Annual Budget Message to the Congress, Fiscal Year 1970.
To the Congress of the United States:
The 1970 budget, which I am transmitting to you today, points the way toward maintaining a strong, healthy economy and continuing progress in meeting the Nation's highest priority military and domestic needs.
The record of achievements of the past 5 years is an impressive one. We have witnessed a period of unprecedented economic growth, with expanded production, rising standards of living, and the lowest rates of unemployment in a decade and a half. Our military forces today are the strongest in the world, capable of protecting the Nation against any foreseeable challenge or threat. Last month saw man's first successful flight to the moon. In domestic matters, the legislative and executive branches, cooperatively, have forged new tools to open wider the doors of opportunity for a better life for all Americans.
In my first budget message 5 years ago, I stated: "A government that is strong, a government that is solvent, a government that is compassionate is the kind of government that endures." I have sought to provide that kind of government as your President. With this budget, I leave that kind of government to my successor. The 1970 budget program calls for:
Support for our commitments in Southeast Asia, and necessary improvements to maintain and strengthen our overall military capabilities.
Continued emphasis on domestic programs which help disadvantaged groups obtain a fairer share of the Nation's economic and cultural advancements.
A budget surplus in the year ahead, as well as in the current fiscal year, to relieve the inflationary pressures in the economy and to reduce the strains that Federal borrowing would place on financial markets and interest rates.
This Nation can and must bear the cost of the defense of freedom, and must at the same time move ahead in meeting the pressing needs we face at home. But caution and prudence require that we budget our resources in a way which enables us to preserve our prosperity, strengthen the U.S.. dollar, and stem the increased price pressures we have experienced in the past few years.
We can meet these objectives and achieve desirable budget surpluses by:
Holding down total Federal spending and lending through strict control of program commitments.
Extending for one year the 10% tax surcharge on individual and corporation income taxes enacted last June beyond the present expiration date of June 30, 1969.
Americans are united in the hope that the Vietnam peace talks now taking place in Paris will be soon and successfully concluded, so that reconstruction can begin. Meanwhile, the fighting continues. Under these circumstances, the 1970 budget necessarily provides funds to support our military operations in Vietnam for the year ahead. At the same time, we are taking steps to assure an orderly reduction in Southeast Asia support as soon as conditions permit.
With the attainment of a just and honorable peace, consideration can be given to removal of the tax surcharge as military spending declines. At that time, such action could ease the post-Vietnam transition, smooth the conversion to greater peacetime production, and help assure continued economic growth and full employment.
Our domestic programs are increasingly focused on urgent national problems--inadequate educational opportunities, slum housing, increased crime, urban congestion and decay, pollution of our air and water, lack of proper health care, and hunger and malnutrition. The 1970 budget continues to place the greatest emphasis on progress in overcoming these ills.
A substantial part of every budget reflects the continuing momentum of program decisions made in past years, by past Presidents and past Congresses. While adhering to a restrictive expenditure policy, I am making reasonable provision in the 1970 budget for the requirements of ongoing programs, proposing reductions wherever possible and recommending some selective improvements and expansions, including social security benefit increases.
The 1970 budget proposes total outlays of $195.3 billion, made up of $194.4 billion in expenditures and $0.9 billion for net lending.
Budget receipts are estimated at $198.7 billion in 1970, including the effects of extending present income and excise tax rates.
Accordingly, the budget surplus will be $3.4 billion.
The budget totals are, as in last year's budget, based on the new budget concept adopted upon the unanimous recommendation of the bipartisan Commission on Budget Concepts which I appointed in 1967. They include the transactions of the social security and other Government trust funds, and distinguish between expenditures and fully repayable loans.
Assuming the adoption of the recommendations in this budget, the surplus for fiscal year 1970 would follow a surplus of $2.4 billion in 1969. This outlook represents a sharp reversal from the $25.2 billion deficit incurred in fiscal year 1968.
The totals in the expenditure account alone are estimated to produce a surplus of $4.3 billion in fiscal year 1970. This expenditure surplus offers a better measure of the direct effect of the Federal budget on the Nation's income and output, and highlights the fiscal policy which underpins my budget recommendations.
To finance the proposals in this budget, I am recommending appropriations and other new budget authority of $210.1 billion for 1970. Of this amount, $143.9 billion depends on action during the current session of the Congress. The remaining authority will become available under existing law without current congressional action.
SUMMARY OF THE BUDGET AND FINANCIAL PLAN
[Fiscal years. In billions]
1968 1969 1970
Description actual estimate estimate
Budget authority (largely appropriations):
Outstanding debt, end of year: actual
FISCAL PROGRAM FOR 1970
The revenues and budget program I recommend for fiscal year 1970 are described in detail in Parts 2 and 3 of this budget document. The major features of the overall fiscal program follow.
ECONOMIC SETTING.--The fiscal policy I am recommending is designed to:
• Foster continued growth in employment and real income;
• Contain inflationary pressure;
• Ease the upward pressure on interest rates; and
• Continue the improvement in our balance of payments position.
Early in 1961, the American economy entered into a record-breaking period of prosperity which has continued for 8 years. Between 1960 and 1968, we have achieved:
An increase of 45% in the Nation's output of goods and services;
A rise of $24 billion in annual corporation profits, after taxes;
An increase of 31% in real per capita spendable personal income (after adjustment for prices);
The creation of more than 10 million new jobs;
An average annual increase of 3.5% in output per man-hour;
A reduction in the rate of unemployment to 3.3% of the labor force, the lowest level since October 1953; and
A decrease of over 17 million in the number of people living in poverty.
In contrast, recent price developments have not been satisfactory, even though our record compares favorably with other major nations of the world. We have also had a sharp increase in interest rates, and our balance of payments position needs strengthening, although substantial progress has been made toward equilibrium.
To help correct these conditions, I requested and--after considerable delay--the Congress enacted the 10% tax surcharge. This measure has helped to calm fears abroad about our willingness and determination to take the steps needed to protect the American dollar. The delay in enacting the surcharge was costly, however. During the prolonged period of debate, price and cost increases gathered momentum. The fiscal restraint proposed in the 1969 and 1970 budgets is essential if we are to look toward a satisfactory price performance and a return to a sustainable rate of economic growth.
Many factors underlie the economic imbalances we are experiencing. A return to reasonable price stability will require continued fiscal restraint with appropriate adjustments in monetary policy and restraint in price and wage decisions by American business and labor. With a reduction in inflationary pressures, our balance of payments should improve as we strengthen our competitive position in world trade. Relative price stability should also relieve some of the pressures on the money markets and foster a reduction in interest rates. A year ago the very heavy borrowing requirements of the Federal Government were exerting extreme pressure on interest rates. This is no longer the case.
Although we are optimistic, we cannot predict with any certainty when the peace talks in Paris will reach a successful conclusion. Nor can we predict precisely the timing or magnitude of movements in our highly complex economy. Accordingly, I believe the wisest plan of action at this time calls for extension of the tax surcharge. Should the situation change significantly in the coming months, fiscal policy adjustments could be undertaken appropriate to the conditions then forecast.
When I signed the act providing for the tax surcharge, I pointed to the need for procedures in the future to assure closer cooperation between the executive and legislative branches in accomplishing the timely adjustment of fiscal policy. I believe the current uncertain outlook presents an excellent opportunity for attempting corrective action in this area.
I urge the Congress to give serious consideration to coupling extension of the temporary surcharge beyond June 30, 1969, with authority for the President to remove it entirely or partially if warranted by developments. Such Presidential discretion would be subject to congressional veto within a limited time period.
For the longer run, consideration should be given to establishing as a permanent part of our tax system an element of flexibility under which the President, again subject to congressional veto, would have discretion to raise or lower personal and corporation income tax rates within specified limits--such as 5% in either direction.
The Congress should take this action or develop a comparable alternative procedure to prevent in the future the kind of costly fiscal stalemate we experienced in the last year and a half.
REVENUES.--In addition to extending the temporary income tax surcharge, I believe we should also extend the present excise tax rates of 7% on automobiles and 10% on telephone service, rather than allow these rates to drop to 5% on January 1, 1970, as currently scheduled by the Revenue and Expenditure Control Act of 1968. The $198.7 billion total estimated revenues for fiscal year 1970 includes $9.5 billion to be collected from extending the income tax surcharge and current automobile and telephone excise tax rates.
Budget receipts in fiscal year 1969 are estimated at $186.1 billion. Although declining, the continued high cost of supporting our operations in Southeast Asia will amount to more than double the revenue yields anticipated from extending the surcharge and excise tax rates into fiscal year 1970. If the surcharge were allowed to expire on June 30, 1969, and the excise taxes to decline on January 1, 1970, the growth in revenues, mainly resulting from an expanding economy and rising incomes, would approximately offset the revenue loss from the scheduled decline in tax rates. Receipts in fiscal year 1970 under existing law would be close to the estimated revenues in fiscal year 1969, and would be inadequate to cover the unavoidable, built-in increases in outlays.
The rise of $12.6 billion in revenues between 1969 and 1970 includes an estimated $5.4 billion increase under social insurance programs, such as social security and unemployment insurance.
Most of this rise, $5.0 billion, is in social security receipts, including:
• The full-year effect of the increase from 8.8% to 9.6% in the combined employer-employee payroll tax rate, which occurred on January 1, 1969, and
[Fiscal years. In billions]
1968 1969 1970
Source actual estimate estimate
Individual income taxes $68.7 $84.4 $90. 4
Total budget receipts 153.7 186.1 198.7
Under existing law 153.7 185. 6 186.8
A proposed increase in the taxable wage base from $7,800 to $9,000 and in the combined employer-employee tax rate from 9.6% to 10.4%, effective January 1, 1970, in order to finance proposed benefit increases. The increase in the tax rate is currently scheduled by law to take effect on January 1, 1971.
Many Government programs offer services which yield direct and identifiable benefits to specific groups. Some of these programs should be financed by charging users for the services rather than having them financed by the general taxpayer. I believe this is sound public policy and should be extended to new areas.
In the past few years I have recommended legislation for user charges in the field of transportation, so that those who benefit directly will pay a fairer share of the costs involved. I am again recommending such user charges, and the 1970 estimate of revenues includes $0.4 billion based on my proposals.
OUTLAYS.--The estimate of $195.3 billion in total budget outlays in fiscal year 1970 represents our minimum requirements to fill urgent needs at home and abroad. It is based on a detailed review of all Federal programs, with the objective of holding outlays down as much as possible, consistent with essential national economic and program objectives.
For fiscal year 1968, a reduction in agency obligations was enacted. For fiscal year 1969, the Congress enacted an arbitrary ceiling on total outlays in the Revenue and Expenditure Control Act of 1968. Each of these devices conflicts with the normal appropriations process and with current techniques of program planning and execution. Effective Government operations require that we reach an agreement on which of these conflicting budgetary approaches will be used in the future.
In limiting total outlays, the Congress departed from its traditional procedure of using individual appropriation actions as the primary means of exercising its control over the Federal budget. In contrast with normal practice, the Congress placed direct restrictions on the amount of checks that could be issued or cash disbursements that could be made in the 12-month period ending June 30, 1969.
To implement this new restriction, the executive departments and agencies have had to add to their financial control machinery. In prior years, executive control of the budget was exercised at the stage of placing contracts, hiring personnel, making loan and grant commitments, or incurring some other obligation. These obligations lead, of course, to Federal disbursements, sometimes in the same fiscal year and sometimes in a later fiscal year. Now, in fiscal year 1969, each executive establishment must also exercise direct control over the amount of disbursements it makes - within the year.
An inflexible spending ceiling unrelated to the appropriations process forces inefficient or uneconomical practices in carrying out legislatively approved programs. In some cases, national priorities are arbitrarily distorted by the fact that the outlays for some Federal programs are sheltered in basic law from meaningful annual control, and, consequently, compensating reductions have to be made elsewhere.
In periods of inflationary pressure, such as we are now experiencing, the need for holding down Federal outlays is beyond dispute.
[Fiscal years. In billions]
Controllability 1968 1969 1970 Change, actual esti- esti- 1969 to
mate mate 1970
National defense $80.5 $81.0 $81.5 +$0.5
Relatively uncontrollable civilian outlays under present law:
Open-ended programs and fixed costs:
Social security, Medicare, and other social insurance trust
funds 35.5 39.6 42.4 +2.9
Interest 13.7 15.2 16.0 +0.8
Civilian and military pay increase 2.8 +2.8
Subtotal, relatively uncontrollable civilian outlays 82.4 90.2 98.8 +8.6
Relatively controllable civilian outlays:
Undistributed intragovernmental transactions - 4.6 - 5.1 - 5.7 - 0.6
Total budget outlays 178.9 183.7 195.3 +11.6
§Less than $50 million.
Also, it would be unwise to try to correct within fiscal year 1970 the distortions from the obligation reductions of 1968 and the outlay controls of 1969. Therefore, in this budget, the estimates of expenditures and net lending in fiscal year 1970 must reflect the continuation of an executive policy of outlay management.
With such a policy, total budget outlays in 1970 are estimated to be up $11.6 billion from 1969. This includes $0.5 billion for national defense, largely for improvements in our strategic forces, modernization of our tactical air forces, and other increased research and development efforts needed to assure sufficient deterrent power in the future. These increases will be substantially offset by reduced outlays for Vietnam resulting from changing combat patterns and revised supply requirements.
Apart from national defense, three-quarters of the increase between 1969 and 1970 reflects relatively uncontrollable charges which must be met under present laws. The overall increase must, further, be judged in the light of the rising workloads and costs to which the Government--just as businesses, consumers, and other sectors of the economy--must accommodate.
The $8.6 billion increase in relatively uncontrollable outlays consists of: $2.9 billion for benefit payments and other outlays for social security, Medicare, and other social insurance programs financed through trust funds; this increase represents the automatic growth in benefits for these programs under existing law.
--$2.8 billion for the final stage of the pay increases for military and civilian employees enacted in 1967, to achieve pay comparability with the private sector.
--$1.6 billion for other charges which are relatively fixed in the short run under requirements of existing law (for example, interest on the debt, public assistance and Medicaid, and veterans benefits).
--$1.3 billion for outlays arising out of prior year contracts and other commitments now reaching the payment stage. This includes substantial amounts for highways, construction of education facilities, and health and community development programs.
In keeping with national priorities, major social programs account for the largest portion of the $11.6 billion increase in outlays between 1969 and 1970. Of the $7.9 billion increase for these programs, $4.5 billion is for social insurance payments including my proposals for an increase in social security benefits.
Aside from the increases for national defense and such relatively uncontrollable outlays as Federal pay and interest, outlays for all other civilian programs are estimated to increase by only $0.2 billion.
BUDGET AUTHORITY.--For fiscal year 1970, a total of $210.1 billion of budget authority is recommended, including:
• New obligational authority of $209.6 billion for programs in the expenditure account of the budget, and
• Loan authority of $0.5 billion for loan account programs.
Budget authority--mostly in the form of appropriations--must be provided by the Congress before Federal agencies can spend or lend funds. Some authority requires congressional action each year or at fairly regular intervals. Other amounts of authority become available under basic law, and require no specific additional action by the Congress.
Of the total budget authority I am recommending for 1970, $143.9 billion would have to be acted on during this session of the Congress. The estimated 1970 outlays related to such action total $93.8 billion.
The remaining authority, which does not require further congressional action, consists mainly of amounts for social insurance trust fund programs, under which the special receipts financing the programs are automatically appropriated, and for interest on the public debt.
The $15.5 billion increase in total budget authority estimated between 1969 and 1970 consists mainly of $5.4 billion representing the increase in social insurance trust fund receipts, $3.6 billion for the Department of Defense and the military assistance program, and $2.8 billion for the military and civilian pay increase to be put into effect in July 1969.
The remaining increase of $3.6 billion in budget authority for 1970 is the net result of a number of increases and decreases. The major increases are:
--$2.0 billion, primarily for Medicaid and other public assistance, health, and rehabilitation programs in the Department of Health, Education, and Welfare.
--$966 million for foreign economic assistance, to enable us to provide urgently needed resources to developing areas on a selective basis, following the large reductions of the past two years.
--$800 million for interest on the public debt.
--$522 million for airway modernization, highways, and other activities in the Department of Transportation.
[Fiscal years. In billions]
Description 1968 1969 1970
actual estimate estimate
Available through current action by the Congress:
Previously enacted $134.4 $127.8
Proposed in this budget $139.3
To be requested separately:
For supplemental requirements under present law 4.5
Upon enactment of proposed legislation 0.2 1.3
Civilian and military pay increase 2.8
Contingencies 0.2 0.5
Subtotal, available through current action by the Congress 134.4 132.6 143.9
Available without current action by the Congress (permanent authorizations):
Trust funds (existing law) 47.8 53.5 59.1
Interest on the public debt 14.6 16.0 16.8
Other 5.4 5.8 4.3
Deductions for offsetting receipts:
Interfund and intragovernmental transactions -6.9 -8.7 -9.1
Proprietary receipts from the public -4.7 -4.6 -4.8
Total budget authority 190. 6 194.6 210.1
$429 million for job training and other manpower activities of the Department of Labor and the Office of Economic Opportunity.
An allowance for contingencies of $500 million is included in the total of budget authority for 1970 to cover unforeseen developments and the costs of proposals for which specific estimates cannot be made at this time.
The total budget authority shown in this budget for 1969 includes $4.7 billion of supplemental appropriations recommended for action in the current session of the Congress. Of this amount, $1.6 billion is needed to provide for the pay increase which became effective on July 1, 1968. A supplemental appropriation of $1.6 billion is also recommended for the Department of Defense, for special Southeast Asia support.
In addition, the 1969 total makes provision for supplemental appropriations required for public assistance and veterans compensation and pensions, which are now estimated at higher levels than provided for last year, and for the urgently needed replenishment of the resources of the International Development Association and a contribution to the special funds of the Asian Development Bank, following enactment of the necessary authorizations.
The estimate of total outlays in 1969 and 1970 includes the outlays related to these supplemental funds.
IMPACT OF REVENUE AND EXPENDITURE CONTROL ACT IN FISCAL YEAR 1969
In addition to various provisions affecting the tax system, the Revenue and Expenditure Control Act of 1968 (Public Law 90-364) contained several sections designed to curb current and future budget outlays. The act provided for:
Specific limitations on budget authority and outlays in fiscal year 1969, representing-for the programs covered--reductions of $10 billion and $6 billion, respectively, below the levels in the 1969 budget which I sent to the Congress on January 29, 1968.
An analysis of funds previously made available by the Congress which are estimated to be unobligated on June 30, 1969, and to remain available in 1970, with a report including recommendations for recisions of at least $8 billion of such balances.
Restrictions on the hiring of full-time, permanent employees of Federal agencies to 75% of separations, until the total of such employees reaches the June 1966 level.
BUDGET AUTHORITY AND OUTLAYS.--In setting the limitations on budget authority and outlays, the Congress excepted certain programs from the required reductions and subsequently added other exceptions. The exceptions amount in total to more than half of the currently estimated budget, including special support of Vietnam operations and the largest uncontrollable programs in the budget--programs which have shown the sharpest growth in recent years.
The current estimate of $194.6 billion in total budget authority for fiscal year 1969 is $7.1 billion below the estimate in last year's budget. An increase of $6.1 billion is now estimated for the programs exempted from the provisions of Public Law 90-364, largely for (1) special Vietnam costs, reflecting mainly the adjustments I announced on March 31, 1968, (2) the price support operations of the Commodity Credit Corporation, because of larger crops than anticipated last January, (3) social security trust funds, in which the receipts--which constitute budget authority--are greater than originally estimated, (4) interest costs, reflecting both a larger debt and higher interest rates, and (5) public assistance grants, based on reports received from participating State governments.
The current status of - budget authority for fiscal year 1969 is shown below.
For the programs affected by the limitation required under Public Law 90-364, budget authority is now estimated to be $13.2 billion under last January's estimate. A portion of this reduction reflects the conversion to complete private ownership of the Federal National Mortgage Association's secondary market operations, the Federal intermediate credit banks, and the banks for cooperatives. However, the $10 billion required reduction is being achieved over and above these factors, and without the need for me to establish reserves which would result in automatic rescission of enacted 1969 budget authority as authorized under the law.
- For budget outlays, the current situation is shown on page 1284.
In total, outlays in 1969 are now estimated to be $2.4 billion below the original estimate last January. Upward reestimates amounting to $6.0 billion have been necessary in the programs excepted from the spending limitation, reflecting the same factors as those affecting budget authority.
For the portion of the budget covered by the limitation in Public Law 90-364, the current estimate of outlays represents a reduction of $8.3 billion below the January 1968 estimate for fiscal year 1969. These reductions include decreases in Department of Defense programs apart from Southeast Asia support as well as in the civilian agencies of the Government.
As in the case of budget authority, the required $6 billion cutback in outlays for covered programs is being accomplished over and above reductions resulting from financing changes associated with the conversion of certain credit institutions to private ownership. The currently estimated reduction will allow leeway in carrying out the provisions of Public Law 90-364, should unforeseen increases occur in the affected programs in the months ahead.
The Vocational Education Amendments of 1968 contain a provision permanently
BUDGET AUTHORITY FOR FISCAL YEAR 1969--RELATIONSHIP TO PUBLIC LAW 90--364
January Current Change
Description 1968 estimate
Programs excepted from Public Law 90-364 limitation:
Special support of Vietnam operations $25.4 $28.0 +$2.6
Interest 14.4 15.2 + 0.8
Veterans benefits and services 7.8 7. 5 - 0.3
Social Security Act trust funds 41.8 42.6 + 0.9
Old-age and survivors insurance (27.2) (27.8) (+0.7)
Disability insurance (3.7) (3.8) (+0.1)
Health insurance (6.8) (7.3) (+0.5)
Unemployment insurance (4.1) (3.8) (-0.3)
Commodity Credit Corporation (price support and related programs 3.3 4.8 + 1.6
Public assistance grants to States (including Medicaid) 5.8 6. 4 + 0.7
Subtotal, excepted programs 98. 4 104.6 + 6.1
Remainder--covered by Public Law 90-364 limitation 103. 3 90.1 - 13.2
Total 201.7 194.6 - 7.1
BUDGET OUTLAYS IN FISCAL YEAR 1969--RELATIONSHIP TO PUBLIC LAW 90-364
Description 1968 Current Change
Programs excepted from Public Law 90--364 limitation:
Special support of Vietnam operations $26.3 $29.2 +$2.9
Interest 14.4 15.2 + 0.8
Veterans benefits and services 7.3 7.7 + 0.4
Social Security Act trust funds 36.0 36.4 + 0.4
Old-age and survivors insurance (24.6) (24.6) (+0.1)
Disability insurance (2.6) (2.6) §
Health insurance (5.8) (6.2) (+0.5)
Unemployment insurance (3.1) (3.0) (--0.1)
Tennessee Valley Authority (portion financed from power proceeds
and borrowing) 0.1 0.1 +§
Commodity Credit Corporation (price support and related
programs) 2.8 3.6 1+0.9
Public assistance grants to States (including Medicaid) 5.7 6.2 1+0.6
Aid to schools in federally impacted areas (special 1968 supplemental
payments made in 1969) 0.1 +0.1
Subtotal, excepted programs 92.6 98.6 +6.0
Remainder--covered by Public Law 90-364 limitation 93.5 85.1 --8.3
Total 186.1 183.7 --2.4
§ Less than $50 million.
1 Outlays exceeding the January 1968 estimates by more than $907 million for farm price supports and $560 million for public assistance grants are not excepted from the Public Law 90-364 limitation.
exempting appropriations made to the Office of Education from administrative controls on obligations and spending. While this administration has made education an urgent national priority, it is highly undesirable to restrict in this way the actions which a future President might find necessary for prudent management of the Government.
UNOBLIGATED BALANCES.--AS required by section 204 of Public Law 90-364, an analysis has been made of the unobligated balances estimated to remain available in fiscal year 1970. A report of the results, indicating possible recisions of the required $8 billion of these balances, is provided in Special Analysis G. I do not favor those recisions and therefore the tables and schedules in the various parts of the budget do not reflect such action.
FEDERAL CIVILIAN EMPLOYMENT.--The requirement in Public Law 90-364 that restrictions on hiring be imposed until the Government's full-time permanent civilian employment is reduced to the June 1966 level has inevitably created many difficulties for orderly management of the Government's activities. As originally enacted, this requirement would have necessitated an eventual reduction of over 250,000 employees from the level of June 1968, despite a substantial increase in workloads compared with 2 years earlier. Shortly after enactment of the law, the Congress exempted roughly one-third of the Government's full-time employees in specified agencies, with the effect of lowering the required reduction to about 115,000.
The controls in the law also affect temporary and part-time employment, requiring that such employment each month in any agency not exceed the level of the corresponding month in 1967.
The administration has successfully enforced these provisions to date. However, it is clear that continued arbitrary reductions in employment over a period of time will hamstring effective management of programs and personnel practices, will reduce efficiency and increase costs, and will lead to further curtailment or to interruption of Government services. This situation is aggravated by the need to provide staff for new programs adopted after June 1966 and for enlarged workloads which occur as the population grows and the economy expands.
During the past 5 years, I have, as a regular practice, imposed employment limitations on the agencies to provide incentives for improving productivity and to keep the Federal payroll to a minimum. Limitations for each department and agency were related to the program and budgetary levels recommended by me and approved by the Congress, rather than to some arbitrary formula or unrelated benchmark period.
The Congress should rely on its appropriations process--or develop an acceptable accompanying process--to relate employment levels specifically to the work it wants done by each agency and for which it provides the necessary funds. The 1970 estimates in this budget are based on such action.
On the basis of the estimates of receipts and outlays in this budget, the - Federal debt held by the public will decrease from $290.6 billion on June 30, 1968 to $276.6 billion on June 30, 1969, and will further decline to an estimated $272.6 billion on June 30, 1970. This decrease reflects:
The sharp reduction in net Federal borrowing requirements from the unusually high level in 1968, since outlays in both 1969 and 1970 will be financed entirely from current revenues; and
The conversion to complete private ownership during 1969 of the secondary market operations of the Federal National Mortgage Association, the Federal intermediate credit banks, and the banks for cooperatives, causing a net reduction of $10.9 billion in outstanding obligations to the public previously included in the Federal debt.
- Gross Federal debt--which is the sum of the amount of debt held by the public and the amount held within the Government--is estimated at $371.5 billion at the end of the fiscal year 1970. This total includes not only the direct obligations of the Treasury, but also $14.1 billion in securities issued by various other Federal agencies.
The statutory debt limit now stands at $358 billion, with a temporary seasonal increase to $365 billion permitted within each fiscal year. These limits apply mainly to the direct Treasury debt and do not cover most of the publicly issued agency debt. As a result of the unusually large increase in special Treasury issues to Government trust funds for investment of their surplus receipts in the latter half of the fiscal year, the direct Treasury debt will be relatively high, even though a budget surplus. is in prospect and borrowing from the public will decline. It may be necessary, therefore, within the next few months, to revise the present debt limit. Even if this does not prove necessary at that time, the need for such action will, in all probability, arise next fall, when budget receipts will be seasonally low.
FEDERAL DEBT AND BUDGET FINANCING
[End of fiscal yeas, In billions]
Description 1968 1969 1970
actual estimate estimate
Federal debt held by the public $290.6 $276.6 $272.6
Plus: Debt held by Federal agencies and trust funds 79.1 88.6 98.9
Equals: Gross Federal debt 369.7 365.2 371. 5
Treasury debt1 345.3 350.2 357.4
Other agency debt 24.4 15.0 14.1
Net borrowing from the public or repayment of borrowing (-) 23.1 -3.1 -4.0
Other means of financing 2.1 0.7 0.6
Total budget financing 25.2 2-2.4 -3.4
Total budget surplus or deficit (-) -25.2 2.4 3.4
1 Excludes notes issued to the International Monetary Fund.
2 Excludes $10.8 billion of net credits for conversion of certain mixed-ownership credit institutions to private ownership.
THE SETTING OF PRIORITIES
The overall - size of the Federal budget reflects the needs and demands for public services as a whole. The - composition of the budget reveals much about the Nation's priorities.
As the population grows and the economy expands, outlays for such public services as improvements in our national parks and other Federal recreation areas, air safety, law enforcement, and the collection of taxes and customs duties inevitably increase.
In other areas--such as space exploration, veterans benefits, farm price supports, housing aids, and conservation of our natural resources--the Federal Government has undertaken long-range commitments and programs. And, in recent decades, the Government has responded to urgent national social problems by launching programs to reduce unemployment of our workers, protect the incomes and health of our older citizens, revitalize urban areas, attack the sources of poverty, improve educational opportunities for our children and youth, and ensure equal treatment and justice for all Americans.
Outlays for national defense are the heaviest single expense of the Federal Government, representing more than two-fifths of the total budget. Defense outlays in 1970 will be $28.0 billion higher than in 1964, largely reflecting the costs of supporting our efforts in Vietnam.
Within the remainder of the budget, there have been significant shifts in emphasis in these 6 years.
As we have increased our efforts to widen the opportunities for the disadvantaged, and improve the quality of life for all Americans, outlays for major social programs have risen by $37.4 billion, more than doubling since 1964. This is twice the rate of increase of outlays for any other category of Government programs.
Nearly two-fifths of the increase in these social programs is for social security and other social insurance trust fund benefits to ease the burdens of income loss because of retirement or unemployment. But among the most rapidly growing Federal programs have been those which represent investment in human resources--through education, manpower training, improved health care, and aid to the needy.
More than one-tenth of total budget outlays are for unavoidable interest costs and for benefits and services to veterans. These show a combined increase of $8.2 billion between 1964 and 1970, representing a growth of 53%.
Outlays for all the other programs of the Federal Government are estimated at $24.9 billion in 1970, compared with $22.1 billion in 1964. The rise of only one-eighth for these programs in 6 years reflects the general policy throughout the budget of providing increases strictly on a selective basis, giving highest priority to programs which strike at the most urgent problems, holding down those with less urgency, and reducing outlays wherever possible and appropriate to current priorities.
During the six-year period, 1964 to 1970, annual budget outlays will have increased by $76.7 billion, from a total of $118.6 billion in fiscal year 1964 to an estimated $195.3 billion for 1970.
Nevertheless, Federal outlays as a proportion of gross national product--that is, as a share of our total economy--have remained at about one-fifth for the past 15 years. Excluding special Vietnam costs and the self-financed social insurance trust funds, outlays have been declining as a share of the Nation's output.
CHANGING STRUCTURE OF FEDERAL BUDGET OUTLAYS
[Fiscal years. In billions]
Program 1964 1968 1969 1970 Change,
actual actual estimate estimate 1964-1970
Subtotal, major social programs 30.4 53.7 59.8 67.8 +37.4
Interest 9.8 13.7 15.2 16.0 +6.1
Total 118.6 178.9 183.7 195.3 +76.7
BUDGET OUTLAYS AS A PERCENTAGE OF GROSS NATIONAL PRODUCT
1960 1965 1968 1969 1970
actual actual actual estimate estimate
*Less than 0.05%.
In the budgets covering the years of my administration, including the budget I am transmitting today, the Federal Government will have:
Provided $969 billion for programs to improve the lives of our citizens and to protect the Nation's security. About two-thirds of the total increase in outlays are in domestic activities.
Received $936 billion in revenues to finance Federal defense and civilian programs.
The total deficit in the fiscal years 1965 through 1970 is estimated at $33 1/2 billion. That deficit, however, is more than offset by over $35 billion in lower taxes returned to individuals, families, and corporations during this period as a result of the reduced tax rates put into effect shortly after I became President. This reduction takes into account increases in social security taxes to provide higher benefits, and extension of the income tax surcharge and present automobile and telephone excise tax rates through 1970.
The expansion of the Federal Government's social programs in recent years is highlighted by looking separately at selected areas in which the Government is making important contributions to improving the quality of American life. Many of the Government's efforts to develop the Nation's human resources and aid the deprived contribute to more than one important social objective. Outlays devoted to attacking the sources and symptoms of poverty, for example, take the form of improved educational opportunities, health services, manpower training, income security, or a combination of all of these.
The figures used in the following sections are designed to show the full range of Federal activities in the fields covered. They are therefore more inclusive than the functional data used in adding to the budget total, and contain some duplication. However, they do offer a broad perspective of the trends and accomplishments in the total Federal effort to resolve urgent national problems.
HOUSING.--Last year I recommended, and the Congress enacted, the Housing and Urban Development Act of 1968 to fulfill a goal set by this Nation almost two decades ago---"a decent home and a suitable living environment for every American family."
In the years since passage of the Housing Act of 1949, the Nation has made progress in meeting housing needs. However, the goal of decent housing is still unfulfilled for many Americans.
The 1968 Act will involve the Federal Government in a new and closer partnership with private industry and labor to provide 26 million new or rehabilitated homes and apartments over the next 10 years. A significant part of this new program will be Federal assistance for 6 million dwelling units to assure adequate housing for families with meager resources. The initial goal is to build or repair 700,000 homes and apartments for low and moderate income urban and rural families in the first 2 years. Both the Department of Housing and Urban Development and the Department of Agriculture are involved in this major undertaking.
The Housing Act of 1968 is the most significant and comprehensive action in the Nation's history to bring decent, safe, and sanitary housing to all Americans. Its provisions include:
A new home ownership assistance program to enable lower income families to own homes--a goal which has previously been beyond the resources of these families.
A new rental housing assistance program, in order to make it possible for lower income families and elderly persons to obtain decent shelter for 25% of their income.
Establishment of an insured loan program in the Farmers Home Administration to provide assistance for lower income housing in rural areas, at interest rates as low as 1%.
The creation of New Communities to complement our efforts to revitalize the inner city.
Improved services in public housing developments so that tenants can take better advantage of job and education opportunities, and become more involved in solving the problems of the developments in which they live.
Expanded use of rent supplements to enable families eligible for public housing to rent new or rehabilitated private housing, for which they will pay a minimum of 25% of the family's income.
Encouragement for the establishment of national housing partnerships, in which major corporations can work with local builders to help increase housing production.
Private financing is essential if the goals of the Housing and Urban Development Act of 1968 are to be achieved. In addition to the private financing, the 1970 budget contains $1.1 billion in outlays by the Department of Housing and Urban Development for assistance for low and moderate income housing.
We must bring an end to discrimination against prospective homebuyers or renters based on race, color, religion, or national origin. Since January 1, 1969, the fair housing provisions of the 1968 Civil Rights Act have been applicable to 20 million dwelling units. An estimated 55 million additional units will be covered in 1970. The budget provides for the Department of Housing and Urban Development to carry out its responsibilities for education, investigation, and conciliation under the act, and for the Department of Justice to start investigating patterns of discrimination in housing and to take cases to court where conciliation efforts fail.
The massive housing needs of our growing Nation can only be met through a major commitment by governments at all levels working with private industry and labor to provide suitable housing for all Americans-and to eliminate the rat-infested city slum and the dilapidated shacks which dot the countryside. We have now made such a commitment.
AIDS TO URBAN AREAS.--America is an urban nation. Almost two-thirds of our people live in metropolitan areas--consisting of clusters of people and problems. More than 80% of the Nation's population growth between 1960 and 1966 occurred in such major urban centers.
The national interest in the cities could be explained solely in terms of these population statistics. But this explanation is not sufficient. Over a period of years, the American city has been plagued by problems which are now reaching crisis proportions--aggravated by multiple and overlapping governmental responsibilities and racial and economic separation. Central cities and suburbs are both hard-pressed to provide the public services required by their citizens. Their revenue sources lag behind service needs. Frequent tax increases--based mainly on property and retail sales--bear down heavily on the poor and middle-income families.
To meet the serious urban challenges of today, and to plan for a better tomorrow, the Federal Government is channeling steadily rising amounts of funds into these metropolitan areas. In part, these funds are used for direct Federal programs, such as social security benefits to individuals and construction of post offices. In addition, Federal grant-in-aid programs are increasingly focused on the special needs of the city. In 1964 we spent an estimated $5.6 billion, or 55% of total Federal grants in such areas. The 1970 budget provides $16.7 billion for aid in metropolitan areas, about 67% of total Federal grants.
This increase in urban assistance is the result of both new programs and the reshaping of existing efforts.
To help meet the financial needs of the Nation's fastest growing urban areas, I recommend legislation to create a federally assisted Urban Development Bank. This Bank will provide long-term financing and technical assistance for capital improvements vitally needed by urban communities, large and small.
The Model Cities program is concentrating all available resources in a comprehensive attack on neighborhood social and physical blight. I am requesting $750 million for 1970 and $1,250 million for 1971 to provide special supplementary grants to the cities participating in the program.
Other existing programs are being molded into more effective patterns for urban use. The urban renewal program, for example, is giving priority to city actions which increase the supply of low-income housing or jobs for the unemployed. A new approach, enacted last year, will allow cities to schedule renewal as they do other capital expenditures, speed renewal activity, and obtain annual Federal grants for a citywide program, rather than grants for single projects. The Congress has already provided $750 million for urban renewal for 1970. To assure continued progress, I recommend an additional $250 million for 1970 and another $1,250 million for 1971.
Although sufficient funds must be available to permit concentrated development, we know that money alone is not enough. To be effective, the funds provided must aid local plans developed with the involvement of the entire community. Both the Community Action and the Model Cities programs help communities carry out their own plans, and require that the plans be developed with the participation of the citizens concerned, an essential ingredient in revitalizing blighted areas of our cities.
During 1970, 150 cities will be on their way to shaping Model Neighborhoods, and some 1,000 Community Action programs will actively continue to help localities and their citizens find their own solutions to the acute problems of poverty they now endure.
A concerted effort is also being launched to increase the number of independent businessmen from racial or ethnic minority groups. The Small Business Administration will make or guarantee loans valued at more than $300 million in 1970 for this purpose-almost a tenfold increase in just 2 years. In addition, the Special Impact programs financed under the Economic Opportunity Act will provide for economic development of disadvantaged communities, including encouragement of local businesses, and incentives for industry to locate in these communities and provide jobs and training for local residents.
We have set forth on an ambitious and challenging task--reclaiming the American city for ourselves and our posterity.
CRIME CONTROL--The first business of government is public order. This Administration has made public safety and order one of its principal concerns. Since 1964, Federal outlays aimed at crime reduction have risen each year, and will approach $900 million in 1970.
We have moved forward on two fronts:
Improved law enforcement at the State and local level, where the primary responsibility rests.
Strengthened Federal Government support through its own enforcement agencies and by expanded aid to States and localities.
The National Crime Commission, appointed in 1965, called attention to our mounting crime problem, the need for modernizing our entire system of criminal justice, and the necessity for additional resources to be devoted to law enforcement. The Commission recommended as a primary thrust, a major Federal effort to improve the administration of justice by assisting and strengthening law enforcement in our States and communities.
The Crime Control and Safe Streets Act, proposed in 1967 and enacted last year, grew out of this recommendation. This landmark law represents the first Federal program for direct major assistance to States and cities to combat lawlessness, bolster law enforcement, and improve court and correctional systems. Its provisions offer a full range of anticrime activity through grants to States and localities, academic assistance to improve the quality of law enforcement manpower, and a research and development effort to bring the knowledge of the physical and social sciences more sharply to bear on the problem of crime.
Also based on this administration's recommendation, the Congress last year enacted the Juvenile Delinquency Prevention and Control Act. This program authorizes grants to assist States and local agencies in dealing with youths individually in their own communities, and in providing special community treatment facilities. Through the use of these facilities, much of the stigma associated with jail and prison environment will be avoided and a barrier to rehabilitation will be removed.
This budget includes outlays of $206 million in 1970 for these two new programs to fight crime and delinquency at the State and local level.
We are also substantially increasing the range and the impact of Federal criminal law and effectively strengthening Federal enforcement agencies.
Other legislative milestones to strengthen the effort toward reducing crime and improving the administration of justice are:
The Gun Control Act of 1968, which regulates the import, manufacture, and distribution of guns.
The Prisoner Rehabilitation Act and the Narcotic Addict Rehabilitation Act, which represent major steps toward returning law violators to society better equipped to be responsible citizens.
Provision of criminal penalties for the illegal manufacture, sale, distribution, or possession of LSD and certain other drugs.
Laws to reinforce the drive against organized crime by easing the gathering of competent evidence, deterring obstruction of criminal investigations, and permitting the Federal Government to attack loan sharking, an activity that provides organized crime with its second largest source of income.
Action has also been taken to strengthen directly the law enforcement agencies of the Federal Government:
The staff of the Federal Bureau of Investigation has increased by over 15% since 1964.
A new FBI Academy is being built which will permit an increase in the number of State and local law enforcement personnel trained from 200 to 3,000 annually.
A new Bureau of Narcotics and Dangerous Drugs has been established in the Department of Justice, effectively consolidating functions previously performed separately in the Treasury Department and the Department of Health, Education, and Welfare.
The Treasury Department's law enforcement staff dealing with counterfeiting, forgery, contraband, and tax fraud has been increased. The Department is taking the lead in planning for a new training center for law enforcement personnel of the Federal Government.
The National Crime Information Center, which began operation in the FBI in 1967, computerizes information on crime, and enables States and cities to make direct requests of the system for information that is instantly available regarding law violators and stolen property.
These and other advances provide a firm basis for an improved anticrime effort. As an urgent next step, the Congress should enact legislation requiring Federal gun registration and licensing, to reduce the tragically large number of violent crimes and deaths involving firearms. A stronger anti-gambling law is also needed to strike at organized crime. Further progress will require both increases in resources and bold new approaches to crime prevention and rehabilitation of criminals to turn them permanently away from crime.
EDUCATION.--This Administration has sought two goals in American education above all others:
That every child, regardless of family income, race, or place of residence, should have an opportunity for all the education he wants and can absorb.
That the schools and colleges should undergo continuing regeneration to improve the quality of education--through experimentation with new materials and methods, new ways of using staff, and new organizations.
The years 1964 to 1970 are witness to an unprecedented growth in Federal support for education. Total Federal outlays for education are estimated at $9.8 billion in 1970, compared with $3.1 billion in 1964. Federal funds represented about 9% of total national expenditures for schools and colleges in 1964. They now equal approximately 14% of the total--including 8% of the support for elementary and secondary education, and 23% for higher education.
This has been a period in which 60 education measures have been enacted, including such landmarks as the Elementary and Secondary Education Act of 1965, the Higher Education Act of 1965, the Vocational Education Amendments of 1968, and the Higher Education Amendments of 1968. These and other laws have enabled us to make major strides toward the realization of our education goals.
We are now assisting in the education of 9 million children from low-income families under Title I of the Elementary and Secondary Education Act of 1965.
We are providing a Head Start for 716,000 preschool children, many of whom would otherwise enter school with two strikes against them, and Follow Through for 63,500 children to preserve their gains.
About 182,000 children who suffer mental or physical handicaps requiring special educational methods are now enrolled in classes with Federal support.
None of these programs were available in 1964.
Under the budget proposals for 1970, college students will receive a total of a million grants, loans, and interest subsidies for guaranteed loans compared with 247,000 in 1964. This assistance is reaching about 1 out of every 4 students.
Between 1965 and 1970, the Federal Government will have assisted in the construction of more than $9 billion worth of college classrooms, libraries, and other facilities, providing space needed to cope with rapidly expanding enrollments. This investment is helping colleges and universities to achieve a level of construction almost double the level of the previous 5 years.
About 500,000 students will receive support for education and training in 1970 under Veterans Administration programs--principally the GI bill--compared with about 30,000 in 1964.
More than 4 million high school students and 845,000 technical students will be enrolled in federally supported vocational education programs in 1970, an increase of 200% in 5 years.
The past few years have been a period of innovation and experimentation to improve the quality of American education. They have been years of:
The "new" physics, math, and history;
Introduction of more effective ways to use personnel in the schools;
Improvement in the quality of teaching through graduate fellowships and short-term refresher training which will reach about one teacher out of 11 in 1970; and
Creation of the Teacher Corps, which in 1970 will bring 2,400 talented and concerned young people into the most demanding classes in the Nation--those in our city slums and poor rural areas.
In recent years, the Federal investment in academic research and development has continued at a high level--mainly through grants by the Department of Health, Education, and Welfare, the Department of Defense, and the National Science Foundation. Federal funds represent about two-thirds of the total research and development performed by universities. They have been of mutual benefit to the institutions--by strengthening their courses of graduate study--and to the people of the Nation, whose health, security, and amenities of daily life are dependent on the results of this research.
The Nation can take great pride in its recent educational advances. For the future, we should set as a national goal a cooperative Federal--State--local government effort to offer quality preschool education not only to poor children, but to all children. And we must increase our efforts to meet the growing financial needs of higher education and to remove all financial barriers which prevent some American children from attending college.
We look forward to further progress in developing a creative and revitalized educational system which draws on the growing store of new and exciting ways of fostering learning and helping every American to fulfill his potential.
MANPOWER.--At a time when more Americans are productively employed than ever before, millions of Americans lack the skills and opportunity to earn a decent living. To help overcome this problem, the Federal Government has significantly expanded its manpower programs.
Outlays for these programs are estimated to rise from $735 million in 1964 to $3.5 billion in 1970, about a fivefold increase. As a result, 2 million individuals will be helped to find suitable jobs, compared with 278,000 individuals in 1964.
Most in need of assistance are those who are ill-equipped for gainful employment through lack of education and job skills, or are handicapped by racial and other discrimination, physical disabilities, and deprived environments. This group has received increasing attention in the Government's manpower development efforts. In 1970, the poor will comprise over 85% of those aided.
Last year I began a new on-the-job training effort, the program for Job Opportunities in the Business Sector (JOBS), to enlist the services of private industry and labor in providing training and employment for the disadvantaged. With the able support of the National Alliance of Businessmen, JOBS has already reached its initial goal of employing 100,000 men and women in the Nation's 50 largest cities almost 6 months ahead of schedule. This budget provides funds for 140,000 additional JOBS training slots in 1970, double the number in 1969. With the continued commitment of the private sector, the goal of 500,000 individuals in jobs by June 1971 will be attained.
In 1970, the broad range of manpower services provided our Nation's population will be expanded:
The Job Corps will provide education and training for 70,000 young people from the poorest families, to help them become productive, self-supporting adults.
The Neighborhood Youth Corps will provide 100,000 part-time job opportunities during the school year and nearly 300,000 such opportunities during the summer months to help needy high school students remain in school. It will also provide work and training experience for over 100,000 out-of-school youths and adults.
The Vocational Rehabilitation program will restore 265,000 of the physically and mentally handicapped to productive lives, 145,000 more than in 1964.
The new Work Incentive (WIN) program, started in 1969, will be operational for the full year, providing training, work experience, and placement opportunities for 175,000 welfare recipients. Care will be provided for 146,000 children of these recipients, to enable them to stay on the job.
The Concentrated Employment Program (CEP), started in 1967, will operate in 82 urban and rural areas, providing concentrated and comprehensive manpower services to 115,000 individuals. These services range from seeking out and recruiting the hard core unemployed, to testing, counseling, and providing them with medical and educational services, through training and placement in jobs.
Other programs will train over 500,000 people in 1970, compared with about 100, 000 in 1964, and will provide job placement services for over 12 million people. These programs include:
Classroom and on-the-job training under the Manpower Development and Training Act,
The New Careers program to open subprofessional jobs in the public sector to the disadvantaged,
Training of servicemen by the Department of Defense which helps prepare them for civilian jobs, including special training of those from disadvantaged backgrounds,
Veterans Assistance Centers to help newly-discharged veterans through counseling and placement in suitable jobs, and
Training provided for Indians by the Department of the Interior.
Helping those who want to work to get a job provides benefits to the entire Nation-to the individual, self-respect; to his family, a better and more secure life; and to society as a whole, a reduced welfare burden and expanded economic activity.
HEALTH.--A primary goal of our Nation is to provide decent medical care for every citizen. Toward this end, Federal outlays for health in 1970 will rise to an estimated $18.3 billion, an almost fourfold increase since 1964. As a proportion of the Nation's total health expenditures, Federal outlays will increase from 13% in 1964 to about 30% in 1970.
The record of the last 5 years has been truly remarkable. Over 40 health laws have been enacted, enabling more people than ever before to get adequate health care.
Twenty million Americans over the age of 65 are being assured financial assistance for their health care needs through the Medicare program.
The Medicaid program will help to meet the medical costs of more than 10 million men, women, and children from low-income families in 1970.
Infant mortality has been reduced from 24.8 per 1,000 births in 1964 to a new low of 22.1 in 1967, sparing an estimated 14,000 lives.
Over 20 million children have been inoculated with a new measles vaccine, and cases of measles have dropped from 400,000 in 1963 to an estimated 20,000 in 1968.
In recent years, major investments have been made to develop the - health resources needed now and for the future. Outlays in 1970 for this purpose are estimated at $3.5 billion compared with $1.8 billion in 1964.
To improve the organization and delivery of health services, regional medical programs have been inaugurated under legislation enacted in 1965, helping to disseminate the latest advances in medical knowledge and techniques across the Nation.
Work has also been started on studies aimed at controlling the rise in medical costs. Legislation is needed to enable the Government to install new methods of payment, as they prove effective, for providing quality care at lower costs. The legislation should also establish a reasonable cost range to govern reimbursements for drugs now covered by Federal programs involving payment for health care.
Funds invested since 1964 have built 331 community mental health centers serving areas containing 51 million people, and 240 community mental retardation centers serving 66,000 people. Such facilities were nonexistent only a few years ago.
The Office of Economic Opportunity has supported the development of 48 neighborhood health centers to demonstrate more effective ways of providing comprehensive family health services to the poor.
The Federal-State Partnership for Health program is moving forward in the development of comprehensive health plans on a State and area-wide basis.
Hospital and long-term care facilities have recently been constructed or renovated under the Hill-Burton program at the rate of about 25,000 beds per year. This program expires at the end of 1970, and should be revised to provide Federal loan guarantees and interest subsidies for modernizing our hospitals and building needed new facilities. Grants should also be provided to help build special innovative facilities.
To reduce the shortage of physicians, dentists, nurses, and other health workers, the Federal Government will have provided during the 1964-69 period $859 million to assist and enlarge the schools training health professionals. More than 40,000 medical and dental students and 45,000 nurse trainees will have received financial assistance over this period. Total outlays for training and education activities related to health professions will reach $932 million in 1970, compared with $298 million in 1964.
Outlays for - health services will rise to $14.0 billion in 1970, with $9.8 billion going for the Medicare and Medicaid programs, and $3.1 billion for the health care programs of the Veterans Administration and the Department of Defense. An estimated 9.5 million aged individuals will receive assistance in paying their hospital and doctor bills through Medicare payments. Medicaid will provide medical assistance for more than 10 million needy people. The Veterans Administration will provide hospital and nursing treatment for an estimated 865,000 patients in 1970, and the Defense Department will make medical care available to over 9 million servicemen, retired military personnel, and their dependents.
Outlays for programs directed to - preventing and controlling health problems will rise to $804 million in 1970, compared with $393 million in 1964. Of the total, $522 million will go for disease prevention and control, $102 million for air pollution and other environmental control activities, and $180 million for consumer protection.
To provide for further improvements in health programs beyond 1970, legislation should be enacted to:
Extend Medicare protection to the almost 2 million individuals who are totally disabled and will be receiving social security or railroad retirement cash benefits;
Provide, for families who cannot afford it, access to health services from prenatal care for the mother to complete medical care for the child through the age of one; and
Offer, within the next decade, protection to the families of all children against the costs of catastrophic illness or injuries.
FOOD ASSISTANCE--Most Americans enjoy a wholesome and adequate diet, knowing persistent hunger only as something to be imagined rather than felt. But for some Americans, hunger and malnutrition are a reality. Even where hunger and malnutrition are not obvious, a chronically poor diet can produce an insidious effect on health, intellect, and productivity. Whenever this occurs, it is a personal tragedy and an affront to our concept of the dignity of man.
We have done much in recent years to overcome the problems of hunger and malnutrition among the poor of our Nation. Federal outlays for food assistance to the poor are estimated at close to $1 billion in 1970, three and a half times the amount spent in 1964.
FEDERAL FOOD ASSISTANCE PROGRAMS FOR THE POOR
[Fiscal years. In millions]
Program 1961 1964 1968 1969 1970
actual actual actual estimate estimate
Food stamp program $1 $30 $187 $273 $338
Total 173 269 403 665 956
At the beginning of 1961, fewer than 4 million people were receiving surplus food items under Federal programs, and the food distributed was worth roughly $2.20 per month per person. A - food stamp program was started in 1961 to help overcome the inadequacy of this assistance to poor families. In 1970, food stamps, on the average, will be adding $6.80 a month per person to the food purchasing power of each participating family. For the poorest families, the addition to the food budget can amount to more than $15.00 per person per month. This program alone will reach an estimated 3.9 million persons.
We have also enlarged and improved the - direct distribution program, so that the Federal Government now makes available 22 foods which, when combined with other carefully selected and inexpensive foods, can provide needy families with an adequate diet. Commodities will be distributed to more than 4 million persons by the end of 1970.
Adequate food is especially important in the formative stages of life. Accordingly, under a program begun in 1968 the Federal Government is expanding donations of - supplementary food packages to families in which there are infants or expectant or nursing mothers. The budget includes funds to provide about 1 million persons with supplementary food packages through this program by the end of 1970, compared with 225,000 at the end of 1969.
No American school child should have to suffer for lack of food because his family cannot afford the price. In 1964, our - food assistance for children reached only 1.6 million of the then 9.4 million school-age children from poor families. Under the proposals in this budget, by the end of 1970, we will have the capacity to help meet the dietary needs of all the poor children in school.
The growth in food assistance programs over the last 5 years reflects the judgment of this administration that hunger and malnutrition in the United States are intolerable. We have come far in our struggle to banish these long-standing conditions, but further efforts are needed by all levels of Government-State, local, and Federal--as well as by the private sector. The Nation cannot be satisfied until no man, woman, or child in it is hungry or undernourished because of poverty beyond his control.
INCOME SECURITY.--The vast majority of Americans are economically independent throughout their working years, but face separation from the labor force at some point. Many other Americans, because of age, disability, family responsibilities, or other factors, are unable to earn the income needed for their minimum living requirements. To help assure - all Americans greater financial security now and for the future, the Federal Government has developed programs to provide retirement benefits, unemployment insurance, public assistance, and other cash payments. Many of these benefits are financed through payroll taxes.
Income security programs have been substantially improved in recent years, both through increased benefit rates and expanded coverage. As a result:
Cash payments will rise from $29 billion in 1964 to more than $47 billion in 1970.
Over that period, the number of people receiving payments will increase from about 35 million to an estimated 44 million, reflecting not only population growth but also the extension of eligibility to the very old, young disabled workers, and disabled widows.
These programs still face problems of gaps in coverage and inadequate payment levels. In recognition of this situation, I appointed a commission in 1968 to review the entire range of income maintenance programs. A final report is expected within the next year which should provide a basis for constructive change.
- Retirement benefits.--The Social Security Act of 1935 committed the Federal Government to fostering a life of dignity and economic independence for the older American. We have made considerable progress towards this objective in the last 30 years.
The social security system now covers 90% cf all working Americans. Almost all other workers are covered by Federal retirement systems providing protection for railroad workers, Federal employees, and military personnel. Combined, the Federal retirement programs will pay an estimated $23 billion in benefits in 1970 under existing laws, a 69% increase over 1964.
During my administration, three major improvements in social security benefits have been enacted. These improvements:
Raised the average benefit to a retired worker from $74 to $98 per month.
Raised the minimum monthly retirement benefits from $40 to $55.
Provided special benefit payments to more than 700,000 senior citizens aged 72 and over who were not previously eligible.
To enable social security beneficiaries to share more equitably in the productivity of our Nation, I am recommending, effective January 1, 1970:
A 13% overall increase in social security benefits including:
--at least a 10% increase for almost 25 million social security beneficiaries,
--a 45% increase to $80 in monthly benefits for the 2 million receiving minimum benefits,
--an increase from $1,680 to $1,800 a year in the amount of money which beneficiaries may earn without losing benefits, and
--a minimum benefit of $100 a month to individuals who have worked in covered employment for 20 years. These changes will add $1.6 billion to the incomes of social security beneficiaries in fiscal year 1970.
- Survivor benefits.--Special efforts have been made to improve assistance to families whose economic security is endangered by the loss of the breadwinner. These survivor benefits will total $8.4 billion in 1970.
• Average monthly social security benefits for widows have been increased from $68 in 1964 to $92 in 1970.
• The age at which widows without children can collect benefits has been lowered, while the age at which children in school can receive benefits has been raised.
• As a result of such liberalizations, and the normal growth in the number of beneficiaries, total social security payments for survivors will rise from $3.5 billion in 1964 to $6.6 billion in 1970. In the same period, the annual average payment to each survivor will rise from about $800 to $1,020.
To help the young war widow, a "widow's GI Bill" was enacted in 1968, authorizing payment of a $130 monthly allowance to a widow enrolled in an educational or training course preparing her for a good job and financial independence. Similar benefits are given to wives of veterans totally disabled in military service. In 1970, nearly 9,000 widows and wives will be enrolled at a cost of $17 million.
- Disability benefits.--Federal programs assist a broad spectrum of the disabled. The largest dollar share goes to those disabled in their productive years, in the form of cash assistance and rehabilitation. For this group, the 1970 budget will finance a total of $6.0 billion in cash benefits to 5.1 million beneficiaries.
An estimated 2 million disabled veterans will receive $2.2 billion in compensation payments, and the social security system will provide 2.6 million eligible disabled persons With $2.6 billion in benefits.
As part of my proposed improvements in the social security system, I recommend that, effective July 1, 1970, the waiting period for disability benefits be reduced from 6 months to 3 months, and eligibility not be limited to disabilities lasting more than one year.
In 1970, rehabilitation training will be provided for an estimated 12,000 veterans receiving service-connected compensation payments, 32,000 persons receiving public assistance, and 2,000 social security beneficiaries. Such training, estimated to cost $60 million in 1970, has enabled many disabled persons to achieve economic independence.
To overcome the shortcomings in coverage and benefits under State workmen's compensation laws, legislation should be enacted to assure adequate benefit levels and to extend coverage to most of the 20% of the Nation's work force not now covered, so that they will be protected against the loss of income and the cost of medical care from industrial accidents and diseases.
- Unemployment benefits.--A large share-about 75%--of the working force is protected against temporary periods of unemployment by the Federal-State unemployment insurance program. In 1970, benefits totaling $2.3 billion will be paid to a weekly average of 1.2 million workers. The unemployment insurance system should be improved by enactment of legislation to:
Raise benefit levels,
• Increase the duration of benefits and provide services to increase the employability of covered workers, and
• Correct abuses in the present system.
- Income support.--In 1970, an estimated 12.4 million persons will receive $5.9 billion in payments based on their need. Public assistance grants to the States will provide income maintenance payments to 10 million needy individuals who are elderly, blind, disabled, or members of families with dependent children. The 1970 budget includes $3.7 billion for this purpose. Pension assistance totaling $2.2 billion will be provided 2.3 million veterans and their survivors.
FEDERAL AID TO THE POOR--A major weapon in the fight against poverty is a growing economy, with full use of our human and physical resources. The overall economic expansion of the past 8 years has opened up countless new job opportunities for persons who would otherwise be unemployed or underemployed. And the benefits of our unparalleled levels of prosperity and productivity are widely distributed among our people.
Nevertheless, 22 million Americans still living under conditions of poverty do not enjoy the comforts and abundance most of us take for granted. There is no single cause of poverty, nor is there a single cure. Lack of education, inadequate or outmoded skills, poor health, racial injustice, substandard housing--these are the conditions on which poverty feeds. Without a concerted national effort, these conditions are passed along from one generation to the next, in a vicious cycle of hopelessness and dependency.
In 1964, the Nation launched a war on poverty designed to strike at its causes. This has called for both better coordination of programs already in existence to aid the poor and, more importantly, a determined effort to find new means for offering disadvantaged groups in urban and rural America a chance to develop their own capacities and become productive members of our society.
The effort to eliminate poverty requires a comprehensive response to a wide range of physical and human needs. Under this approach, aid to the poor from programs of the Federal Government has risen sharply in recent years. The estimated $27.2 billion included in the 1970 budget for such aid represents an increase of $15.3 billion or 130% over 1964, and is almost three times the level of 1961. This increase reflects both the expansion of programs designed to attack poverty directly, and a greater focusing of other social programs on the problems of the poor and disadvantaged.
About three-fifths of the total aid provided currently takes the form of income and other assistance directed toward individual and family maintenance for the poor. The largest relative increases since 1964, however, are in education, job training and other employment aids, and health assistance, which promote greater self-reliance and provide the basis for material and cultural advancement. Outlays for these purposes will rise from 11% of total aid in 1964 to nearly 40% in 1970.
Since 1964, about 12 million citizens have moved out of the bonds of poverty. The past few years have necessarily involved considerable experimentation. We have had many successes and some failures. We knew from the start that elimination of this long-standing problem could not be accomplished quickly. But I continue to believe that we should not falter in our commitment to the basic objective of giving every American a chance to share in the promise of America. The investment involved will return many times its cost, with benefit for all of us.
FEDERAL AID TO THE POOR 1
[Fiscal years. In billions]
Category 1961 1964 1968 1969 1970
actual actual actual estimate estimate
Education $0.1 $0.1 $2.3 $2.2 $2.4
Employment assistance 0.1 0.2 1.6 2.0 2.4
Health assistance 0.7 1.0 4.1 5.0 5.8
Maintenance of individuals and families:
Income assistance 8.3 9.8 12.4 12.9 3.5
Total 9.8 11.9 22.1 24.4 27.2
*Less the $50 million.1Figures represent outlays, except for direct loan programs, in which they represent program levels.
The Economic Opportunity Act has been successfully administered by the Office of Economic Opportunity, and should be extended for two more years.
ACHIEVING EFFECTIVE GOVERNMENT
Good government involves more than good laws and intentions. To attain program goals effectively and provide Government services efficiently, we need:
• Proper organizational arrangements;
• Efficient and economical procedures and practices;
• Sound decision making processes; and
• Well-qualified personnel.
The vast size and scope of the activities carried out by the Federal Government makes the achievement of these objectives a difficult and unending job. As added functions are assumed or existing ones changed, we must constantly strive to see that the Government's organization and procedures stay in step with the new roles involved, that wasteful methods are uncovered and eliminated, and that the Government is responsive to the needs of the people. The American taxpayer expects and must receive an alert and effective public service.
The last 5 years have been a period of extensive organizational and management improvements. The Federal Government's structure has been better adapted to increasingly complex and multipurpose activities that require closer working relationships with State and local governments. Cost consciousness has been pressed in all the agencies of the Government. This work can never be finished, and further improvements must continue to be made.
IMPROVED GOVERNMENT ORGANIZATION,--The continuous drive for organizational improvements has been marked by four principal approaches:
- First, there has been a fundamental restructuring of organizations to provide a single focal point for leadership in broad functional areas. In 1964, the Office of Economic Opportunity was established to spearhead the planning, coordination, and operation of the national attack on poverty. Two new Cabinet agencies have also been established. In 1965, the Department of Housing and Urban Development was established to provide overall coordination of programs to improve our urban areas. In 1966, the Department of Transportation was created, bringing together a number of major transportation programs previously administered in separate agencies.
After thorough study of the Post Office Department, the Commission on Postal Organization has recommended a new corporate form of organization for the postal service under Federal ownership, providing for significant management and operating improvements. I urge enactment of legislation along the lines recommended by the Commission.
- Second, program responsibilities have been realigned, relating them more closely to agency missions. For example, in 1966, the operation and coordination of efforts to secure civil rights for all our citizens was strengthened by transfer of the Community Relations Service to the Department of Justice from the Department of Commerce. Also in that year, programs to combat water pollution were brought together by moving the Federal Water Pollution Control Administration from the Department of Health, Education, and Welfare to the Department of the Interior.
In 1968, a further consolidation of transportation programs was achieved through the transfer of programs for urban mass transportation facilities from the Department of Housing and Urban Development to the Department of Transportation. This leaves the Maritime Administration as the only major transportation agency still outside of the Department of Transportation. To help facilitate attainment of an efficient national transportation system, the Maritime Administration should be transferred from the Department of Commerce to the Department of Transportation.
- Third, internal organization and coordination of programs have been strengthened within a number of agencies. The Environmental Science Services Administration was established in the Department of Commerce, bringing together various related functions of that Department. A major reorganization of the customs activities of the Treasury Department has made possible better conduct of those functions. The welfare and health programs of the Department of Health, Education, and Welfare were reorganized to achieve better coordination and supervision.
- Fourth, cooperative interagency arrangements have been developed, where consolidation of related functions in a single agency has not proved practical or desirable. For example:
• Under an interagency agreement, only one preliminary application form is used for water and sewer grant and loan programs administered by several agencies.
• A special procedure at certain international airports speeds the clearance of incoming passengers through customs, immigration, health, and agricultural inspections.
Many of the improvements in Government organization were achieved under the provisions of the reorganization statute, which authorizes the President to submit reorganization plans to the Congress. The latest extension of this authority terminated on December 31, 1968. This statute should be extended again to permit the new President to continue to make adjustments and improvements in governmental structure to meet changing requirements.
A STRENGTHENED FEDERAL SYSTEM.--In our expanded efforts to attack complex domestic social and economic problems in our society, the Federal Government has relied heavily on the talents and resources of State and local governmental units. In recent years, States and localities have administered more than two-thirds of the total expenditures by all levels of government for domestic civilian programs, and have financed over half of that total from their own funds. Reliance on a partnership between all levels of government is in keeping with time-honored traditions-forged in the early days of the Republic, and reconfirmed with the passage of time.
To help cope with the relentless rise in public service requirements facing the Nation, the Federal Government has provided large-scale financial aid to the 50 States and their 80,000 local governments. Budget outlays for Federal aid will more than triple in the course of only a decade, rising from $7 billion in 1960 to about $25 billion in 1970. The increase from 1964 alone represents a doubling in amount. Between 1964 and 1970, Federal aids will have added a cumulative total of over $110 billion to State and local funds.
Federal grants to State and local governments now make up more than one-fifth of total Federal spending for civilian domestic programs, and represent about 18% of State and local revenues.
The recent rapid increase in both the number bet and scale of Federal grant programs has created some stress and complexity, pointing up the need for closer cooperation and coordination among the various levels of government. We have taken a number of steps in the last few years to meet this challenge.
Cooperation among the different levels of government has been facilitated by providing - clear paths of communication between the Federal Government, State Governors, and the thousands of Mayors and other local officials. I have opened these lines of communication even further by directing that the executive branch of the Federal Government - consult with State and local chief executives in developing rules and regulations, and on other matters that affect their governments. Through - training programs and grants, Federal agencies have assisted States and localities in improving the caliber of their personnel in selected program areas.
The Intergovernmental Cooperation Act of 1968 augments these measures by providing more program information to Governors and State legislatures, permitting the selective waiver of grant requirements that unduly restrict State and local operations, and involving State and local governments in the development, execution, and evaluation of Federal programs and projects.
Other steps have been taken to - reform and simplify procedures.
• We have relieved some of the administrative problems of State and local governments by consolidating a number of categorical grants-in-aid in the field of health. Similar measures in other program areas are necessary.
• Procedures have been simplified to speed up the processing of high-priority grants to State and local governments, including the use of a standard interagency application form for certain types of public works projects.
• Arrangements are being made for simplified interagency funding of certain State and local projects related to reducing poverty and juvenile delinquency. General authority should now be provided for joint funding simplification in all grant-in-aid programs.
These recent efforts have brought significant progress in improving intergovernmental communication and procedural arrangements. We must build on that progress through a continued and imaginative search for further improvements.
BETTER DECISION MAKING PROCESSES.--In the summer of 1965, I directed the development and application of a Government-wide Planning-Programing-Budgeting (PPB) system to improve the decision making processes by which resources are allocated among Federal programs, and by which the annual budget is prepared. Under this system, the departments and agencies are developing information and analyses that relate program planning and performance to identified goals and objectives. These goals are reviewed, alternate means of achieving them are identified, and the effectiveness and costs of the alternatives are compared in determining which to select. This is followed by evaluation of each program at suitable intervals.
During its 3 years in operation, the PPB system has improved substantially the basis for decision making within the executive branch. This year, new analyses have played a role in decisions about areas as diverse as the possible leasing of public lands for oil shale development, the choice of means to make materials in the Government's archives more widely available, and the urgency of increasing the effectiveness of family planning.
Twenty-two agencies, representing over 95% of the 1970 budget, are now operating within this system. The annual budget recommendations of these agencies are submitted for Executive consideration within a framework that permits better decisions on programs and alternatives in relation to objectives. A new Special Analysis, published this year for the first time, shows my recommendations for budget authority for selected agencies classified in terms of the program structures developed under the PPB system.
The example of the Federal Government in adopting improved procedures for reaching decisions has been followed by a number of State and local governments. This is a particularly promising development, both for the effectiveness of government at each level and for intergovernmental cooperation.
COST REDUCTION.--Shortly after I became President, I promised that in my administration the Government would conduct its operations with the utmost thrift and frugality, get a dollar's value for a dollar spent, and set an example of prudence and economy.
In 1965, a systematic, formal cost reduction program was initiated throughout the Federal Government. The key points of this new effort were that the head of each department and agency would:
• Assume direct supervision of a formal cost reduction program;
• Establish specific dollar cost reduction goals;
• Subject every major proposed expenditure to searching scrutiny in terms of costs and benefits;
• Employ independent means to verify savings; and
• Recommend high priority use of savings achieved.
Federal employees were asked to make cost reduction a personal goal and to redouble their efforts to achieve savings and conduct their work as efficiently as possible.
To cite only a few examples of accomplishments in the past year alone:
• The Department of Agriculture conducted a drive to reduce procurement and property management costs which produced savings of $13.4 million by using property that other agencies found to be in excess of their needs, consolidating orders, improving contract procedures, and conserving utilities.
• The National Aeronautics and Space Administration reported savings of $184 million last year under its formal contractor cost reduction program, in which 38 principal contractors actively participate.
• The Department of Defense achieved savings of $1.2 billion last year from more than 27,000 separate and validated management actions. As one example, the Air Force developed a way to repair the worn turbine shafts of jet engines, thus eliminating replacement costs of $2.4 million.
In order to broaden and strengthen the Government's drive for economy and efficiency in all its operations, I established an Advisory Council on Cost Reduction in 1967, with members selected from both Government and private life. The Council has been evaluating the cost reduction program, exploring opportunities for further savings, and consulting with leaders in business, industry, and research to draw on their experience and ideas for reducing costs.
A FAIR SELECTIVE SERVICE SYSTEM.-Over the last 10 years, the number of young men inducted into the Armed Forces from the eligible and available group has declined from 70% to 50%. This development has made it increasingly important that those called into military service are selected in an equitable manner.
It was my intention to develop a fair and impartial random system of selection (FAIR) and put it into effect by administrative action. However, in the Military Selective Service Act of 1967, the Congress prohibited such action without specific authorizing legislation. I believe that the Congress should now enact such legislation so that a FAIR selective service system can be instituted at an early date.
AN IMPROVED FEDERAL SERVICE.--Regardless of how appropriate our organization and administrative procedures are, the ultimate, effective delivery of services depends on people. The complex nature of the interagency and intergovernmental programs demands highly competent, well trained, imaginative public servants at all levels of government.
We must be in a position to recruit and retain skilled people willing to devote their careers to public service. They should not have to do this at personal sacrifice. In 1967, I therefore proposed, and the Congress enacted, legislation to increase the pay of Federal employees in several stages until it is comparable to pay for similar work in private employment. Under the law, the final step in achieving pay comparability is to occur in July 1969. This budget provides funds to fulfill that promise.
Prompt action is now needed to lessen the financial sacrifice currently required of high-ranking Federal officials--Members of the Congress, judges, and those in executive positions in all three branches of the Government. The Commission on Executive, Legislative, and judicial Salaries, which the Congress established in 1967, has concluded that higher rates of pay are urgently needed to improve the Government's ability to attract able men and women for these offices and positions. In accordance with the requirements of law, this budget includes a supplement which contains my recommendations on increased salary levels for these Federal officials.
This budget provides an allowance of $2.8 billion to cover the costs of pay increases in fiscal year 1970 for Federal military personnel and civilian employees, and for Government officials and executives.
In addition, consideration should be given in the near future to modernizing the military pay structure by converting to a full salary system and improving the retirement system.
This Nation remains firmly committed to a world of peace and human dignity. In seeking these goals, we have achieved great military strength with the sole aim of deterring and resisting aggression. We have continued to assist other nations struggling to provide a better life for their people. We are successfully pushing forward the frontiers of knowledge to outer space and promoting scientific and technological advances of enormous potential for benefit to mankind.
In recent years, we have taken significant strides toward expanding the opportunity for each American to:
• Develop his mind, skills, and earning power to their maximum potential.
• Contribute his full share to a society which respects and values differences in race, religion, or culture.
• Escape the withering bonds of poverty, which stifle and starve the spirit.
• Live in an environment free of pollution, in a community stimulating but safe, in a neighborhood diverse but harmonious, and in a home or apartment both adequate and available at a reasonable price.
We have come far in our journey, but we are still a long way from our destination. We can be justly proud of our recent achievements, but we must look ahead to those victories yet to be won.
No course of action can have a higher purpose than that of furthering world peace and human freedom. In this budget, as in my previous budgets, I have pursued that course to the best of my ability. I have faith that America will not now fail in its resolve, nor founder in its responsibility, to press ahead for freedom and justice at home and abroad.
LYNDON B. JOHNSON
January 15, 1969
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 1970. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/236102