Richard Nixon photo

Annual Budget Message to the Congress, Fiscal Year 1973.

January 24, 1972

To the Congress of the United States:

The Budget of the United States for the fiscal year 1973 has as a central purpose a new prosperity for all Americans without the stimulus of war and without the drain of inflation.

To provide for the needs of our people by creating new peacetime jobs and revitalizing the economy, we are spending $38.8 billion more in the current (1972) fiscal year than our receipts.

I make that estimate fully aware that it is a large deficit, but one that is necessary in a year of reduced receipts, as we increase jobs and bring the economy back toward capacity.

! am able to project a 1973 budget, with rising revenues, that cuts this year's actual deficit by $13 1/2 billion and brings us strongly forward toward our goal of a balanced budget in a time of full employment.

If we were to spend less, we would be "too little and too late" to stimulate greater business activity and create more jobs; if we were to spend more, we would be spending "too much, too soon" and thereby invite a renewal of inflation. Instead, we must spend "enough and on time" to keep the economy on a steadily upward peacetime course while providing jobs for all who want them and meeting the urgent needs of the American people.

The budget for fiscal 1972 reflects this Government's confidence in the American economy's ability and capacity to respond to sensible stimulation. The budget for 1973, held to full-employment balance, diminishes stimulation as the new prosperity takes hold and, by so doing, acts as a barrier against the renewal of inflationary pressure.

I strongly urge the Congress to respect the full-employment spending guideline this year, just as business and labor are expected to respect wage and price guidelines set forth to protect the earning and buying power of the American worker and consumer. In the long run, only the intelligent application of responsible fiscal and monetary policies, coupled with the breaking of inflationary expectations, will bring about peacetime prosperity without rising prices in a free market economy.

Deficit spending at this time, like temporary wage and price controls, is strong but necessary medicine. We take that medicine because we need it, not because we like it; as our economy successfully combats unemployment, we will stop taking the medicine well before we become addicted to it.

Preparing the Federal budget forces us to face up to the choices and challenges before us--to decide what national interests take priority.

The budget is a superb deflator of rhetoric because it calls to account the open-ended promises heard so often in an election year. Proposals, no matter how attractive, must be paid for, and when spending is proposed that takes us beyond full employment balance, that payment must either be in the form of new taxes or rising prices. As the budget submitted herewith proves, I intend to resist the kind of spending that drives up taxes or drives up prices.

One priority that most Americans will agree upon is the return of power to people, after decades of the flow of power to Washington. One good way of turning rhetoric into reality is to put that principle into practice in the tax area.

Power in its most specific sense is spending power. My own choice between Government spending and individual spending has been clear and consistent: I believe some of that power should be taken from the Federal Government and returned to the individual.

Accordingly, over the past 3 years, the rate of increase in Government spending has been cut nearly in half compared to the 3 comparable years before this Administration took office.

From 1965 to 1968, Federal spending increased by 15%--an annual average of 17%; over the 3-year period 1969-72, spending rose by 28%--an average of 9% per year. The increase from 1972 to the spending level proposed in this budget is only 4.1 %. This slash in the momentum of Federal spending is all the more dramatic when you consider that 71 % of Federal spending is "uncontrollable"-that is, locked into the budget by previous congressional decisions.

By putting the brakes on the increase in Government spending, we have been able to leave more spending power in the hands of the individual taxpayer. In 1973, individuals will pay $22 billion less in Federal income taxes than they would if the tax rates and structure were the same as those in existence when I took office. To a family of four that earns $7,500 a year, that means a reduction of Federal income taxes of $272 this calendar year. I believe that the members of that family can use that money more productively for their own needs than Government can use it for them.

The basic shift in the Government's fiscal philosophy has gone relatively unnoticed. The upward curve of Federal spending is beginning to flatten out, while the Federal income tax "bite" out of the individual paycheck is becoming measurably less. This change in direction is as remarkable as it has been unremarked. We are not only talking about returning power--economic power, real power--to people and localities, we are doing something about it.


[Calendar year]

Reduction between

Taxes paid 1969 and 1972

Wage income 1969 1972 Amount Percentage

$5,000 $290 $98 $192 66

$7,500 756 484 272 36

$10,000 1,225 905 320 26

$15,000 2,068 1,820 448 20

Throughout this budget, a clear trend can be seen that is designed to return power to people--in real terms, in dollars and-cents terms. It is a trend which is expressed by Federal income tax cuts, by more State and local participation in program administration, and by more Federal funds going to State and local governments without restrictions.

This is the right course for the American people; it reflects their will; I remind the Congress of its power and responsibility to make revenue sharing and other returns of power to people a reality in this current session.

Another priority--one upon which so much of our progress at home depends-is to create a peaceful world order. We could never fulfill our hopes for a full generation of peace from a position of weakness; we can only negotiate and maintain peace if our military, power continues to be second to none.

A demagogue may find it easy enough to advocate that we simply allocate necessary defense dollars to social programs, but a responsible Congress and a responsible President cannot afford such easy answers.

Our success in reducing our involvement in Vietnam by 480,000 men before May i, 1972, and comparable materiel reductions will help enable us for the first time---to spend more in the Department of Health, Education, and Welfare than we spend in the Department of Defense.

But it would be foolhardy not to modernize our defense at this crucial moment. Accordingly, and still within our full employment guideline, I propose a $6.3 billion increase in budget authority for military programs, including vitally needed additions to our strategic forces and our naval strength.

in the 1972 defense appropriation bill, which the Congress did not pass until December of 1971, the Congress cut my appropriation request by $3 billion. My 1971 defense request was cut by the Congress by $2.1 billion. These were costly cuts, especially in the field of research and development.

We must be prudent in our defense spending, making certain we get the best defense for each taxpayer dollar spent. Productivity here too must be increased, but we cannot afford to be "penny-wise and pound-foolish." Nothing could be more wasteful than to have to pay the price of weakness. It costs far less to maintain our strength than it would cost to fall behind and have to catch up, even if that could be done. I urge the Congress not to make the costly mistakes it has made in previous years in its defense cuts; the budget as submitted represents America's actual military needs, and offers the best means to secure peace for the coming generation.

Another priority of this budget is to direct the resources of the Federal Government toward those needs the American people most want met and to the people who are most in need.

Welfare Reform, with training and work incentives, with a new fairness toward the working poor and a minimum income for every dependent family, is a good idea whose time has come. It has been proposed and studied; it has been refined and improved upon; it is ripe for action now. Further delay in enactment would not only be unwise in fiscal terms, but cruel in human terms. The proposed program is infinitely better than the wasteful, demeaning system that now calls itself welfare. This budget proposes appropriation of $450 million to start the replacement of welfare with "workfare."

Revenue Sharing has been debated at length. Each day and each State's experience only confirms the inescapable fact that it is wanted and needed--now. The States and cities urgently require this aid; individual Americans need it for everything from improved law enforcement to tax relief. This budget allocates $2.5 billion in 1972 and $5.3 billion in 1973 to make General Revenue Sharing a reality now.

Schools need emergency assistance now to make necessary adjustments to provide equal educational opportunity. This budget allocates $500 million in 1972 and $1 billion in 1973 for this purpose.

Government reorganization is needed now, to deliver more services for each tax dollar collected. The pain this change will bring to special interests and bureaucracies is less important than the pain existing bureaucratic arrangements now cause the people. A reorganized government will be a better, more efficient government.

Health care must be improved and made available to all Americans, without driving up medical costs. This budget provides for legislative actions and necessary funding to make better health care available on the most widespread basis, to emphasize preventive medicine, and to pursue an all-out campaign to eliminate cancer and sickle cell anemia.

Drug abuse prevention must be intensified to curb narcotics trafficking and to expand Federal drug rehabilitation efforts coordinated by the White House Special Action Office. The budget allocates $594 million to these and other drug abuse prevention campaigns.

A new commitment to the aging is long overdue to add dignity and usefulness to their lives. This budget provides for total spending of $50 billion on behalf of the aging, $16 billion more than in 1969. Most importantly, $5 1/2 billion will be added to the incomes of older Americans when proposed social security and Welfare Reform legislation is fully in effect. In addition, service initiatives will be launched that will focus on better nutrition and other services designed to help the elderly live independently in their own homes.

Scientific research and technology, so essential to our national security, also must focus more directly on solving our domestic problems, increasing our productivity, and improving our competitive position in international trade. The budget allocates $17.8 billion for this, an increase of $1.4 billion over 1972.

Veterans of the Nation will receive the special consideration they deserve, with particular emphasis on those reentering civilian life after service in Vietnam. This budget provides more than $ 12 billion in budget authority for veterans benefits, with an increase of over $1 billion for modernization, replacement, and record staffing of VA hospitals, higher compensation for disabled veterans, and enhanced job training opportunities, higher GI bill allowances, and other improved services.

Details on each of these proposals are given later in this Budget Message.


ECONOMIC SETTING.--In January 1969, the Nation's chief economic problem was mounting inflation.

Anti-inflationary policies that we adopted began gradually to lower the rate of price increases. However, progress was slower than we had hoped and was accompanied by an unacceptable increase in unemployment. This increase was in part a result of the transition of 2 1/2 million people from wartime to peacetime activities.

During 1970 and 1971, responsible economic policies provided stimulus to expand the economy. The budgets for these years had actual deficits of 92.8 billion and $23 billion, but full-employment surpluses of $3. 1 billion and $4.9 billion.

As a result of these policies, progress was made in moderating inflation and in expanding real output in the first half of calendar year 1971. However, inflation and unemployment continued to be unacceptably high. Meanwhile, a deterioration in the trade and balance of payments position of the United States, caused in part by the inflationary pressures of the latter half of the 1960's and aggravated by weaknesses in international monetary and trading arrangements, required decisive corrective action.

Action was called for and action was taken.

On August 15, 1971, I announced a new economic policy that:

--imposed a 90-day freeze on wage and price increases;

--proposed a job development tax credit to increase employment by stimulating investment;

--recommended repeal of the automobile excise tax and an early increase in the personal tax exemption, which together would provide an extra $8 billion of stimulus to the economy over a 3-year period;

--reduced planned Federal spending in 1972 by $5 billion; and

--suspended the convertibility of the dollar into gold and other reserve assets and imposed a temporary 10% import surcharge, thereby laying the foundation for improved trade performance and for basic changes in the international economic system.

The public responded to the new economic policy with the widespread support essential to its success.

This policy has begun to move the economy toward full employment without inflation and without war, a condition we have not experienced in this generation. The consumer price index rose only 1.7% at an annual rate from August to November-the lowest rate of increase for a comparable period in 4 1/2 years. From August to December, industrial wholesale prices rose only 0.5% at an annual rate, after increasing at a 4.6% annual rate during the first 8 months of the year.

Now we have moved beyond the wage and price freeze into a transitional period of flexible wage and price controls and on the way to a return to reasonable stability under free markets.

The proposed tax reductions were part of the Revenue Act of 1971, which became law on December 10. Because of the general expectation that the Congress would approve them, the economic effect of these reductions began to be felt immediately after August 15. Automobile sales soared to a record rate in October, interest rates declined, and business investment plans-after some hesitation--are being revised upward. Taken together, these results will create many of the new jobs needed for full employment.

Negotiations with our international trading partners produced a major agreement in mid-December. Exchange rates were realigned through a devaluation of the dollar and revaluation of the currencies of some of our major trading partners. The 10% surcharge on imports was removed as promised. That agreement will improve the competitive position of U.S. industry and agriculture and permit us to move forward in negotiations on fundamental reform of the international monetary system and on elimination of barriers to expanded international trade.

Each element of the new economic policy has a vital role in sustaining the momentum of our economy. The 1973 budget carries out a fiscal policy that is responsive to the needs of the Nation and responsible in holding down inflation.

BUDGET POLICY.--The full-employment budget concept is central to the budget policy of this Administration. Except in emergency conditions, expenditures should not exceed the level at which the budget would be balanced under conditions of lull employment. The 1973 budget conforms to this guideline. By doing so, it provides necessary stimulus for expansion, but is not inflationary.

We have planned the 1973 expenditures to adhere to the full-employment budget concept, even though this has required making many difficult decisions. It now appears that the 1972 full-employment budget will be $8.1 billion in deficit. While our economy can absorb such a deficit for a time, the experience of the late 1960's provides ample warning of the danger of continued, and rising, full-employment deficits. The lesson of 1966-68, when such deficits led to an intolerable inflation, is too clear and too close to permit any relaxation of control of Government spending.

Keeping 'the 1973 budget in full employment balance will not be easy. The tax changes that have been made during my Administration have reduced 1973 full-employment revenue by a net total of $20 billion. This reduction has been good for the economy, and has given each of us more freedom to decide how he will spend his money and live his life. However, the lower receipts and the need to balance the 1973 full-employment budget require that the Congress carefully consider the Nation's priorities, as I have done in preparing this budget. The task is made harder by the fact that the growth of programs-especially, uncontrollable programs, which now account for 71 % of total outlays--could easily lead to another full employment deficit in 1973 if the Congress adds to my recommendations for domestic spending as it did last year.

The simple fact is that not all programs can or should grow. I urge the Congress to face squarely the difficult questions involved in setting priorities within the overall constraint of a full-employment balance, and not to take the dangerous course of trying to match domestic spending increases with cuts in vitally needed defense funds.


For 1973, the Federal budget at full-employment is approximately in balance. Budget receipts in 1973 are estimated to be $220.8 billion, which is $23 billion higher than in 1972. If the economy were operating at full employment throughout the year, the revenues produced would be $245 billion.

Estimated receipts for 1973 reflect a reduction of $6.9 billion as a result of the tax cuts proposed in the new economic policy and incorporated in the Revenue Act of 1971. About $5 billion of this reduction is in individuals' taxes. The resulting increase in consumers' purchasing power will be a major source of strength in the economy.


[Fiscal years. In billions]

1971 1972 1973

Description actual estimate estimate

Budget receipts $188.4 $197.8 $220.8

Budget outlays 211.4 236.6 246.3

Deficit (--) -23.0 --38. 8 --25.5

Full-employment receipts 214.1 225.0 245.0

Full-employment outlays 1 209.2 233.1 244.3

Full-employment surplus or deficit (--) 4.9 --8.1 0.7

Budget authority 236.4 249.8 270.9


Outstanding debt, end of year actual

Gross Federal debt $382.6 $409.5 $455.8 $493.2

Debt held by the public 284.9 304.3 343.8 371.3

Outstanding Federal and federally assisted

credit, end of year:

Direct loans 2 51.1 53.2 50.7 51.4

Guaranteed and insured loans 3 105.4 118.7 136.8 158.6

Direct loans by Government-sponsored

agencies 37.5 38.8 54.6 65.8

1These estimates reflect the fact that under conditions of full employment outlays for unemployment insurance benefits and the Emergency Employment Act program would be lower. Spending under other programs are also affected by employment conditions. For example, outlays for food stamps, social security benefits, public assistance, and veterans' pensions would also be lower under conditions of full employment, and interest would be higher. If adjustments were feasible for all such items, full employment outlays probably would be lower.

2 Including loans in expenditure account.

3 Excluding loans held by Government or Government-sponsored agencies.

Budget outlays in the coming year are expected to be $2046.3 billion, an increase of $9.6 billion over the current year. This outlay increase will also help provide jobs and business investment in the year ahead, while remaining within the limit set by full-employment budget guidelines. If the economy were operating at full employment throughout the year, outlays for unemployment insurance benefits and the Emergency Employment Act--and outlay totals--would be lower than the amounts included in the 1973 budget.

This budget requests $271 billion of budget authority--the right to make commitments to spend---in 1973. About $185 billion of this amount will require new action on the part of the Congress.


The highest priority of my Administration is to bring about an era of peace and prosperity. We are pursuing this goal through partnership with our allies, military strength adequate to deter aggression, negotiations with those with whom we differ, and foreign assistance that encourages self-sufficiency.

We seek peace to reduce the human suffering that is an inevitable part of war. With peace we can release energies and resources that can be used to improve the quality of life everywhere. We have accomplished much of this high purpose during the past 3 years--particularly as a result of the Vietnamization program.

• South Vietnamese forces have assumed the responsibility for ground combat operations. Vietnamization is moving forward in other areas as well.

As a result:

--U.S. casualties due to hostilities have been averaging less than 10 per week, as compared with 300 per week in 1968;

--the authorized troop level in South Vietnam will have been reduced from 549,500 in January 1969 to 69,000 as of May 1, 1972; and

--draft calls have been reduced from a Vietnam war high of 382,000 to 94,000 in calendar year 1971, as we move toward the goal of zero draft calls.

• Negotiations with the Soviet Union on strategic arms limitations are progressing.

• Agreement has been reached with NATO members on a 5-year plan to strengthen their defenses, with a substantial increase in their financial contribution.

• Security assistance programs are being planned with a view toward better coordinating them with our overall security effort. In some cases, this may permit additional reductions in U.S. manpower needs overseas.

Our efforts toward peace have not been--and will not be--at the expense of our military strength. Indeed, measures to maintain that strength are a vital part of our peace efforts. Accordingly, this budget proposes a substantial increase in defense programs to provide for the following improvements:

--additional resources for our strategic forces to increase emphasis on our sea-based strategic deterrent force and to continue modernization of present offensive and defensive forces;

--a major increase in shipbuilding, reflecting the high priority I place upon modernizing our naval forces;

--a sizable increase in research and development to assure continuation of our technological superiority;

--newer equipment, higher manning levels, and further training to improve the ability of the National Guard and Reserves to supplement the Active Forces;

--continued development and procurement of more effective weapons systems for the land and tactical air forces; and

--a major effort to achieve an all volunteer force. Toward this end, a career in the Armed Forces was made more attractive by doubling the basic pay of first time enlistees in November 1971. Other increases in military pay are budgeted for January 1972 and 1973.

Strong foreign assistance programs are also an essential part of our strategy, for peace, serving to:

--implement the Nixon Doctrine by helping foreign nations assume a greater share of the responsibility for their defense;

--strengthen the economies of developing nations; and

--provide humanitarian assistance and relief.

We must be steadfast in our foreign assistance. We are moving from an era of confrontation to an era of negotiation and increased reliance on our allies to defend themselves. In this setting, I have carefully weighed our basic assistance requirements against our domestic priorities, and now submit a program based on a thorough assessment of what is essential. We must not undercut the efforts of developing nations to stand on their own. Nor can we shortchange the nations now shouldering the burden of their own defense after they--and we--have given so much.


My Administration has begun widespread reform and has sought to take new directions in Federal human resources programs. From 1969 to 1972, outlays for these purposes grew by 63%, while total budget outlays grew by only 28%. This increase is designed to buy such real improvements as:

--greater benefits for the aged and other beneficiaries under social security;

--additional training opportunities for the disadvantaged;

--reform of the food stamp program to establish national standards and to give more help to the most needy;

--better health care for millions of low-income persons and for the aged;

--expanded and improved veterans programs;

--increased educational opportunities for students from lower income families; and

--extension of unemployment insurance coverage to more Americans. As a result, human resources spending will be 45% of the 1973 budget, while defense programs will be 32%. Our policy of ending our involvement in the Vietnam war has helped make this possible by freeing resources to keep us strong externally as well as internally. This exactly reverses the priorities of the prior administration. In 1968, the defense share was 45% and the human resources share was 32%.

While this is a substantial record of progress, our work is far from complete.

This budget recommends new initiatives and emphasizes many reforms proposed last year--on which the Congress has yet to complete action. These proposals are a necessary part of my efforts to return more of the power to the people, to strengthen the capacity of State and local governments to govern, and-- specially by assuring the civil rights of all our citizens--to contribute to personal freedom and human dignity.

To help overcome the fragmentation in human services, which so often loses sight of the whole person and the family, I am proposing Allied Services legislation that would assist State and local governments to respond to human needs more efficiently, more flexibly, and more comprehensively. The legislation would authorize the transfer of Federal funds between Department of Health, Education, and Welfare programs not included in revenue sharing, the waiver of cumbersome Federal program requirements, and limited funding for planning and administrative costs.

WELFARE REFORMS.---Almost four decades of experience with the present welfare system is more than enough to teach us that the system has failed.

• It takes away the incentive to work.

It lacks adequate job opportunities and child care services that would encourage and assist recipients to become self-supporting.

• Its benefits are inadequate to the needs of its recipients.

• It encourages families to break up so that they might qualify for assistance.

• Its 54 different systems with diverse standards defy efficient administration and create severe inequities.

I urge that the Congress approve promptly the Administration's Workfare legislative proposal. My proposal would remove the greatest evils of the present system by:

--emphasizing work incentives, work requirements, job training and public employment opportunities, child care, and reform of social service programs to encourage families to become and remain self-supporting;

--providing benefits for the first time to families with fathers who work but who do not earn enough to provide a decent standard of living for the family;

--setting a national minimum income standard for all families with children in America;

--establishing uniform national eligibility standards;

--reducing the fiscal pressure on States caused by rapidly rising welfare expenditures; and

--raising income limits to allow retired persons to earn more without loss of benefits.

NUTRITION FOR THE NEEDY.---This Administration has taken decisive steps to feed the hungry and eliminate malnutrition in America. Most importantly, major reforms of the Food Stamp program that I proposed are now in operation. New regulations will:

--establish uniform eligibility standards that equal or exceed the present State standards in all States;

--concentrate benefits on those most in need;

--guarantee family stamp allotments for the needy large enough to purchase a nutritionally adequate diet, with increases tied to the cost of living; and

--provide a work requirement for those able to work.

As a result of these and earlier Administration actions, we have provided more benefits to more people in need than ever before. Food stamp outlays have increased ninefold from 1969 to 1973-reaching an estimated $2.3 billion in benefits for 13 million poor in 1973.

In addition, there will be nearly a threefold increase between 1969 and 1973 in the number of needy schoolchildren receiving subsidized lunches.

A NEW DIGNITY FOR. THE AGING.--Last November, I convened the White House Conference on Aging to develop proposals for improving the lives of our senior citizens. The recommendations of the Conference clearly indicate that programs to aid the aged should serve two essential purposes.

• They should provide the aged with sufficient income and necessary services to permit them to remain independent.

• They should assist aged citizens to live active and useful lives.

This budget is responsive to these recommendations. In 1973, the Federal Government will spend nearly $50 billion to assist the Nation's 21 million aged persons. This is $16 billion more than the amount spent to assist the aging in 1969.

Several major proposals in this budget are responsive to the special needs of the aged:

--social security and workfare legislation that will add $5.5 billion to the income of the elderly when it is fully in effect and provide an income floor for older Americans;

--elimination of the monthly premium for supplementary medical insurance in Medicare that will save the elderly $1.5 billion in the first full year;

--$100 million, a fivefold increase over the amount budgeted last year, for the Administration on Aging to provide additional homemaker services, home health aides, transportation, and nutrition services to help older Americans remain in their homes;

--a tripling of the retired senior volunteer program, a doubling of the foster grandparents programs, and a doubling of jobs programs for older persons with low incomes from the levels budgeted last year to enable more of the aged to engage in useful community projects; and

--tax incentives that will broaden the coverage of private pension plans. The Congress has not yet acted on the major reform in the social security system that I proposed last year--providing automatic adjustments for increases in the cost of living. The older Americans who depend on their social security checks have waited long enough. I urge the Congress to act promptly on this reform and, in addition to:

--raise benefits by 5%, effective July 1, 1972, making the cumulative increase more than one-third in less than 3 years;

--allow recipients to earn more money from wages without losing their benefits; and

--increase widows' benefits up to the level their deceased husbands would have received.

IMPROVING HEALTH CARE.--Almost a year ago, I submitted a health message to the Congress establishing a National Health Strategy for the 1970's. This strategy was directed toward three objectives: prevention of health problems, assured access to medical care, and greater efficiency within the health care system.

To achieve these objectives, I urge the Congress to act promptly on the pending National Health Insurance Standards Act, the proposed Family Health Insurance Plan, and legislation to support the development of health maintenance organizations.

In addition, in 1973, I propose further actions that are essential to my national health strategy, including:

--a substantial increase in funds for the attacks on cancer and sickle cell anemia;

--continued financial support to our health manpower training institutions and to their students;

--expanded efforts to develop health maintenance organizations as a model of improved health care delivery;

--significant increases for protecting consumers from hazardous food and products;

--expanded community programs to deal with special health problems, such as drug addiction and alcoholism;

--improvement of the Medicare program by eliminating the monthly premium for physician services; and

--substantial increases in medical personnel at veterans' hospitals and in funds for constructing new and better hospital facilities for veterans.

DRUG ABUSE PREVENTION.--Last summer, I emphasized the need for a coordinated attack on drug abuse and drug dependency in this country and created the Special Action Office for Drug Abuse Prevention and the Cabinet Committee on International Narcotics Control to monitor and coordinate a concerted Federal effort. Legislation to give the Special Action Office a statutory base was proposed by the Administration more than 7 months ago and should be approved promptly.

In 1973, I am proposing an increase in program levels of $120 million for treatment, rehabilitation, and law enforcement programs, including control of illicit supplies. Funds for research, education, prevention, treatment, and rehabilitation will increase from $310 million in 1972 to $365 million in 1973 while obligations for law enforcement activities will grow from $164 million in 1972 to $229 million in 1973. Under the direction of a Special Consultant to the President, we are mounting a coordinated attack on dope sellers in 24 cities throughout the country.

GUARANTEEING CIVIL RIGHTS.--All of our citizens should expect a first priority of government to be protection of their civil rights. My Administration is committed to a course of action to insure that people can share fully in the benefits of our society regardless of race, sex, religion, or national origin. Significant accomplishments have been made. Much remains to be done:

--We will continue the increase in minority hiring in the Federal service, especially in professional and supervisory positions, despite cutbacks in Federal employment. More than 13,000 minority employees were hired between November 1969 and May 1971, and minority increases in upper and middle grade levels occurred at much faster rates than for nonminorities. Minorities now constitute approximately one-fifth of all Federal employees.

--We will continue to press efforts to assure that women will hold more jobs with greater responsibilities than ever before. Between October 31, 1970 and October 31, 1971, women holding Federal positions at levels GS-13 and above increased by 7%.

--We will continue the upgrading of efforts to open opportunities for Spanish-speaking Americans. The budget of the Cabinet Committee on the Spanish-Speaking will be increased by 42%.

--We will step up our efforts to promote self-determination for Indians on reservations and to assist them in their economic development. For example, legislation to establish an Indian Trust Counsel Authority has been proposed to guarantee that the rights of the Indian people in natural resources are--at last---effectively defended. Outlays for programs benefiting Indians on reservations will reach $1.2 billion in 1973.

--We will double our resources and our efforts to assure that Federal contractors meet the commitments of their affirmative minority hiring plans. Compliance reviews will increase to 52,000 compared to 12,300 in 1969.

--We will continue to accelerate Federal financial aid and technical assistance to increase minority business opportunities in America. Outlays for these programs have grown from $213 million in 1969 to $716 million in 1973.

--We will continue our efforts to help with the problems of school desegregation and upgrade our assistance to black colleges and other developing institutions of higher education. The Emergency School Act will provide $ 1.5 billion over a two-year period to assist in school desegregation.

--We will add to our efforts to eradicate unlawful discrimination in the sale, rental, or financing of housing. Expenditures for these programs will increase 20% in 1973 to $11 million.

--We will increase the outlays of the Equal Employment Opportunity Commission from $22 million to $30 million to enhance their capability to end discrimination in the private sector.

To carry out these plans, I have recommended total expenditures of $2.6 billion for Federal civil rights activities in 1973. This compares with $911 million in 1969. Outlays will increase by 25% between 1972 and 1973.

VETERANS BENEFITS.--In moving toward a generation of peace, we will provide improved benefits for the men and women who have helped obtain that peace through military service and great sacrifice. For the returning veteran, this budget demonstrates our concern by providing greater opportunities for entry into jobs, education, and training. For those who have been disabled in service, this budget provides medical care of high quality that is better tailored to their needs-together with greater benefits for rehabilitation and compensation. For the widows and children of those who did not return, this budget provides additional dependents' compensation, education, and training. Budget authority for these and other benefits and services will be increased by $1 billion in 1973--to $12.4 billion.

Marked benefit improvements will include:

--an increase of 10,000 in average employment in VA medical facilities, raising the staff to patient ratio for VA hospital care to a record 1.5 to 1;

--a 66% increase in budget authority for construction of new and better hospital facilities, including seven new replacement hospitals;

--improvements in the structure and levels of veterans compensation benefits, to insure more adequate benefits for the most seriously disabled; and

--an increase in the monthly individual benefit payment for the GI bill from $175 to $190, linked with other program improvements I have proposed.

EDUCATION AND MANPOWER TRAINING.---The need for reform in Federal education and manpower training programs has not diminished since last year, but the reforms I recommended then are still awaiting action by the Congress.

We must reform these programs so that people can achieve their potential intellectual and occupational skills. For this reason, I again emphasize the need for action on proposals to:

--substitute special revenue sharing programs for categorical grant programs in both of these areas;

--assist school districts in desegregation efforts;

--establish a National Institute of Education to support research and experimentation and a National Foundation on Higher Education to promote reforms in our colleges and universities;

--provide additional training opportunities and strong incentives under Welfare Reform for welfare recipients to undertake suitable employment or job training;

--assure the returning veteran greater opportunities for jobs, education, and training; and

--reform student aid programs for higher education to increase their effectiveness and direct more aid to students from lower income families. Let me use that last proposal as an example. I believe that no qualified student should be denied a college education because he cannot afford to pay for it. Most Americans and most Congressmen agree. I have proposed the legislation that will make this a reality. I am ready to sign that legislation. But there it sits, in Congress, while thousands of young people miss their chance.


When I took office, the safety and health of our citizens were menaced by rising crime. Violent crimes and illegal traffic in narcotics and dangerous drugs were threatening to get out of control. A crisis existed, and prompt action was called for. I directed that a national strategy to combat crime be developed and promptly put into effect.

Any successful strategy to combat crime must recognize that State and local governments are responsible for most law enforcement in the United States. Such a strategy must also provide for the prevention of crime and for the rehabilitation of criminals.

I took action early to strengthen the hand of State and local government law enforcement agencies.

• Outlays for law enforcement assistance were increased substantially. They will total $595 million in 1973, nearly 18 times the $33 1/2 million of 1969.

• Law enforcement special revenue sharing was proposed to give State and local governments increased flexibility to use Federal funds in ways that are best suited to solving local crime problems. The Congress should act on this proposal.

Federal law enforcement activities are also an essential part of our efforts to combat crime--especially organized crime and traffic in narcotics and dangerous drugs. In 1973, we will:

--step up our attack against the criminal systems that import and distribute narcotics and dangerous drugs; and

--continue to enforce vigorously the Organized Crime Control Act of 1970.

Outlays for law enforcement activities will be $2.3 billion in 1973, an increase of $1.7 billion over 1969.

My Administration has given priority to combating crime in our Nation's Capital, where the Federal Government has a special responsibility. These efforts have been successful. Serious crime in the District of Columbia in 1971 was approximately 14% below the level of the previous calendar year.


Protecting and improving our environment is a never-ending job. The basic responsibility rests with States and local governments, industry, and the public. However, the Federal Government must provide leadership.

In 1970, the Environmental Protection Agency was established to improve our pollution control efforts, and the Council on Environmental Quality was established to advise on problems and policies related to environmental quality.

Now, new initiatives are being undertaken.

• To clean our air, we have:

--set national standards for the six major air pollutants and guidelines for State implementation plans to meet these standards;

--set pollution abatement standards for new facilities in five industrial categories;

--recommended a sulfur emissions tax to encourage reductions in this major source of pollution; and

--supported research and development to provide a low-pollution alternative to the conventional internal combustion engine and to provide means to reduce pollution from burning coal and oil.

• To clean our water, we have:

--required permits under the Refuse Act to control discharges of industrial pollutants into our waterways;

--proposed legislation to control dumping into oceans, coastal waters, and the Great Lakes; and

--initiated a 3-year, $6 billion program to assist State and local governments in building sewage treatment facilities

• To reduce noise pollution, we have proposed legislation to regulate and to set labeling requirements for major sources of noise.

• To improve and protect health, we have proposed new legislation on pesticides to regulate their use and to strengthen and coordinate Federal and State control efforts.

• To use our lands more wisely, we have proposed legislation on power plant siting, mined area protection, and land use regulation.

Many of the proposals that I have submitted to the Congress have not yet been enacted. Our Nation cannot make the major efforts that are needed to protect and improve the environment unless Congress will respond to the urgent need for this legislation. I urge rapid approval by the Congress of these pending environmental proposals. With the passage of this legislation--and the additional proposals that I will submit to Congress in a special environmental message in February--we will be able to move forward vigorously in all areas of environmental quality.

The outlays requested for major environmental programs in 1973 are $2.5 billion, more than three times the 1969 level. These funds will support expanded efforts in all major environmental programs. For example, Federal programs have assisted in increasing the population served by secondary sewage treatment from 91 million in 1969 to 115 million in 1973, and in removing 27% more pollution from municipal sewage effluent than was removed in 1968.

PARKS AND OPEN SPACES.----As our expanding economy provides higher standards of living and increased opportunity for leisure, our citizens will want additional parks and other recreational facilities, especially in and near cities. We also want to assure the preservation of nationally important natural and historic areas. This budget provides for meeting these future needs.

I am proposing that the Land and Water Conservation Fund annual authorization be fully funded to provide:

--$197 million in grants for State and local governments to assist them to acquire and develop lands for recreation and parks; and

--$98 million for the acquisition of nationally significant natural or historic areas by Federal agencies.

In the period 1970-73, this program will have provided over $ 1. 1 billion, compared to $535 million provided for this purpose in 1966-69.

The budget also proposes to continue, under the Legacy of Parks program, the transfer of surplus Federal property to State and local governments for recreation facilities, parks, and historic sites. In 1973, over 20,000 acres, with a market value of $120 million, will be transferred under this program. For the period 1969-73, a total of 47,000 acres of land with a market value of $245 million will have been provided to State and local governments.

COMMUNITY DEVELOPMENT AND HOUSING.--During the past 3 years, solid progress has been made toward providing decent, safe, and sanitary housing for every American. In calendar year 1971, the volume of new housing construction-more than 2 million new starts--was the highest in the history of this country. The construction of Government-assisted housing for low- and moderate-income families has also been increased to record high levels over the past 3 years.

This Administration has taken steps to decentralize Federal programs that assist community development and housing activities to make them more responsive to local needs and preferences.

Our efforts to aid community development and to provide better housing are still not as productive as they can be. I have proposed major reforms that would make them more so:

--a program of urban community development revenue sharing that would replace five categorical grant programs and provide State and local governments $2.3 billion in 1973;

--a Department of Community Development that would consolidate in one organization the many programs and activities that are essential to community development;

--legislation that would simplify and consolidate housing programs; and

--a new planning and management assistance program that would help States and localities improve their executive management capabilities. These reforms, pending before the Congress, should be enacted promptly.

AGRICULTURE AND RURAL DEVELOPMENT.---This Administration has made major improvements in programs to help farmers share equitably in the Nation's progress. In addition, I have proposed a new program for rural community development through revenue sharing. I urge the Congress to enact this program in time to be effective on July 1, 1973.

I will shortly recommend further legislation to:

--improve the availability of credit for both farmers and rural residents; and

--give greater emphasis to our efforts to encourage community and industrial development in rural areas.

My budget proposals for 1973 will also further our goal of making all rural residents first-class citizens living in first-class communities. Specifically, we will:

--expand the availability of rural housing;

--strengthen farm incomes through orderly handling of the bumper 1971 grain crop; and

--help finance critically needed waste disposal and water supply systems for nearly 500,000 rural families.


In this year's budget, and subsequently, I shall propose how we can accelerate the effort I began 3 years ago to turn science and technology to the service of man.

Research and development have been critical elements of our national life since World War II. They have been the key to our national security and health and instrumental in the solution of many important civilian problems. Research and development also have made significant contributions to our economy in terms of jobs, productivity, and foreign trade.

This Administration has continuously searched for more effective ways to turn science and technology to the service of man. Since 1969, funds for civilian R & D have increased 65%. We have started new programs and strengthened others to help focus R & D on priority human needs.

We have been reordering our research and development investments in defense and space. We have reassessed the space program and placed it on a firm future footing with increased attention to practical and economical applications of space and reductions in the cost of manned space flight.

At the same time we have strengthened our defense research and development capability to insure that the country will not face the possibility of technological surprise or lack the deterrent power necessary to protect our national security. To provide this assurance, budget authority for Department of Defense research, development, test, and evaluation is being increased $838 million to an all-time high of $8.5 billion in 1973.

To emphasize this Administration's strong belief that science and technology can make significant contributions to the quality of American life and to economic growth, I propose additional steps in 1973 to:

--secure the contributions that science and technology can make to our national life;

--initiate a series of experiments to find better ways to encourage private investment in R & D, including investment by small entrepreneurial R & D firms, which have made significant contributions to the generation and exploitation of innovative ideas;

--draw more directly on the capabilities of those agencies which have created the technologies that harnessed the atom and conquered space. AEC and NASA will increasingly use their talents on such problems as clean, economical energy, and clean, safe, and fast transportation systems. For example, this year we shall have the agency which sent men to the moon and back begin to assist the Department of Transportation in finding better ways to send people downtown and back; and

--review carefully our policies in areas of economic regulation, which may unnecessarily restrict wider utilization or development of new technical advances.

I am also initiating new programs and strengthening research and development aimed at three important objectives:

--protecting man and nature from each other;

--using the resources of nature to serve mankind's needs; and

--pioneering new and improved human services.

The overall result of our efforts to strengthen science and technology in the national interest is reflected in the 1973 increase of $1.4 billion in obligations to a total of $17.8 billion. I firmly believe this large increase is vital to the security, welfare, and economic well-being of our country.


Improved efficiency and responsiveness at all levels of government is a major objective of this Administration. One of my first acts as President was to direct that an intensive review be made of our Federal system of government. We found that the executive branch was badly organized to accomplish domestic objectives. We found that State and local governments were often unable to meet the needs of their citizens because of a fiscal crisis that was steadily worsening. And we also found that Federal programs to assist State and local governments had become a maze of separate programs, understood only by members of a new profession--grantsmanship specialists.

The Administration has developed a comprehensive strategy for dealing with these problems. This strategy includes:

• Revenue sharing--an important element of the strategy--to provide fiscal relief and to strengthen State and local governments;

• Reorganization of the executive branch to create four new departments structured around the basic domestic activities of government;

• Federal Assistance Review (FAR) to strengthen delivery of Federal assistance to State and local governments;

• Regional councils to help in our program of returning power to the people;

•Technical assistance to help State and local governments improve their organizational structures and management processes; and

• Budget reform to enable the executive branch and the Congress better to serve the people.

REVENUE SHARING.--A year ago I proposed to the Congress a General Revenue Sharing program and six special revenue sharing programs to relieve the fiscal crisis of State and local governments and to eliminate some of the problems of the present categorical grant system. No action has yet been taken on these proposals. I again urge that Congress enact these proposals.

If enacted to become effective January 1, 1972, as I am proposing, the General Revenue Sharing program would:

--provide $2.5 billion of budget authority in fiscal year 1972 and $5.3 billion in fiscal year 1973 to help relieve the fiscal plight of State and local governments;

--enable those units of government closest to the people to determine how the funds would be spent to meet local needs and priorities; and

--reduce pressures to raise State and local taxes.

The special revenue sharing programs would provide assistance to State and local governments for six broad purposes, with discretion in the use of these funds to be left primarily to State and local governments. The following table shows the categories proposed and the first full year budget authority that would be provided for each one:


Description Billions

General revenue sharing $5.3

Special revenue sharing:

Urban community development. 2.3

Rural community development. 1.1

Education 3.2

Manpower training 2.0

Law enforcement 0.9

Transportation 2.8

Total 17.6

In total, these revenue sharing proposals would provide $17 1/2 billion to State and local government in their first full year of operation. The magnitude of the fiscal crisis and the inefficiency and unresponsiveness of the present grant system make favorable action during this session of Congress an urgent need. We can ill-afford further delay.

REORGANIZATION OF THE EXECUTIVE BRANCH.--In my 1971 State of the Union message, I proposed reform of the executive branch by regrouping functions now scattered among seven cabinet departments and several independent agencies into four new departments organized around the major domestic purposes of government: Community development, natural resources, human resources, and economic affairs.

In my message on departmental reorganization, which I transmitted to the Congress on March 25, 1971, I described in detail the need for a comprehensive restructuring of the domestic executive departments to equip them to serve our Nation in the last third of this century. I cited the fragmentation of Federal responsibility for education matters, for manpower programs, for the development and conservation of water resources, for the management of public lands, and for assisting communities in meeting their needs for water and sewer services.

Typically, three or four separate departments or agencies are now engaged in administering overlapping or conflicting programs concerned with a single government objective. This dispersion and duplication of related functions has increased the costs of administration, generated interagency conflict and rivalry, weakened the departmental secretary as a leader in program development and execution, and imposed inexcusable inconvenience on the public being served. The excessive number of departments and agencies independently pursuing related goals has also frustrated able officials at all levels, impeded the decentralization of Federal operations, and made the coordination of administration in the field inordinately difficult.

By pulling together under each secretary the bulk of the programs which contribute to the achievement of a stated departmental mission, we can assure the prompt decision making, the improvement of procedures, and the integration of Federal activities which we need for effective government.

Legislation and detailed plans for the reorganization have been transmitted to the Congress. I urge the early enactment of these basic proposals. They are vital elements of my strategy to narrow the gap between what the Federal Government promises and what it delivers.

FEDERAL ASSISTANCE R E V I E W (FAR) .--In 1969, I initiated the Federal Assistance Review program to streamline the Federal grant system. Primary emphasis was placed on improving the operation of Federal programs to strengthen the capacity of State and local governments. Achievements include:

--standardization of regional boundaries;

--simplification of Federal review procedures for grant applications;

--substantial delegation of authority to Federal field offices;

--a system for informing Governors and State legislatures of approval action on all Federal grants;

--a Project Notification and Review System, utilizing State and regional clearinghouses to facilitate State and local review of Federal grant applications at the formative stage;

--a pilot integrated grant administration program, enabling State and local governments to apply for several Federal assistance grants through a single application; further consolidation and joint funding authority is being sought under proposed legislation; and

--more participation by State and local officials in determining how Federal funds are used to respond to local needs.

FEDERAL REGIONAL COUNCILS.---As part of the FAR effort, Federal Regional Councils, consisting of the regional directors of the major human resources agencies, were established in each of the I o regions. The Councils have now demonstrated considerable potential for increasing Federal responsiveness and coordination at the State and local level.

I shall shortly constitute the Councils formally as bodies within which regional directors of the major grant agencies develop common strategies and mechanisms for program delivery, review program plans jointly with Governors and mayors, and resolve regional interagency issues expeditiously.

TECHNICAL ASSISTANCE.--Since 1969, the Federal Government has offered broad-based organization and management assistance to State and local governments who have requested it. The assistance has taken the form of a review of the organizational structures and the major management processes of each requesting government. Improvements are then suggested. Subsequently, technical and other assistance is available to help the governments implement improvements they think are important. Even though resources are limited, I intend to encourage this form of technical assistance.

REFORMING THE BUDGET PROCESS. The American people deserve, and our Government requires, a more orderly and more rational budget process.

The preparation of this budget, like those of other recent years, has been handicapped by the delays in enactment of appropriations for the fiscal year which began last July 1. There is still one 1972 appropriation bill which has not been enacted even as I write this, 12 months after I submitted the 1972 budget. Moreover, the uncertainties and hesitation caused by these delays in congressional action have hindered the orderly management of the Government.

There has been excessive attention to details and virtually no attention paid to overall totals or the effect of individual irresponsible acts of spending on the budget totals. Any procedural reform that encouraged the Congress to be aware of the overall effect of their individual actions would have substantial benefits for us all.

There have been delays of many months in the enactment of regular appropriation bills, and there have also been periods in which temporary appropriations have been permitted to expire, leaving some agencies with no authority to continue operations.

Changes in the way the Congress conducts its business are its business. But, in the matter of the budget process, the results of the present methods have seriously affected how well I can administer and manage the executive branch.


In 1976, our Nation will celebrate its 200th birthday. Three basic questions must be answered as we look toward a proper celebration of our bicentennial.

• How can we best achieve our great national goals?

• What role should the Federal Government have in this effort?

• How can we best rededicate ourselves to the ideal of personal freedom?

In considering these questions, we cannot ignore the hard fact that the increase in uncommitted resources between now and 1976 will be small in comparison with the magnitude of the tasks, forcing us to make difficult decisions about priorities.

My basic preferences in allocating our national resources are clear.

First, I believe that to avoid permanent inflation and waste we should assure that we count the costs be[ore we make spending decisions. We can do that by adhering to the principle that spending must not exceed the level at which the budget would be balanced if the economy were at lull employment.

Second, I believe that an increasing share of our national resources must be returned to private citizens and State and local governments to enable them--rather than the Federal Government--to meet individual and community needs.

RESPONSIBLE BUDGETING. The first principle--the full employment budget principle--imposes a necessary discipline on Federal spending.

Last year, the budget margin projected for 1976--the potential Federal budget surplus, assuming lull employment and only the programs and tax structure in existence or proposed then (1971) --was $30 billion. Actions taken in the last 12 months and those proposed in this budget will reduce that margin to only $5 billion. This margin is less than $25 for each man, woman, and child in the expected 1976 population, and is less than 1.6% of projected 1976 budget receipts. And yet, it must be sufficient to cover the 1976 costs of all new proposals not included in this budget.

The moral is clear. A strong fiscal discipline will be necessary in the years ahead if we are to preserve the buying power of the dollar. New spending programs must be evaluated against the most stringent of standards: do they have enough merit to warrant increases in taxes or elimination of existing programs?

This Administration has measured its proposals against this standard. I have made the hard choices necessary to assure that they can be financed within a full employment budget policy.

I urge the Congress to engage in a similar self-discipline in making the hard choices that will be required during the next few years. This Administration will vigorously oppose irresponsible and shortsighted spending proposals that would commit large sums of Federal money to schemes that are politically attractive but would endanger an inflation-free prosperity.


There will be those who contend that in this budget their favorite programs are not financed, or are not financed as much as they want them to be.

They will be absolutely right.

Government expenses increase each year because special interest groups, representing only those who stand to benefit from their program, persuade decision makers that more resources are needed for those programs without regard to the effect on the total budget. The cost is multiplied by geometric progression when this tactic is repeated for literally hundreds of programs. Seldom do any of these groups recommend additional taxes to finance their proposed spending.

Then inflationary factors, frequently induced by the large total volume of spending resulting from individual decisions made without consideration of the larger picture, force the cost of these programs upward. At the same time the special constituency benefiting from the program is enlarged and strengthened, its demands are correspondingly increased, and the cycle continues ,to feed upon itself.

Taken together, what is good for all the special interests is bad for the public interest. Our strength is in our ability to act as one nation, not as a conglomerate of warring and greedy factions.

For this reason my 1973 budget, large as it is, will not be large enough to satisfy many. However, I hope the American people will make their desire for less pervasive government known in unmistakable terms to .their elected representatives. It is essential to preserve the private enterprise system, with its competitive spirit and its work ethic, which has done so much to inspire the independent and help the dependent and which has made this Nation the economic example to the rest of the world.

That system has enabled us to secure, for our people, a far higher standard of living than any experienced, or even envisioned, by the rest of the civilized world.

I do not wish it said of my Administration that we furthered or encouraged the process of discarding that heritage. So, I have emphasized fiscal responsibility and downward pressure on Federal expenditures, rather than simply accept all requests of all special groups and hope that the inevitable need for new taxes could be delayed as long as possible.

I am not averse to a day of reckoning, but when it comes, I want it to be said that this Administration foresaw the danger, held spending .to amounts that could be paid from full-employment revenues, and took all steps possible to reduce the need for raising taxes so that the Federal Government plays a smaller, not a larger, role in the life of each of us. In this way, every citizen will have a larger share of the fruits of his labor to spend the way he or she freely chooses.


January 24, 1972.

Note: The message as sent to the Congress included illustrative diagrams which have not been reproduced in this volume.

The President signed the message in a ceremony in the Cabinet Room at the White House.

Richard Nixon, Annual Budget Message to the Congress, Fiscal Year 1973. Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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