Annual Budget Message to the Congress, Fiscal Year 1971.
To the Congress of the United States:
I have pledged to the American people that I would submit a balanced budget for 1971. This is particularly necessary because the cost of living has been rising rapidly for the past five years.
The budget I send to you today--the first for which I bear full responsibility as President--fulfills that pledge.
Outlays are estimated at $200.8 billion, with receipts at $202.1 billion, yielding a surplus of $1.3 billion.
This anti-inflationary budget begins the necessary process of reordering our national priorities. For the first time in two full decades, the Federal Government will spend more money on human resource programs than on national defense.
A budget must be a blueprint for the future. In the 1971 budget, I seek not only to address today's needs, but also to anticipate tomorrow's challenges. Only with a plan that looks to the years ahead can we gain control over the long-range use of our resources, and mark a clear course for meeting national goals. Most worthwhile objectives are costly. Therefore, we must pursue our purposes in an orderly fashion, measuring our efforts to accord with the budget resources likely to be available.
A balanced plan for resource allocation does not require Federal domination. On the contrary, by placing greater reliance on private initiative and State and local governments, we can more effectively mobilize our total resources to achieve national purposes over the long run.
This comprehensive perspective was instrumental in shaping the 1971 budget.
THE BUDGET AT A GLANCE
1969 1970 1971
Item actual estimate estimate
Receipts $187. 8 $199.4 $202. 1
Outlays 184. 6 197.9 200. 8
Surplus 3.2 1. 5 1. 3
With this budget we will move ahead to:
• Meet our international responsibilities by seeking an honorable peace in Vietnam, by maintaining sufficient military power to deter potential aggressors, by exploring with the Soviet Union possible limitations on strategic arms, and by encouraging multilateral aid, expanded trade, and a greater measure of economic serf-help for developing nations of the world.
• Help restore economic stability by holding down spending in order to provide another budget surplus and to relieve pressure on prices--and to achieve that surplus without income or excise tax increases.
• Launch a major effort to improve environmental quality by attacking air and water pollution, by providing more recreation opportunities, and by developing a better understanding of our environment and man's impact upon it.
• Inaugurate the Family Assistance Program, fundamentally reforming outmoded welfare programs, by encouraging family stability and providing incentives for work and training.
• Provide major advances in our programs to reduce crime.
• Foster basic reforms in Government programs and processes by making entire program systems operate more effectively, and by encouraging responsible decentralization of decision-making.
The proposals in this budget are important steps toward these goals. Even so, taking these steps requires difficult choices.
The need to choose among alternative uses of our resources is a basic fact of budgetary life. In the past few years, too many hard choices were avoided. Inflation was permitted to steal purchasing power from us all, and to work particular hardship on the poor and the millions of Americans who live on fixed incomes, as well as on the housing industry, small businesses, and State and local governments.
Indeed, the willingness to make hard choices is the driving force behind my 1971 budget proposals.
OVERVIEW OF THE 1971 BUDGET
All Government spending flows from budget authority that is enacted by the Congress. Budget authority for 1971 is estimated at $218.0 billion. Of the total, $148.1 billion will require current action by the Congress, with the balance becoming available automatically as the result of past congressional actions.
Budget outlays for 1971 will be held to $200.8 billion, which is only $2.9 billion more than in 1970. The 1971 total consists of $200.1 billion in expenditures and $0.7 billion for net lending.
SUMMARY OF THE BUDGET AND FINANCIAL PLAN
[Fiscal years. In billions]
1969 1970 1971
Description actual estimate estimate
Budget authority (largely appropriations):
Total budget authority 196. 2 209. 1 218. 0
Receipts, expenditures, and net lending :
Expenditure account surplus 4. 7 4. 4 2.0
Net lending 1. 5 2.9 0.7
Budget surplus 3. 2 1. 5 1. 3
Total budget financing -- 3. 2 -- 1. 5 --1.3
Outstanding debt, end of year:
Gross Federal debt $369. 8 367. 1 374. 7 382. 5
Debt held by the public 190. 6 279.5 278. 5 977.3
Outstanding Federal and federally assisted credit,
end of year:
Direct loans 1 55.3 46. 9 59. 2 53.8
Guaranteed and insured loans 2 97. 6 105. 1 107.6 11 9. 9
Direct loans by Government-sponsored
agencies 10. 9 27.2 38. 5 46. 6
1Including loans in expenditure account.
2Excluding loans held by Government or Government-sponsored agencies.
Revenues are estimated to be $202.1 billion in 1971, exceeding 1970 levels by only $2.7 billion. The small size of the increase reflects the termination of the income tax surcharge and the provisions of the recently enacted Tax Reform Act of 1969.
The surplus for 1971, an estimated $ 1.3 billion, is essential both to stem persistent inflationary pressures and to relieve hard-pressed financial markets.
Budget surpluses enable us to keep Federal debt held by the public from rising. This measure of debt will decline slightly from $279.5 billion at the end of fiscal year 1969 to $278.5 billion at the end of 1970, and drop still further to an estimated $277.3 billion by the end of 1971.
Federal civilian employment--as measured by those in full-time, permanent positions--will decline for the second consecutive year. This decline reflects the tight rein I am holding on employment, despite sharp increases in workload. Within this reduced total, selective increases will be permitted to meet such high priority needs as: more effective law enforcement, improvement of the quality of our environment, expansion of airway capacity, medical care of veterans, and payment of social security benefits.
The 1971 budget was framed in a period of persistent price rises and is designed to help curb the inflation that has gripped our economy too long.
ECONOMIC SETTING.--In the years preceding my inauguration, total demands on our productive capacity increased too rapidly to maintain price stability, largely because of Federal deficits. Government spending rose by more than 50% from 1964 to 1968, fanning the flames of inflation with a 4-year deficit of $39 billion. As a result, increases in consumer prices accelerated during this period, with a rise of almost 6% during the past year.
When I took office last January, the only responsible course was to design a policy that would curb the rising cost of living while avoiding recession and an excessive increase in unemployment. In our first six months in office, we revised the 1970 budget inherited from the previous Administration to reduce defense expenditures by $4.1 billion, and controllable civilian programs by $3.4 billion more.
We also recommended needed additional revenues, including:
• Continuation of the income tax surcharge at 10% until December 31, 1969, and at 5% until June 30, 1970--yielding $7.6 billion in revenues; and
• Repeal of the investment tax credit and extension of selected excise taxes and user charges, for an additional $2.4 billion.
Responding to inflation, interest rates rose sharply. The restrictive monetary policy of the Federal Reserve System limited the flow of money and credit and created further upward pressure on rates.
Monetary and fiscal policies succeeded in moderating economic expansion as we progressed through calendar year 1969, bringing some reduction of corporate profits and the first signs of a slowing in the rate of price increases. We know from past experience that prices react slowly to changes in economic activity. Thus, it is not surprising that it is taking time to translate anti-inflationary actions into price relief.
To contain inflation, we must maintain a policy of fiscal restraint in the current fiscal year and continue it in 1971.
For 1971, total outlays can be held to an estimated $200.8 billion only if marginal programs are reduced or eliminated, and some desirable new programs postponed.
Demanding and unpopular actions are essential to a responsible fiscal policy in today's economic setting. They must be taken to:
• Reduce inflationary pressures and expectations; and
• Relieve the pressure in financial markets.
Only in this way can we hope to:
• Improve our balance of international payments position; and
• Achieve a rate of economic growth that is compatible with our longer range objective of high employment with price stability.
REVENUES AND TAX POLICY.--Total receipts are estimated at $202.1 billion for 1971.
The small increase, only $2.7 billion above 1970, reflects offsetting forces. Aside from the income tax surcharge, receipts would have risen $9.7 billion under tax rates in effect through December 1969. This amount includes $1.2 billion from planned administrative steps to speed up the collection of excise taxes and income taxes withheld by employers. Another $1.6 billion results from the proposed revenue recommendations discussed in Part 3 of the budget.
On the other hand, total receipts will be sharply reduced by the expiration of the income tax surcharge on June 30, 1970, and by various tax reductions included in the Tax Reform Act of 1969 reductions that will depress revenues $2.9 billion below my tax proposals in April.
The recently enacted Tax Reform Act meets some--but not all--of the objectives sought by the Administration. It provides:
• A low-income allowance that removes the burden of paying Federal income taxes now borne by more than 6 million people with incomes below the poverty level, and reduces the tax burden of an additional 8 million people with incomes only slightly above the poverty level;
• A minimum tax on income, which insures that taxpayers heretofore using certain preferences in the law to eliminate their tax liabilities will bear some tax burden; and
• An increase in the personal exemption from $600 to $650, effective July 1, 1970 (eventually rising to $750), and also an increase in the standard deduction.
[Fiscal years. In billions]
1969 1970 1971
Source actual estimate estimate
Individual income taxes $87. 2 $92. 2 $91.0
Total budget receipts 187. 8 199. 4 202.1
Under existing law 187. 8 199.4 200. 5
*Less than $50 million.
I urge the Congress to enact the following revenue proposals:
CONTROLLING GOVERNMENT SPENDING--The Federal budget must meet the objectives of many individual programs at the same time that the expenditure total must conform to the resources available.
Current fiscal year---The Congress set a spending ceiling for the Executive Branch for 1970, with provisions allowing the ceiling to be changed by congressional actions that relate to the budget.
The original ceiling set in the law was $191.9 billion. The Congress recognized, however, that a substantial part of Federal spending in any one year is determined by prior legal obligations and is, therefore, beyond the immediate control of the Executive Branch. For this reason, the law provides that the overall ceiling can be raised by up to $2.0 billion to take account of increases above the estimates of selected uncontrollable expenditures such as social security and interest on the public debt. Actions of the Congress already taken or projected in this budget are expected to add another $1.8 billion to the ceiling, thus raising the overall ceiling to $195.7 billion. (A more detailed analysis of the factors affecting the budget ceiling is found in Part 2.)
I support the intent of the Congress to maintain firm control of Federal spending. But the $2.0 billion allowance for increases in uncontrollable spending now appears completely unrealistic. Spending for these uncontrollable programs is now expected to be $4.3 billion higher in 1970 than estimated last April. This is $2.3 billion above the amount allowed for this contingency by the Congress.
On the other hand, we have held controllable spending firmly within the limits set by the Congress. Nonetheless, total 1970 spending is now estimated at $197.9 billion, which is $2.2 billion above the legal ceiling. The excess results entirely from the $2.3 billion increase in outlays for the designated uncontrollable programs. There is a margin of only $0.1 billion under the ceiling on all other spending.
I believe that an overall spending target provides a useful discipline to guide individual actions by the Congress and the Executive Branch. However, an outlay ceiling should include adequate provision for spending on uncontrollable programs.
I recommend, therefore, that the 1970 ceiling be amended in two ways. First, the fixed allowance for uncontrollable outlays should be removed for those outlays that the Congress has already placed beyond the Executive's control. Second, the ceiling itself should be amended so that the extremely slim margin between the revised ceiling and the current estimate of total outlays is sufficient to permit prudent management of the Government without forcing crippling cuts in vital programs during the few remaining months of this fiscal year. I further suggest that the Congress reconsider the real utility of having a flexible ceiling apply to the Congress while a rigid ceiling is applied to the Executive Branch.
The dedication of this Administration to expenditure control has been demonstrated by the $7.5 billion of reductions we have already made this year. We will continue our vigorous efforts to contain Federal spending. With the cooperation of the Congress, we are determined to hold total spending for 1970 to the revised target of $ 197.9 billion.
I also recommend that congressional attempts to control outlays in the future focus on the earliest stages of Government spending--authorization of programs and enactment of budget authority.
Based on our experience this past year, I believe that Congress can improve its contribution to better budgeting of national resources by taking steps to:
• Make individual appropriations and other legislative actions consistent with its wishes on overall budget totals;
• Provide a closer link between legislative consideration of receipts and outlays; and
• Enact appropriations before the fiscal year begins, phasing the authorization and appropriation processes in a more orderly way. Many of the appropriations for the fiscal year that began last July were not enacted until December. Two appropriation bills-totaling $22 billion--were not enacted when Congress adjourned in December. The Executive Branch will speed its processes wherever feasible to help make more timely action possible.
It is many years, indeed a generation, since the Congress was able to finish its work in a session lasting 3 to 4 months. The Congress now works the year round. All too often, major appropriation bills are not acted upon until the final weeks of the session, perhaps as long as half a year after the beginning of the fiscal year. Obviously, this causes inefficiency and uncertainty within the executive departments and throughout the country. To bring the appropriation and the administrative cycles back into harmony, suggestions have been made to change the fiscal year to correspond to the legislative year, perhaps with new appropriations scheduled to begin January 1 rather than July 1. However, even if this change were deemed desirable, by itself it would not achieve the desired result. The Congress also have to revise or speed its actions, which, by the Congress' must precede appropriations. I urge Congress to consider this question.
Budget year.--Outlays for 1971 reach approximately $200.8 billion, only $2.9 billion, or 1.5% more than in 1970.
This is substantially less than the 6% increase in the consumer price index during the past calendar year.
The rise in total outlays in 1971 is also substantially less than the increase in outlays that are virtually mandatory under present laws. For example, social insurance trust fund outlays (including Medicare) and public assistance grants (including Medicaid) alone are estimated to increase in 1971 by $6.8 billion.
Aside from these outlays, I have reduced the total of other Federal spending below its 1970 level.
New pay raises for Federal civilian and military employees are budgeted for $175 million in 1970 and $1.4 billion in 1971. These increases reflect (1) the pay adjustments accompanying postal reform, (2) the principle of pay comparability of civilian jobs with similar jobs in private industry, and (3) the legal requirement that military salaries be increased in pace with the compensation of Federal civilian employees. The annual survey of the Bureau of Labor Statistics indicates that a civilian pay raise averaging 5.75% would be consistent with the present legal comparability principle. Because the need to control and contain the inflationary spiral is of paramount importance at this time, however, I recommend that the comparability pay raises (which require congressional action) be deferred six months beyond the recent pattern, and be made effective January 1971.
The 1971 budget shows a significantly different set of priorities from those contained in the budget presented by the previous Administration a year ago. Although 1971 outlays are $5.5 billion higher than the total originally proposed a year ago for 1970, outlays for national defense and space activities have been reduced by $10.8 billion. The current estimate of 1970 spending for defense and space is $4.4 billion less than that recommended last year by the outgoing Administration, and a further reduction of $6.3 billion is proposed for 1971.
A substantial increase in postal revenues is necessary in order to avoid an excessive postal deficit, which would otherwise consume a large part of the resources made available by the difficult cuts we are making in other programs. Enactment of the pending bill to raise postal rates, in addition to other measures currently under study, will cause net outlays for the Post Office to decline by an estimated $866 million from 1970.
The reductions I am proposing make it possible to provide funds for some of our most urgent domestic needs. This is appropriate policy. Burdened by overcommitments of the past, we must pursue our goals prudently. My budget for 1971 includes increases of:
• $500 million for starting the Family Assistance Program, to replace an unworkable and often inequitable system with one that encourages family stability, provides incentives for work and training, and offers expanded opportunities for day care.
• $275 million for the first quarterly payment under my proposed revenue sharing plan,
• $310 million for improved crime reduction efforts.
• $330 million for air and water pollution control, and for additional parks and open spaces, as integral parts of our efforts to enhance environmental quality.
• $764 million for food assistance programs, to help eliminate malnutrition and hunger.
• $468 million for transportation facilities and services, important ingredients in continued economic growth and job development.
• $352 million for manpower training, to help more of our people to become productive and self-supporting.
BUDGET AUTHORITY.----Budget authority--generally in the form of appropriations--must be provided by the Congress before Federal agencies can commit the Government to spend or lend funds.
SELECTED BUDGET OUTLAYS
[Fiscal years. In millions]
1969 1970 1971 Change,
Description actual estimate estimate 1970-1971
Social insurance trust funds $39, 849 $45, 681 $51, 667 +$5, 986
Public assistance (including Medicaid) 6, 281 7, 479 8, 977 +798
Civilian and military pay increases ........ 1 175 11, 400 +1, 225
Subtotal 46, 130 53, 335 61,344 +8, 009
National defense 81, 240 79, 432 73,583 -- 5, 848
Space 4, 947 3, 886 3, 400 -- 486
Post Office 920 1, 247 382 -- 866
Family Assistance Program ....... ....... 500 +500
Control of air and water pollution, and increased
parks and open spaces 644 785 1, 115 +330
Crime reduction 658 947 1, 257 +310
Revenue sharing ....... ....... 275 + 275
Food assistance 1, 192 1, 514 2,278 +764
Transportation 6, 319 7, 019 7, 487 +468
Manpower training 1, 193 1, 368 1, 720 +352
1 Includes the projected costs of certain pay adjustments in the Postal Field Service related to postal reform.
I am recommending a total of $218.0 billion of budget authority for fiscal year 1971. This includes $216.8 billion of new oblational authority and $1.3 billion of lending authority.
Not all budget authority requires current congressional action. For example, existing laws provide that the receipts of social insurance trust funds be automatically appropriated as budget authority each year. Similarly, whatever is needed for interest on the public debt is automatically provided under a permanent appropriation. For activities of this nature, $86.7 billion of budget authority for 1971 will become available automatically.
The remaining $148.1 billion is proposed for consideration during this session of Congress. The outlays associated with budget authority requiring current congressional action are estimated to be $93.5 billion in 1971.
FEDERAL DEBT.--This budget provides for a reduction of Federal debt held by the public of $1.2 billion from the level on June 30, 1970, and $2.2 billion lower than on June 30, 1969• These repayments of debt out of budget surpluses will afford some modest relief to financial markets to help meet heavy demands for housing and State and local government financing.
At the same time, federally assisted financing outside the budgets--both guaranteed and insured loans and loans of Government-sponsored agencies--will be substantially higher both in 1970 and in 1971. This expansion in federally assisted credit programs helps to cushion the impact of tight money on housing.
[Fiscal years. In billions]
1969 1970 1971
Description actual estimate estimate
Available through current action by the Congress:
Previously enacted $133. 2 $133.9 .......
Proposed in this budget ........ ........ $136. 8
To be requested separately:
For supplemental requirements under present law ........ 4. 4 0. 3
Upon enactment of proposed legislation ........ -- * 8.2
Revenue sharing ........ ......... 0. 3
Civilian and military pay increases 1 ........ 0.2 1. 4
Contingencies ........ 0.5 1.2
Subtotal, available through current action
by the Congress 133.2 138. 9 148. 1
Available without current action by the
Congress (permanent authorizations):
Trust funds (existing law) 53. 1 60. 6 64. 5
Interest on the public debt 16.6 18. 8 19. 0
Other 6. 2 4. 6 3.2
Deductions for offsetting receipts --12. 9 --13. 9 -- 1 6. 8
Total budget authority 196. 2 209. 1 218.0
* Less than $50 million.
1 Includes the cost of certain pay adjustments in the Postal Field Service related to postal reform.
FEDERAL DEBT AND BUDGET FINANCING
[Fiscal years. In billions]
1969 1970 1971
Description actual estimate estimate
Federal debt held by the public (at end of fiscal year) $279.5 $278. 5 $277. 3
Plus: Debt held by Federal agencies and trust funds 87.7 96. 3 105. 2
Equals: Gross Federal debt 367. 1 374. 7 382. 5
Treasury debt 1 352. 9 362. 1 370. 3
Other agency debt 14. 2 12. 6 12.2
Net repayment of borrowing (-) -- 1.0 --2.6 -- 1. 2
Other means of financing --2. 2 1.1 --0.1
Total budget financing --3.0 --1. 5 1.3
Total budget surplus 3. 2 1. 5 1. 3
1 Excludes notes issued to the International Monetary Fund.
Gross Federal debt differs from debt held by the public in that the former also includes debt held within the Government, such as the investments of the social security trust funds in special Treasury issues. Gross Federal debt will continue to rise, from $367.1 billion on June 30, 1969, to an estimated $389.5 billion on June 30, 1971. The increase is more than accounted for by investments by trust funds and other Government agencies of their surplus receipts. In 1971, the surplus in the trust funds will be an estimated $8.7 billion, compared with $8.6 billion in 1970.
The statutory debt limit covers almost all of the gross Federal debt, but it excludes most borrowing by Federal agencies other than the Treasury. The present temporary debt limit of $377 billion will expire on June 30, 1970, and the statutory maximum will then revert to the permanent level of $365 billion.
An increase in the statutory limit will be necessary even though the past two budgets and the one proposed for 1971 all show surpluses of receipts over outlays. These surpluses reflect the rise in accumulated balances of trust funds that are invested in Treasury issues--thus increasing the amount of debt subject to the statutory limitation. I will recommend appropriate increases in the statutory limit prior to the end of the fiscal year.
A STRATEGY FOR THE SEVENTIES
I am pleased to present a budget that demonstrates a shift in priorities; we now begin to turn in new directions.
CHANGING PRIORITIES.----About 41% Of estimated outlays in the 1971 budget will be devoted to human resources--spending for education and manpower, health, income security, and veterans benefits and services. Spending for national defense, despite continued improvements in our military forces, will claim a smaller percentage of the budget than in any year since 1950. Although still comparatively small, other major programs of this Administration-pollution control, crime reduction, transportation, and housing-are planned to grow substantially in the years ahead.
REDUCING OUTMODED OR UNECONOMIC PROGRAMS.--I believe strong]y that the Federal budget process can no longer confine itself to marginal increases or decreases. Much of the budget is the outcome of program decisions made in years past, or even decades ago. Today, more than two-thirds of Federal outlays are relatively uncontrollable in the near term.
We must begin to cull from the budget mass those programs that are ineffective or poorly designed and those where the original need has long since vanished. Since needs and technology change rapidly, Government programs must keep pace.
[Fiscal years. Percentage distribution of total budget outlays]
1961 1969 1971
Program actual actual estimate
National defense 48 44 37
Human resource programs 1 30 34 41
Other 99 22 23
Total budget outlays 100 100 100
1 Includes the following functional categories: education and manpower, health, income security, and veterans benefits and services.
Therefore, I propose to restructure, reduce, or terminate a number of outmoded or uneconomic programs that will save $2.1 billion in 1971. These proposals, discussed in detail in Part 2 of the budget, envision that:
• Fundamental restructuring of programs will save nearly $1.4 billion in 1971. For example, the basic concept underlying the present objectives of the Nation's stockpile of strategic and critical materials must be re-examined and modernized. Many commodities in the stockpile are now far in excess of foreseeable needs. Expanded authority will be sought to permit the disposal of $750 million of these materials in 1971.
• Program terminations will save about $300 million from lower priority activities in 1971. Much of the total is accounted for by eliminating certain agricultural programs which have accomplished their purposes or are no longer high priority.
• Reductions in uneconomic programs will total $436 million in 1971. The largest reduction stems from actions taken in manned flight activities of the space program.
These actions will provide more than $2 billion each year to help meet high priority needs of today and pressing problems of the future.
PREPARING FOR THE FUTURE.---This Administration is placing heavy emphasis on the long-range implications of current decisions. We must become increasingly aware that small decisions today often lead to large cash outlays in the future. Past failure to recognize this fact is responsible for much of the current budgetary inflexibility, hampering our present progress.
The future holds great promise. But looking ahead, we can also foresee that
• The expected increase in Federal tax revenues will not be sufficient to meet all meritorious claims--a reduction in taxes, a budget surplus with high employment, the initiation of new programs, and the expansion of existing programs--that will be made.
• It will be necessary to evaluate existing programs and proposed new programs to ensure that Federal funds are raised and spent in the most effective way. We will have to shift funds from uses with relatively low effectiveness or priority to those uses that now have higher priorities.
Growth of the economy.--From fiscal years 1970 through 1975, the labor force is expected to grow from 85 million to 99 million, a net addition equal to the total employment in the State of California. Coupled with rising productivity and a return to more modest price trends, our gross national product could increase from $960 billion in fiscal year 1970 to nearly $1.4 trillion in 1975. It took the Nation 19 decades to reach a total output of $700 billion, but we will double that amount by our Bicentennial.
The growth of our productive capacity will be matched by growth in demand. Population will rise from 205 million to 218 million, a net addition greater than the present population of New England. There will be 4 million new family units formed.
Pressures on the Federal budget.--This growth and change will be reflected in Federal Government finances. During fiscal years 1971-1975:
• On the basis of my tax recommendations last April, and those contained in this budget, the increase in personal income, corporate profits, and other sources of revenue would have increased the yield of the tax system to $278 billion in 1975.
• However, the new Tax Reform Act will reduce that potential increase in
1975 by $12 billion. As a result, Federal revenues will be a smaller proportion of gross national product in 1975 than in 1970. Growth will also require additional Government services and generate greater spending. By 1975 we estimate that:
• The increases in population, wages, and other factors would seem to necessitate growth in many existing Federal services, causing outlays to rise by $28 billion--unless further
economies are found.
• Program terminations and restructuring recommended in this budget will reduce the growth in the budget base, however, by $2 billion. Further cuts will be sought in the future.
• New initiatives that I have already proposed or am proposing in this budget are estimated to rise to $18 billion in outlays.
In the past, the Federal Government has been unwilling to pull all the pieces together and present the results of projecting Government finances into the future. I feel that this is an essential part of an enlightened discussion of public policies even though precise figures are, of course, impossible.
Looking ahead, the margin of discretionary Federal resources left over--in a sense, a national nest eggs--for distribution to private citizens through tax reduction, for distribution to State and local governments as we move forward with the New Federalism, or for new Federal Government programs, is small. Furthermore, the inherent uncertainty in projecting the future rate of economic growth and unforeseen international tensions could easily alter these projections to show no future resources for discretionary action.
With these qualifications in mind, we can estimate that anticipated revenues are likely to exceed projected outlays by $22 billion in 1975--a margin equal to only 1.5% of our gross national product. Furthermore, our current estimates indicate little, if any, margin for 1972.
Decisions to include new spending programs in this and future budgets will recognize long-run savings that would be lost if action is not taken. For example, the proposed Family Assistance Program is designed to reform our outmoded welfare system. If enacted, it would cost an estimated $4.4 billion in the first full year of effect. However, the incentives to preserve families intact and increase gainful employment will eventually mean a long-run increase in economic self-sufficiency, which I believe far outweighs these substantial, but essential, public costs.
The path to our goals.--Among the meritorious claims on our resources are: • Protecting our physical environment by taking further actions to reduce air and water pollution, and by providing additional parks, open spaces, and other recreation opportunities.
BUDGET PROJECTIONS 1
[Fiscal years. In billions]
Description estimate projected
Tax structure proposed by Administration (April 1969) 2 $205 $278
Less effect of 1969 Tax Reform Act --3 -- 12
Total 202 266
Current program 200 228
New initiatives reflected in this budget 3 18
Less program termination, restructuring,
and reduction currently proposed --2 --2
Total 201 244
Margin remaining .......... 22
1 The assumptions and procedures underlying these projections are described in Part 2 of the budget.
2 Includes revenue effect of legislation proposed in this budget.
• Maintaining our physical and economic base by improving transportation systems, and by stimulating the construction of additional low- and moderate-income housing.
• Bringing better health to all, by reforming the health care delivery system, by increasing the Nation's corps of needed health personnel, and by emphasizing areas that promise important breakthroughs in medical research.
• Equalizing career opportunities by investing in new methods of education, in aid to low- and middle income college students, and in job training.
• Renewing the American education system by emphasizing research and experimentation, by investing in teacher training and new community colleges, and by redressing inequities in educational financing.
• Obtaining budget surpluses in order to generate additional savings so housing and State and local construction can be financed without undue reliance on Federal aid. The absence of such surpluses would tend to keep interest rates high and to make capital markets less efficient.
• Reducing and realigning tax burdens further in a fair and judicious manner, when such action is prudent and desirable in the light of all other national priorities.
As long as the growth of revenues exceeds the growth of "built-in" expenditures we will be able to make some genuine progress toward these goals.
The progress that we make in pursuit of these goals must depend on their relative priority, our ability to design workable programs, and our willingness to raise the required resources.
THE SEARCH FOR PEACE
We seek a world in which all men can live in peace, freedom, and dignity.
PEACE AND NATIONAL SECURITY.--The best way to achieve this goal is through maintaining sufficient strength to deter aggression--and cope with it where necessary-supported by effective and verifiable international agreements, and by collective security and cooperation.
One of my first official acts as President was to direct a comprehensive and orderly review of our national security policies and the programs required to carry them out. This was the most thorough re-examination of its type ever undertaken, designed to bring our strategies, forces, and priorities into proper balance.
This budget reflects the transition from old policies and strategies to the new ones stemming from our review. I have:
• Initiated a plan designed to bring a just and honorable peace to Vietnam. Our approach involves a two-pronged effort to negotiate in Paris and to effect an orderly transfer to the South Vietnamese of the major responsibilities the United States has assumed in that country. We will do so in a manner that will help maintain that country's right of self-determination. While negotiations have been disappointing, progress in Vietnamization has been encouraging and has enabled Vietnamese forces to assume a greater burden on the battlefield. In accord with this plan, I have already announced a series of troop withdrawals that will reduce our authorized forces in Vietnam by 115,500 below that existing when this Administration took office.
• Begun strategic arms limitations talks with the Soviet Union.
• Signed the Nuclear Nonproliferation Treaty.
• Begun construction of the Safeguard missile defense system, intended t¢i protect the United States from limited nuclear attacks, including an accidental missile launch, and to protect some of our retaliatory forces.
• Renounced biological weapons and initiated disposal of existing bacteriological weapons.
• Appointed an advisory commission to develop a comprehensive plan for eliminating the draft and moving toward an all-volunteer military force.
• Signed into law my proposal for draft reform, to shorten the maximum period of draft vulnerability to one year thereby reducing uncertainty for millions of our young men.
Looking to the future, both our strategy and forces must be designed to honor our international commitments and to insurance our national security. We must make realistic and continuing assessments of the programs required to support these objectives.
The strategy of this Administration, I stated at Guam, is based on the tion that our allies will shoulder substantial responsibility for their own defense With this posture, we can safely meet our defense requirements with fewer resources.
INTERNATIONAL RELATIONS.--Early my Administration, we sought to more effective ways to encourage national development and stability with a limited availability of Government funds.
I have concluded that the answers lie in greater initiative by the countries we assist, more trade a larger role for private enterprise, and increased reliance on cooperative, multilateral efforts. I strongly support international organizations as effective channels for development assistance-
We are urging all industrialized countries to reduce trade barriers against products of special importance to developing countries. I urge enactment of trade legislation now before the Congress that would reduce trade barriers and provide more equitable adjustment assistance to industries, companies, and workers injured by import competition.
We are encouraging private enterprise, both locally based and American, to bring its dynamism to the challenge of economic development. To enlarge the role of private enterprise still further, I will establish the Overseas Private Investment Corporation--a recommendation already approved by the Congress.
Trade and private enterprise by themselves are not sufficient. I am also proposing budget authority of $1.8 billion for the Agency for International Development to provide direct aid to developing countries. I will make further proposals to strengthen our aid programs based on a review by my task force on foreign aid.
THE QUALITY OF THE ENVIRONMENT
One of the most important new initiatives that I am proposing for the first time in this budget is to enhance the quality of life--the legacy of one generation of Americans to the next.
Our environment is becoming increasingly unpleasant and unhealthful. We are hampered by polluted air, contaminated rivers and lakes, and inadequate recreation opportunities.
Despite current budget stringency, we must find a way to move aggressively on these problems now. Delay would make our environment more unlivable, and raise the costs of what we must do in any event. I will send a Special Message to the Congress setting forth major proposals to improve and protect our surroundings.
Highest priority will go to elements of the program designed to attack water pollution and air pollution--those problems that most directly impinge on our health and well-being.
The major responsibility to reduce pollution rests appropriately with State and local governments and the private sector. However, the Federal Government must exert leadership and provide assistance to help meet our national goals.
CLEAN WATER.--I am proposing a sustained national commitment to meet our water quality goals. I will seek legislation for a 5-year program providing grants to communities for the construction of sewage treatment facilities. This effort will grow in momentum as communities complete their plans and begin construction. When combined with State and local matching funds, this program will provide $10- billion of construction beyond that already appropriated by the Congress.
The proposed environmental financing authority, discussed later in this Message, will help local communities finance their share of the projects.
I am proposing a fundamental reform of the municipal waste treatment program to assure that Federal funds go to areas where the benefits are clear and where State and local governments have developed adequate programs to achieve stated goals. We must also assure that cost sharing for treatment works is equitable and creates incentives for reducing the amount of waste that would otherwise have to be treated in municipal systems.
I am recommending increased assistance to State water pollution control agencies and a strengthening of enforcement provisions.
CLEAN AIR.--We are now asking the States to set standards for two major air pollutants--sulfur oxides and smoke particles. Standards for additional pollutants will be set shortly. I am proposing additional funds and manpower to help the States with this difficult task.
To help control air pollution, we will accelerate efforts to control sulfur and nitrogen oxides. We will call upon private industry to help solve the problem. The airlines have already agreed to abate aircraft smoke emission by 1972. We will increase our own spending for air pollution control by more than 30% in 1971.
OPEN SPACE.--Improving the environment will also require increased efforts to .. provide adequate park and recreation open space--particularly in and near cities, where the need is the greatest and land prices have been escalating most rapidly. I am recommending appropriation of all the funds presently authorized for the Land and Water Conservation Fund to speed acquisition of Federal park lands and increase assistance to States to provide more recreation opportunities. Wilderness, open space, wildlife--once gone--are lost forever.
CONTRIBUTION OF SCIENCE AND TECHNOLOGY.--Where technology has polluted, technology can purify. Solutions to many of our problems can be found only through greater understanding of our environment and man's impact upon it. We must also augment our ability to measure and predict environmental conditions and trends.
I am confident that this challenge can be met by our leading research institutions and scientists. To encourage research related to environmental and other national problems, I am recommending that appropriations for the National Science Foundation be increased.
REFORMS AND NEW DIRECTIONS
Reform is the watchword of this Administration. In years past, Federal programs all too often have failed to deliver even a reasonable share of their promises.
Reform touches on nearly every aspect of Government activity. It is demonstrated in this budget by proposals to introduce new, more effective program systems, and to modernize and make responsive Government organization and processes.
INCOME SECURITY PROGRAMS.--When this Administration took office, many of our income security programs were in disarray and in need of long-overdue reforms. Welfare programs were discredited in the eyes of both the recipients and taxpayers. Many of our citizens were going without adequate food and nutrition. Social security benefits had become eroded by inflation. Unemployment compensation failed to cover millions of workers, and payments in many States were inadequate.
I set into motion fundamental reforms in each of these areas. I urge the Congress to move promptly on my proposals which are now awaiting action:
• The Family Assistance Program,. would replace an inequitable and unworkable dole that often disrupts family life, with a comprehensive system for aiding all low-income families with children--including the long-neglected working poor. It features national benefit standards, promise of greater family stability, and requirements and incentives for work and job-training. This program would be closely integrated with manpower training and with the food benefits made available under the augmented food stamp program.
• Social security legislation enacted in December provides an across-the-board benefit increase. I have made other proposals to correct inequities in the program, including a liberalization of the "retirement test" (the current earnings that may be allowed without reducing or eliminating social security benefits), and an increase in widows' benefits to make them comparable with what their husbands would have received.
• The unemployment insurance proposals would extend coverage to an additional 5.3 million workers (including many farmworkers), increase the duration of benefit eligibility during any period of high national unemployment, and reform the financing of the system by increasing the taxable wage base.
For the Family Assistance Program, I have included outlays of $500 million in the budget for 1971. This estimate is significantly lower than the $4.4 billion first full-year cost of this program for a number of reasons. Time is required for the various levels of government to prepare to administer elements of the Family Assistance Program that can be put into effect during fiscal year 1971. Many State legislatures will be unable to meet in time to implement the program. Rates of participation in a new program of this scale take time to build up, causing a delay before the program can reach its full operating level. We intend to make every effort now and after the Congress has acted to initiate this high priority program on a responsible and workable basis.
The Family Assistance Program is an essential element of the income strategy adopted by this Administration. This approach of directly providing income and work opportunity for the poor is based on the proposition that the goal of self-sufficiency requires continuing emphasis and that the best judge of each family's particular needs is the family itself.
FEDERAL AID SYSTEM.--The old system for providing financial aid to State and local governments has become bogged down in an administrative morass. It breeds excessive centralization of decision making, and tends to sap local initiative.
This Administration has begun to decentralize domestic programs. We seek to reinvigorate institutions close to the people, and to enlist their support in the solution of local problems before they become national problems. I hope to see new life in local institutions and a new vitality in voluntary action.
Federal revenue sharing with State and local governments is one vital element of our decentralization efforts. Revenue sharing funds will not be frozen into specified program areas. Policy officials at the State and local level will have the responsibility for using these funds to meet high priority needs. Revenue sharing is based on a formula that encourages State and local governments to increase their own fiscal efforts. I urge prompt action on this important effort to restore balance to our federal system.
Including revenue sharing, total Federal aid to State and local governments will rise to an estimated $28 billion in 1970, nearly four times the amount in 1961.
Recent experience has made it clear that many State and local government units are having serious difficulty securing funds in the municipal bond market. To assure more adequate access of these governments to financial markets, I shall propose the creation of an environmental financing authority to enable such governments to borrow money needed for their share of federally assisted projects for water pollution abatement.
Action is also underway to simplify administrative and technical requirements in Federal assistance programs. By cutting red tape, we can reduce processing time and decentralize decision making. I urge completion of congressional action on my proposals to authorize joint funding of closely related grant projects and grant consolidation.
To achieve better coordination of Federal programs in the field, we have established uniform regional boundaries and regional office locations for the principal agencies involved in urban programs. This action will provide focal points for State and local officials to deal with these Federal field offices. I have also created 10 regional councils, composed of the regional directors of the main grant-making agencies, to mesh Federal activities more closely with State and local programs.
IMPROVED ORGANIZATION.--There is great need for better organization and management of the Federal governmental system. I refer to the legislative branch and the judicial branch as well as to the executive branch. The Advisory Council on Executive Organization is hard at work on plans to strengthen the ability of the Executive Branch to insure that government programs produce the results intended by the Congress and the President.
The Congress has recently established, by law, a Council on Environmental Quality to coordinate efforts to improve our surroundings--an objective which I share.
We have reorganized the Office of Economic Opportunity to strengthen its capacity for innovation and experimentation in developing programs that effectively meet the needs of the economically disadvantaged. Other agencies, such as the Departments of Labor, Agriculture, and Housing and Urban Development, have been reorganized internally to increase their effectiveness.
A blue ribbon panel is studying the Department of Defense, its organization, research and development programs, and procurement practices. I have formed a Defense Program Review Committee to insure that major defense policy and program issues are analyzed in their strategic, economic, diplomatic, and political context.
The Nation's postal system is in need of basic reform. I have recommended complete reorganization of the Post Office along businesslike lines, and repeat my request to Congress for prompt approval.
I have also proposed strengthening our programs dealing with consumer affairs, including creation of an Office of Consumer Affairs in the Executive Office of the President and an Assistant Attorney General for Consumer Protection in the Department of Justice.
EDUCATION AND MANPOWER.--I place high priority on expanding the use of manpower programs as a means of getting people off welfare rolls and into productive employment. I have proposed a new comprehensive Manpower Training Act that will bring together a variety of separate programs and will enable State and local units to make more manpower decisions for themselves. These steps will give increased responsibility to State and local governments for planning and operating manpower programs to meet local conditions and the specific needs of each trainee. In the meantime, major operating reforms are taking place in nearly all manpower training programs to increase their effectiveness.
Computerized Job Banks will be in operation in 81 cities by 1971, providing a daily listing of available jobs to help match job seekers with employment opportunities more rapidly.
We will continue our efforts to insure equal employment opportunities to all Americans. I have already requested the Congress to grant enforcement powers to the Equal Employment Opportunity Commission. I reiterate that request. Under the concept of the "Philadelphia Plan," we will help provide minority groups with fair access to training and jobs with Federal contractors.
The Federal Government is making a substantial investment in the Nation's education system. In 1971, counting all the education-related efforts of Federal agencies, we will spend an estimated $10.7 billion--the largest amount in our history.
This Administration is committed to improved performance in education programs. I have initiated proposals to provide broader support for education, including grant consolidation, and other steps to improve the effectiveness of Federal aid. I am also recommending major new efforts to raise student achievement through research and development projects. We are evaluating and redirecting other programs to assure that Federal assistance is targeted on high priority purposes, such as disadvantaged children, and that it achieves the results we expect.
In the coming weeks I will send further recommendations to the Congress, outlining proposals for educational reform.
CRIME REDUCTION.--Some of my most important legislative proposals still awaiting congressional action are designed to launch a determined attack against crime. The budget for 1971 provides about $1.3 billion for crime reduction, nearly double the outlays in 1969. This budget represents a first step in a comprehensive program for improving all parts of our criminal justice system--at every level of government.
To accomplish this objective, I am proposing: • A $190 million increase in outlays for the Law Enforcement Assistance Administration for broad-purpose block grants to States. The responsibility for reducing local crime rests with agencies of State and local governments, but the Federal Government must provide effective assistance when the need is so great.
• Reforms in correctional programs. Outlays will reach $177 million for these purposes in 1971.
• An intensification of the war on organized crime. I propose increasing our strike forces against organized crime to 20 in 1971, and continuing experimentation with strike forces also using State and local enforcement officers.
• An enlarged and more vigorous effort to control the traffic in narcotics and dangerous drugs.
• The development and testing of more effective methods for controlling and preventing crime. For the future, we must have a better understanding of criminal behavior, particularly juvenile crime and delinquency.
TRANSPORTATION.--Mobility of people and goods is important to economic growth and personal satisfaction. Today, our mobility is threatened by increasing congestion and aging facilities. This Administration has proposed legislation to: • Assist urban transportation through a 12-year, $ 10 billion program of grants to communities to modernize and expand public transit facilities and services. The 1971 budget includes budget authority of $3.1 billion to cover the first 5 years of the program.
• Expand our airways and airports and maintain a high level of safety. We will accomplish this through a 10-year, $3.1 billion program of research and investment in our national airway system, and a $2.5 billion grant program for airfield construction and improvement. These added costs will be financed through increased user charges.
• Revitalize our merchant marine through improved techniques of Federal aid for ship construction and operation. This 10-year program envisions building as many as 30 new ships each year, with a gradual reduction in the Federal subsidy. The approach is conditional, challenging the industry to become more efficient and less dependent on Government subsidy.
HOUSING.--The budget includes a substantial effort to help meet our housing needs. In 1971, over 1.9 million low and moderate-income families will be living in good homes and apartments because costs have been kept within their reach through the Federal Government's actions. Moreover, we are requesting enough authority for new commitments in 1971 to help provide almost 600,000 additional housing units for such families.
We can meet the housing needs of the Nation only if we are able to effect basic reforms in the way we now go about the task. There is growing doubt that the Nation's homebuilding industry has the resources essential to build the needed volume of housing. The housing industry suffers disproportionately from credit shortages. More plumbers, electricians, and other construction workers are needed. Vital materials like lumber may not be available in sufficient quantities at reasonable prices.
We have been actively working to solve these underlying problems. We have inaugurated Operation Breakthrough. This experimental effort is designed to link the development of new methods for high-volume housing production with the assurance of housing markets large enough to make volume production feasible.
HEALTH.--In the Sixties, the Federal Government embarked on a number of new health care programs. Medicare currently covers hospital costs and physician services for 20 million aged. Medicaid provides coverage for over 10 million poor.
Serious problems remain. Foremost among them are the rapid rise in medical care prices, inadequate health services for the poor, and other health problems only recently recognized.
To cope with fast-rising demand and health costs, we need to increase the efficiency and supply of our medical resources--both physical and human. We must provide more practicing physicians, dentists, nurses, and other health manpower. I have proposed revisions in the Hill-Burton program to increase construction of facilities for outpatient care as a means of easing the pressure on hospitalization or inpatient treatment facilities. Modernization needs will be met by a new loan guarantee program. Revisions will also be proposed in Medicaid to stimulate the use of proper, but less expensive, medical treatment outside hospitals and long-term care institutions. Increased emphasis will be given to programs to assess and demonstrate more efficient ways of providing health care.
To provide better health care to the poor, I am increasing the number and sen;ices of comprehensive health centers in low-income areas.
To combat growing health problems, I have proposed significant increases in community-based programs for the prevention or cure of drug addiction, rehabilitation of alcoholics, and family planning services and research. Last year I announced a 5-year goal to reach 5 million women who want, but are not receiving, family planning services. The new National Center for Family Planning Services, working with the Office of Economic Opportunity, will reach 2.2 million women in 1971, almost halfway toward our goal.
While continuing general support for medical research, I am also recommending substantial increases in research on cancer, heart disease, serious childhood illnesses, and dental health--where current findings promise significant advances in the future.
SPACE--Man has ventured to the moon and returned--an awesome achievement.
In determining the proper pace for future space activities, we must carefully weigh the potential benefits of:
• Scientific research by unmanned spacecraft;
• Continued exploration of the solar system, including manned exploration of the planets; and
• The application of space and aeronautics technology to the direct benefit of mankind.
I have reviewed many exciting alternatives for the future. Consistent with other national priorities, we shall seek to extend our capability in space--both manned and unmanned. I intend to do this within total space outlays 19% smaller than in 1970. In our current efforts, we will continue to stress additional uses of space technology. Our actions will make it possible to begin plans for a manned expedition to Mars.
EFFECTIVE PROGRAM PLANNING AND EVALUATION.--The American people rightly demand that Government spending be subjected to tough-minded evaluation so that their tax dollars are used in the most effective way.
I am revitalizing our Government-wide system for program planning and evaluation. Several steps have already been taken this year. I have encouraged the analysis of major policy issues to identify Federal programs that should be redirected, terminated or expanded. This process provided helpful information for many of the major problems addressed by the Executive Branch this year, and helped frame my program proposals for Family Assistance, Food Stamps, and Space.
Long-range planning is receiving increased emphasis in the Bureau of the Budget, and has provided a basis for the longer-range perspective of this budget. To help anticipate future needs, I created a National Goals Research Staff to examine long-term trends and to explore what America's goals and priorities might be in the years to come. It is my hope that the forthcoming Bicentennial will also focus public attention on the ideals of our American heritage.
I have also taken some first steps to increase the amount of information upon which effective program planning and evaluation must be based. At my direction the Bureau of the Budget instituted a continuing audit of the timeliness of major Federal statistical series. They are now being issued more promptly than a year ago. Still further efforts to strengthen the statistical program are also underway to provide the Executive Branch, the Congress, and the public with data adequate to meet today's needs.
We have begun to travel a new road. I am confident that this new road will lead us to an honorable peace in Southeast Asia and toward peace and freedom in the years ahead. As we travel that road of responsibility, our economy will overcome its inflationary fever and return to a sustainable rate of growth.
Domestic programs are being reshaped and revitalized to reach and involve the individual American. Guiding us in this effort are five central themes, which are essential elements of the New Federalism:
• An awareness of the growing desire for fairness and equal opportunity in every facet of American life;
• A recognition of the importance of the interests of the individual in the decisions that determine his destiny;
• An emphasis on restructuring basic program systems to ensure that Government efforts deliver the full measure of their promise;
• An understanding that national unity is needed for the setting of goals, and national diversity must be respected in the administration of services; and
• A willingness to return power to the people and dignity to the individual, through financial help to State and local governments and renewed reliance on private, voluntary action.
This budget reflects these principles; it expresses the shared purposes of the Nation.
This budget imparts to our goals a sense of timing and commitment appropriate to a vigorous, free people seeking constantly to expand the Nation's potential and improve its performance.
February 2, 1970
Note: The illustrative diagrams have been deleted from the message as printed above.
Richard Nixon, Annual Budget Message to the Congress, Fiscal Year 1971. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/240083