serious problems of planning education programs at the State and local level caused by grant delays, I am seeking early appropriations for elementary and secondary education. The amounts which will be available must be known in the spring, if local communities are to be able to use them most effectively in the ensuing school year. I am also proposing to consolidate related grants for college student aid and for vocational education. This consolidation, coupled with advance funding action similar to that mentioned above, will facilitate advance planning by both the institutions and students.

Further action is underway to determine whether additional consolidations of grant programs are feasible. As proposals are developed, they will be promptly forwarded to the Congress.

Again, as last year, I must stress that State and local governments must help themselves too. Encouraging steps are being taken, but many serious problems of modernization of executive direction and financial systems remain which can only be remedied by those governments and their citizens.

COST REDUCTION.--I have continued to insist that the executive branch of the Federal Government be operated as economically and efficiently as possible.

Some examples of the actions agencies took in the past year to cut costs are:

• The Department of Defense achieved savings of over $339 million by value engineering. Under this program unnecessary equipment, facilities, procedures, and supplies are eliminated. A good example is the $2.1 million saved by the redesign of an aircraft camera. Performance was improved and unit costs were reduced by about 40%.

• The Manpower Administration of the Department of Labor, through improved work methods, achieved estimated savings of over $19 million.

• All Government agencies, by sharing automatic data processing resources through an exchange program, avoided costs of over $28 million. Redistribution of ADP equipment avoided new procurement of $80 million.

• The National Aeronautics and Space Administration, by utilizing idle, excess, and surplus Government property, avoided expenditures of over $22 million for new equipment or facilities. In addition, NASA saved over $16 million by improving procurement practices.

• A value analysis of the specifications for the computer display channel of the National Airspace System development enabled the Federal Aviation Administration to avoid costs of approximately $12 million.

• The Coast Guard reorganized its search and rescue mission function along the east and gulf coasts, leading to savings estimated at $14.6 million.

• The Post Office has improved its procurement of transportation to the extent that $107 million was saved in the period from 1965 through 1967.


This is a critical and challenging time in our history. It requires sacrifices and hard choices along with the enjoyment of the highest standard of living in the world. No nation has remained great by shedding its resolve or shirking its responsibilities. We have the capacity to meet those responsibilities. The question before us is whether or not our will and determination match that capacity.

In the past 4 years, this Nation has faced formidable challenges. We have confronted them with imagination, courage, and resolution. By acting boldly, we have forced a number of age-old concerns--ignorance, poverty, and disease--to yield stubborn ground.

The roll call of accomplishments is long. But so is our agenda of unfinished business. Our heritage impels us to steadfast action on those problems of mankind which both gnaw at our conscience and challenge our imagination.

As your President, I have done all in my power to devise a program to meet our responsibilities compassionately and sensibly. The program is embodied in this budget for 1969. I urge active support for its principles and programs.


January 29, 1968

Note: As printed above, illustrative diagrams and references to the budget document have been deleted.

Letters from the President to the Speaker of the House of Representatives or the President of the Senate proposing changes in the 1969 budget are printed in the Weekly Compilation of Presidential Documents (vol. 4, pp. 829, 833, 1051, 1114, 1443, 1474).

Lyndon B. Johnson, Annual Budget Message to the Congress, Fiscal Year 1969. Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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