Richard Nixon photo

Annual Budget Message to the Congress, Fiscal Year 1974

January 29, 1973

To the Congress of the United States:

The 1974 budget fulfills my pledge to hold down Federal spending so that there will be no need for a tax increase.

This is a budget that will continue to move the Nation's economy toward a goal it has not achieved in nearly two decades: a high employment prosperity for America's citizens without inflation and without war.

Rarely is a budget message perceived as a dramatic document. In a real sense, however, the 1974 budget is the clear evidence of the kind of change in direction demanded by the great majority of the American people. No longer will power flow inexorably to Washington. Instead, the power to make many major decisions and to help meet local needs will be returned to where it belongs--to State and local officials, men and women accountable to an alert citizenry and responsive to local conditions and opinions.

The 1974 budget proposes a leaner Federal bureaucracy, increased reliance on State and local governments to carry out what are primarily State and local responsibilities, and greater freedom for the American people to make for themselves fundamental choices about what is best for them.

This budget concerns itself not only with the needs of all the people, but with an idea that is central to the preservation of democracy: the "consent of the governed."

The American people as a whole--the "governed"--will give their consent to the spending of their dollars if they can be provided a greater say in how the money is spent and a greater assurance that their money is used wisely and efficiently by government. They will consent to the expenditure of their tax dollars as long as individual incentive is not sapped by an ever-increasing percentage of earnings taken for taxes.

Since the mid-1950's, the share of the Nation's output taken by all governments in the United States--Federal, State, and local--has increased from a quarter to a third. It need not and should not go higher.

The increase in government claims on taxpayers was not for defense programs. In fact, the defense share of the gross national product declined by one-quarter while the share for civilian activities of all governments grew by three-fourths, rising from 14% of the gross national product in 1955 to about 25% in 1972.

In no sense have Federal civilian programs been starved; their share of the gross national product will increase from 6 1/2% in 1955 to 14% in 1972. Nor will they be starved by the budget that I am proposing. A generous increase in outlays is provided each year by the normal growth in revenues. Higher Federal tax rates are not needed now or in the years ahead to assure adequate resources for properly responsive government--if the business of government is managed well. And revenue sharing will help State and local governments avoid higher taxes.

During the past 2 years, with the economy operating below capacity and the threat of inflation receding, the Federal budget provided fiscal stimulus that moved the economy toward full employment. The 1974 budget recognizes the Federal Government's continuing obligation to help create and maintain-through sound monetary and fiscal policies--the conditions in which the national economy will prosper and new job opportunities will be developed. However, instead of operating primarily as a stimulus, the budget must now guard against inflation.

The surest way to avoid inflation or higher taxes or both is for the Congress to join me in a concerted effort to control Federal spending. I therefore propose that before the Congress approves any spending bill, it establish a rigid ceiling on spending, limiting total 1974 outlays to the $268.7 billion recommended in this budget.

I do not believe the American people want higher taxes any more than they want inflation. I am proposing to avoid both higher taxes and inflation by holding spending in 1974 and 1975 to no more than revenues would be at full employment.


This year's budget presents, for the first time, a detailed preview of next year's. I have taken this step to demonstrate that if we stay within the 1974 and 1975 estimated outlays presented in this budget, we will prevent a tax increase--and that the 1974 budget is a sound program for the longer range future, not simply for today. This innovation in budget presentation is a blueprint for avoiding inflation and tax increases, while framing more responsive instruments of government and maintaining prosperity.

Our ability to carry out sound fiscal policy and to provide the resources needed to meet emerging problems has been limited by past decisions. In 1974, $202 billion in outlays, or 75% of the budget, is virtually uncontrollable due to existing law and prior-year commitments. But just as every budget is heavily influenced by those that have preceded it, so it strongly influences those that follow.

Control over the budget can be improved by projecting future available resources and the known claims on them, and then making current decisions within the constraints they impose. That is why, in my first budget, I began the practice of showing projections of future total revenues and outlays under current and proposed legislation. In the 1973 budget, 5-year projections of the cost of legislative proposals for major new and expanded programs were added..

This budget presents an even closer look at the implications of the 1974 proposals for the 1975 budget. It projects, in agency and functional detail, the outlays in 1975 that will result from the major program proposals in the 1974 budget, including the outlay savings that can be realized from program reductions in 1973 and 1974. In so doing, it takes into consideration the longer range effect of each of our fiscal actions.

Most importantly, this budget shows the narrow margin between projected outlays and full-employment revenues in 1975, despite the economy measures that are recommended. Program reductions and terminations of the scale proposed are clearly necessary if we are to keep control of fiscal policy in the future.

The 1974 budget program implies 1975 full-employment outlays of about $288 billion, $19 billion (7%) more than in 1974. This is within our estimate of full employment revenues of $290 billion for 1975. There is, however, very little room for the creation of new programs requiring additional outlays in 1975 and no room for the postponement of the reductions and terminations proposed in this budget.

The program reductions and terminations I have proposed will result in more significant savings in 1975 and later years than in 1973 and 1974. It is for this reason, too, that I have included the 1975 projections in my budget this year. The Federal spending pipeline is a very long one in most cases, and the sooner we start reducing costs the better for the Nation.

The estimated 1975 outlays for the various Federal agencies are, of course, tentative. The outlay total, however, is the approximate amount that will represent appropriate Federal spending in 1975 if we are to avoid new taxes and inflation. As program priorities change and require increases in some areas, offsetting decreases must be found in others. As the projections indicate, this is necessary for both 1974 and 1975.


FISCAL POLICY.--In July 1970, I adopted the full-employment budget principle in order to make the budget a tool to promote orderly economic expansion.

Consistent with this principle, the budget that I submitted to the Congress last January proposed fiscal stimulus as part of a balanced economic program that included sound monetary policy and the new economic policy that I launched on August 15, 1971. My confidence that the American economy would respond to sensible stimulus in this context has been fully justified. During 1972, employment increased by 2.3 million persons, real output rose by 7 1/2%, business fixed investment was 14% higher, and the rate of increase in consumer prices declined.

From 1971 through 1973, the full-employment budget principle permitted and called for substantial actual budget deficits. For this reason, some people have forgotten the crucial point that the full employment principle requires that deficits be reduced as the economy approaches full employment--and that it establishes the essential discipline of an upper limit on spending at all times.

The full-employment budget principle permits fiscal stimulation when stimulation is appropriate and calls for restraint when restraint is appropriate. But it is not self-enforcing. It signals us what course to steer, but requires us to take the actions necessary to keep on course. These steps are not taken for us, and they are rarely easy.

As we look ahead, with the economy on the upswing, the full-employment budget principle- and common sense--prescribe a shift away from fiscal stimulus and toward smaller budget deficits. We must do what is necessary to make this shift.

Holding 1973 spending to $250 billion and achieving full-employment balance in 1974 and in 1975 will be difficult. Reduction of some activities and termination of others are necessary and are proposed in this budget. Nonetheless, the budget provides significant increases for many important programs.

If we did not budget with firm restraint, our expenditures in 1973 would be over $260 billion. The ballooning effect of one year's expenditures on the next would in turn have meant that 1974's expenditures would be about $288 billion, far beyond full-employment revenues, and 1975's expenditures would be approximately $312 billion, leading to a huge, inflationary deficit.

If spending is to be controlled, the Congress must establish a spending ceiling promptly. Otherwise, the seeds sown in individual authorization and appropriation actions will produce ever-growing Federal spending not only in the coming fiscal year but in the years beyond.

Should the Congress cause the total budgeted outlays to be exceeded, it would inescapably face the alternatives of higher taxes, higher interest rates, renewed inflation, or all three. I oppose these alternatives; with a firm rein on spending, none of them is necessary.

REFORMING CONGRESSIONAL BUDGET PROCEDURES.--Delay in congressional consideration of the budget is a major problem. Each time I have submitted a budget, the Congress has failed to enact major portions of it before the next budget was prepared. Instead, it has resorted to the device of continuing resolutions to carry on the activities for which it has not made appropriations. Such delay needlessly compounds the complexities of budget preparation, and frustrates the potential of the budget as an effective management and fiscal tool.

The complexity of the budgeting process is another problem. Because of modifications made to reflect the desires of the more than 300 congressional committees and subcommittees that influence it, the process has become more complicated and less comprehensible.

The fragmented nature of congressional action results in a still more serious problem. Rarely does the Congress concern itself with the budget totals or with the effect of its individual actions on those totals. Appropriations are enacted in at least 15 separate bills. In addition, "backdoor financing" in other bills provides permanent appropriations, authority to contract in advance of appropriations, authority to borrow and spend without an appropriation, and program authorizations that require mandatory spending whether or not it is desirable in the light of current priorities.

At the same time, a momentum of extravagance is speeded by requirements created initially by legislative committees sympathetic to particular and narrow causes. These committees are encouraged by special interest groups and by some executive branch officials who are more concerned with expansion of their own programs than with total Federal spending and the taxes required to support that spending. Since most programs have some attractive features, it is easy for the committees and the Congress itself to authorize large sums for them. These authorizations, however, create pressure on the appropriations committees to appropriate higher amounts than the Nation's fiscal situation permits.

Last October, the Congress enacted legislation establishing a joint committee to consider a spending ceiling and to recommend procedures for improving congressional control over budgetary outlay and receipt totals.

I welcome this effort and pledge the full cooperation of my Administration in working closely with the committee and in other efforts of the Congress toward this end.

Specific changes in congressional procedures are, of course, the business of the Congress. However, the manner in which the Congress reviews and modifies the budget impinges so heavily on the management of the executive branch that I am impelled to suggest a few subjects that deserve high priority in the committee's deliberations, including:

--adoption of a rigid spending ceiling to create restraint on the total at the beginning of each annual review;

--avoidance of new "backdoor financing" and review of existing legislation of this type;

--elimination of annual authorizations, especially annual authorizations in specific amounts; and

--prompt enactment of all necessary appropriation bills before the beginning of the fiscal year.

The Congress must accept responsibility for the budget totals and must develop a systematic procedure for maintaining fiscal discipline. To do otherwise in the light of the budget outlook is to accept the responsibility for increased taxes, higher interest rates, higher inflation, or all three. In practice, this means that should the Congress pass any legislation increasing outlays beyond the recommended total, it must find financing for the additional amount. Otherwise, such legislation will inevitably contribute to undue inflationary pressures and thus will not be in the public interest. And it will be subject to veto.

I will do everything in my power to avert the need for a tax increase, but I cannot do it alone. The cooperation of the Congress in controlling total spending is absolutely essential.


The 1974 budget proposes an approximate balance in full-employment terms and an actual deficit that is about one-half the 1973 deficit. The 1975 budget totals I propose here would also yield a balance in full-employment terms.

The full-employment budget balance in 1974 assures support for continuation of the economy's upward momentum without rekindling inflation. Greater stimulus in 1974 would be dangerous, and would put an unsupportable burden on future budgets.


[Fiscal years. In billions]

1972 1973 1974 1975

Description actual estimate estimate estimate

Budget receipts $208.6 $225.0 $256.0 *

Budget outlays 231.9 249.8 268.7 *

Deficit (--) -23.2 -24.8 -12.7 *

Full-employment receipts 225.0 245.0 268.0 $290.0

Full-employment outlays 1 298.9 247.3 267.7 288.0

Full-employment surplus or deficit (--) -3.9 -2.3 0.3 2.0

Budget authority 248.1 280.4 288.0 313.5

....................................................................... 1971

....................................................................... actual

Outstanding debt, end of year:

Gross Federal debt $409.5 $437.3 $473.3 $505.5

Debt held by the public 304.3 323.8 348.8 365.3

Outstanding Federal and federally assisted

credit, end of year:

Direct loans 53.1 50.1 50.1 51.0

Guaranteed and insured loans 2 118.1 133.1 150.3 164.1

Government-sponsored agency loans 3 38.8 48.9 59.6 71.8

1In these estimates, outlays for unemployment insurance benefits and the Emergency Employment Act program are calculated as they would be under conditions of full employment.

2 Excludes loans held by Government accounts and special credit agencies.

3 Excludes Federal Reserve banks, but, starting in 1972, includes Export-Import Bank (previously reported as direct loans) and, starting in 1974, includes the newly authorized Environmental Financing Authority.

* Estimates of actual receipts and outlays have not been made at this time.

Budget receipts in 1974 are estimated to be $256 billion. This is an increase of $31 billion over 1973, reflecting growing prosperity, higher personal income, and rising corporate profits. The receipts estimates also reflect the impact of tax cuts resulting from the Tax Reform Act of 1969, the new economic policy and the Revenue Act of 1971, as well as the payroll tax increases enacted to finance higher social security benefits.

Budget outlays in 1974 are expected to be $268.7. billion. The total would have been substantially greater--probably about $288 billion--had my Administration not made an extraordinary effort to hold to the fiscal guidelines of a $250 billion maximum in 1973, rather than the nearly $261 billion which otherwise would have occurred, and to full-employment balance in 1974.

Even so, this budget necessarily proposes an increase in outlays of $19 billion, or nearly 8% over the previous year. It provides amply for America's security and well-being in the year ahead.

The 1974 budget program projects full employment outlays of $288 billion in

1975, which, together with the revenues that would be produced under existing law, will mean full-employment balance in that year.

About $288 billion of budget authority-the new authority to make commitments to spend--is requested for 1974. Of the total, about $173 billion will require new action by the Congress.


THE ROLE OF GOVERNMENT.--The last article of the Bill of Rights says:

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

The philosophy of the Founding Fathers embodied in this amendment is also my philosophy. I believe that a larger share of our national resources must be retained by private citizens and State and local governments to enable them to meet their individual and community needs.

Our goal must not be bigger government, but better government--at all levels. Our progress must not be measured by the amount of money we put into programs, but by the accomplishments which result from them.

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 poorly organized to accomplish domestic program objectives;

--State and local governments often could not meet the basic needs of their citizens; and

--Federal programs to assist State and local governments had become a confusing maze, understood only by members of a new, highly specialized occupation--the grantsmen.

My Administration has developed a comprehensive strategy for dealing with these problems through restructuring the executive departments and revitalizing the federal system.

A RESTRUCTURED FEDERAL GOVERNMENT. --A thorough overhaul of the Federal bureaucracy is long overdue, and I am determined to accomplish it.

As the role of government has grown over the years, so has the number of departments and agencies which carry out its functions. Unfortunately, very little attention has been given to the ways in which each new unit would fit in with all the old units. The consequence has been a hodgepodge of independent, organizationally unrelated offices that pursue interrelated goals. As a result, able officials at all levels have been frustrated, public accountability bas been obscured, and decentralization and coordination of Federal operations have been impeded. This overlapping of responsibilities has increased the costs of government. It has generated interagency conflict and rivalry and, most importantly, it has imposed inexcusable inconvenience on the public that is supposed to be served.

To help remedy this situation, I proposed to the Congress in 1971 that the executive branch be restructured by consolidating many functions now scattered among several departments and agencies into four new departments. These new departments would be organized around four major domestic purposes of government: community development, human resources, natural resources, and economic affairs--tires consolidating in a single chain of command programs that contribute to the achievement of a clearly stated mission. Under this arrangement, we will he able to formulate policy more responsibly and more responsively and carry out that policy more efficiently and more effectively. I welcome congressional cooperation in this important endeavor and will seek it in the weeks ahead. I plan now to streamline the executive branch along these lines as much as possible within existing law, and to propose similar legislation on departmental reorganization to the 93d Congress.

Meanwhile, I have already taken the first in a series of steps that will increase the management effectiveness of the Cabinet and the White House staff. I hope the smaller and more efficient Executive Office of the President will become a model for the entire executive branch.

Reorganization of the executive branch is a necessary beginning but reorganization alone is not enough.

Increased emphasis will also be placed on program performance. Programs will be evaluated to identify those that must be redirected, reduced, or eliminated because they do not justify the taxes required to pay for them. Federal programs must meet their objectives and costs must be related to achievements.

The Federal Assistance Review program, which I began in 1969, has made important progress in decentralizing and streamlining Federal grant programs. To speed the process of decentralization, improve program coordination, and eliminate unnecessary administrative complications, I have strengthened the Federal Regional Council system. These councils, working with State and local governments, have played an impressive and growing role in coordinating the delivery of Federal services.

A REVITALIZED FEDERAL SYSTEM.--Restructuring of the Federal Government is only one step in revitalizing our overall federal system. We must also make certain that State and local governments can fulfill their role as partners with the Federal Government. Our General Revenue Sharing and special revenue sharing programs Can help considerably in achieving this goal. They provide our States and communities with the financial assistance they need--in a way that allows them the freedom and the responsibility necessary to use those funds most effectively.

On October 20, 1972, I signed a program of General Revenue Sharing into law. This program provides State and local governments with more than $30 billion over a 5-year period beginning January 1, 1972. This historic shift of power away from Washington will help strengthen State and local governments and permit more local decisionmaking about local needs.

Although final congressional action was not taken on my special revenue sharing proposals, I remain convinced that the principle of special revenue sharing is essential to continued revitalization of the federal system. I am, therefore, proposing the creation of special revenue sharing programs in the 1974 budget.

These four programs consist of broad purpose grants, which will provide State and local governments with $6.9 billion to use with considerable discretion in the areas of education, law enforcement and criminal justice, manpower training, and urban community development. They will replace 70 outmoded, narrower categorical grant programs and will, in most cases, eliminate matching requirements.

The funds for special revenue sharing will be disbursed according to formulas appropriate to each area. In the case of manpower revenue sharing, an extension of existing law will be proposed. Current administrative requirements will be removed so that State and local governments can group manpower services in ways that best meet their own local needs.

The inefficiency of the present grant systems makes favorable action on special revenue sharing by the Congress an urgent priority.



Description Billions

Urban community development 2.3

Education 2.5

Manpower training 1.3

Law enforcement .8

Total 6.9

As an important companion to returning responsibility to State and local governments, I proposed to the Congress in 1971 a program to provide funds to help State and local governments strengthen their management capabilities to carry out their expanded role. I am submitting this important proposal again this year.

The federal system is dynamic, not static. To maintain its vitality, we must constantly reform and refine it. The executive branch reorganization and special revenue sharing programs that I am proposing, along with continued decentralization of Federal agencies, are essential to that vitality.


Building a lasting peace requires much more than wishful thinking. It can be achieved and preserved only through patient diplomacy and negotiation supported by military strength. To be durable, peace must also rest upon a foundation of mutual interest and respect among nations. It must be so constructed that those who might otherwise be tempted to destroy it have an incentive to preserve it.

The 1974 budget supports America's efforts to establish such a peace in two important ways. First, it maintains the military strength we will need to support our negotiations and diplomacy. Second, it proposes a sound fiscal policy that, supported by a complementary monetary policy, will contribute to prosperity and economic stability here and abroad.

Our strength, together with our willingness to negotiate, already has enabled us to begin building a structure for lasting world peace and to contribute to a general relaxation of world tensions.

--We have made substantial progress toward ending our involvement in the difficult war in Southeast Asia.

--In the past 4 years, we have concluded more significant agreements with the Soviet Union than in all previous years since World War II, including the historic agreement for limiting strategic nuclear arms.

--We have ended nearly a quarter century of mutual isolation between the United States and the People's Republic of China and can look forward to the development of peaceful cooperation in areas of mutual interest.

In this atmosphere, other nations have also begun to move toward peaceful settlement of their differences.

One of the results of our negotiations, taken together with the success of the Nixon Doctrine, our substantial disengagement from Vietnam, and the increased effectiveness of newer weapons systems, has been a significant but prudent reduction in our military forces. Total manpower has been reduced by about one-third since 1968, and will be further reduced as we end the draft and achieve an All-Volunteer Force. At the same time, our allies are assuming an increasing share of the burden of providing for their defense.

As a result, defense outlays have been kept in line. In 1974, they will be substantially the same as in 1968. During the same period, the total budget has grown by 50%, and nondefense outlays have grown by 91%, or $90 billion. When adjusted for pay and price increases, defense spending in 1974 will be about the same as in 1973 and about one-third below 1968.

But, while this Administration has succeeded in eliminating unnecessary defense spending, it is equally determined to spend whatever is necessary for national security. Our 1974 budget achieves this goal. It assures us of sufficient strength to preserve our security and to continue as a major force for peace. Moreover, this strength will be supported, beginning this year, without reliance on a peacetime draft.

A framework for international economic progress is an important part of our efforts for peace. A solid beginning has been made on international monetary reform through our participation in the ongoing discussions of the Committee of Twenty. We will continue to press these efforts during the year ahead.

Our foreign assistance programs also reflect our intention to build a lasting structure of peace through a mutual sharing of burdens and benefits. America will remain firm in its support of friendly nations that seek economic advancement and a secure defense. But we also expect other nations to do their part, and the 1974 budget for foreign assistance is based upon this expectation.

Our goal is a durable peace that is sustained by the self-interest of all nations in preserving it. Our continuing military strength and our programs for international economic progress, as provided for in this budget, will bring us closer to that goal for ourselves and for posterity.


The 1974 budget for human resources programs, like the three that have preceded it under this Administration, reflects my conviction that social compassion is demonstrated not just by the commitment of public funds in hope of meeting a need, but by the tangible betterments those funds produce in the lives of our people. My drive for basic reforms that will improve the Federal Government's performance will continue in the coming fiscal year.

Between 1969 and 1974, outlays for Federal human resources programs have increased 97%, while total budget outlays have grown by only 46%. As a result, human resources spending now accounts for close to half the total budget dollar, compared with just over one-third of the total at the time I took office.

Many solid accomplishments have resulted. Higher social security benefits are bringing greater dignity for the aged and the disabled. Better health care and better education and training opportunities, especially for the disabled, the disadvantaged, and veterans, are helping to raise the social and economic status of millions of individuals and have improved the productive capacity of the Nation as a whole. Expanded food programs are helping to assure adequate nutrition for the needy.

However, disappointments and failures have accompanied these accomplishments. The seeds of those failures were sown in the 1960's when the "do something, do anything" pressure for Federal panaceas led to the establishment of scores of well-intentioned social programs too often poorly conceived and hastily put together. In many respects, these were classic cases of believing that by "throwing money at problems" we could automatically solve them. But with vaguely defined objectives, incomplete plans of operation, and no effective means of evaluation, most of these programs simply did not do the job.

We gave these programs the benefit of every doubt and continued them while we conducted a long-needed, thorough review of all Federal human resources programs. Based on this review, the 1974 budget proposes to reform those programs that can be made productive and to terminate those that were poorly conceived, as well as those that have served their purpose.

We can and will find better ways to make the most of our human resources-through the partnership of a restructured Federal Government and strong State and local governments, and with the help of a socially committed private sector that is bolstered by a revival of individual initiative and self-reliance among our people. But only by halting the unproductive programs here and now can we assure ourselves of the money needed to pursue those programs that will get results.

INCOME SECURITY. Federal income maintenance programs have expanded dramatically in the last 4 years. Cash benefits under the social security system alone will have grown from $30 billion in 1970 to $55 billion in 1974, an increase of 83%. These benefits will account for about one-fifth of all Federal budget outlays. Legislation enacted in calendar year 1972 alone increased these benefits by $10.5 billion, or almost 30% over 1971 benefits.

Beginning on January 1, 1974, under the terms of legislation passed last year, the Federal Government is scheduled to assume responsibility for providing a basic assistance payment for the aged, blind, and disabled. While this would require that we add a very large number of Federal employees to the Social Security Administration, I have ordered this increase held to an absolute minimum, and I will urge the Governors to seek ways of eliminating an equivalent number of positions in their States so that the overall size of government will not grow.

The 1974 budget for income maintenance programs will emphasize:

--intensified efforts to eliminate wasteful and inefficient management of welfare programs; and

--further improvement in the welfare of the aging.

The legislation that established General Revenue Sharing also set a long-needed ceiling on Federal outlays for social services. In 1969, Federal outlays for these services were less than $400 million. By 1972, States had discovered that this ill-defined program could be used to finance most public services and they were planning to make claim on about $5 billion in Federal funds.

This runaway, open-ended program was out of control. The $2.5 billion statutory limit imposed on the program, about seven times the 1969 level, will restore a measure of control. We are now emphasizing efforts to assure that this massive increase in funding is used effectively to meet the real needs of public assistance recipients for useful social services.

EDUCATION AND MANPOWER TRAINING.--Outlays in the 1974 budget for education and manpower, including those for veterans, will be $12 billion. The 1974 program is based upon a reevaluation of the Federal Government's role in these areas. The primary responsibility for most of these activities, other than those for veterans, rests with State and local governments. The proper Federal role is primarily that of helping State and local governments finance their own activities, while conducting directly those few programs that can be done efficiently and effectively only by the Federal Government.

The 1974 budget supports such a role for the Federal Government. It provides for:

--creation of education and manpower revenue sharing programs to give State and local governments greater power in allocating resources within these vital areas;

--proposed legislation that would provide an income tax credit for tuition paid to nonpublic elementary and secondary schools;

--full funding for Basic Education Opportunity grants to provide assistance for college students;

--continued emphasis on training disadvantaged veterans;

--an increase in the work incentive program to help welfare recipients get jobs; and

--phasedown of the temporary Emergency Employment Assistance program consistent with the increase in new jobs in the private sector.

HEALTH.--My strategy for health in the 1970's stresses a new Federal role and basic program reforms to assure that economical, medically appropriate health services are available when needed. As major elements in this strategy, the 1974 budget provides for:

--a proposal for national health insurance legislation;

--increased funding for cancer and heart disease research;

--initiation of a nationwide system of physician-sponsored Professional Standards Review Organizations to assure quality and appropriateness of care;

--reform of Medicaid and Medicare to reduce financial burdens for aged and disabled patients who experience long hospital stays and to improve program management and increase incentives for appropriate use of services; and

--increased special care units and continued improvement of outpatient and extended care benefits for veterans.

The impact of the 1974 budget will be significant. In 1974, nearly 5 million more poor, aged, and disabled persons will benefit through expanded financial support for health services. There will be continued emphasis on consumer safety. Finally, strengthened cost controls will give Americans greater protection against unreasonable medical cost increases.

DRUG ABUSE CONTROL.--During my first term, in order to meet what had become both a crime problem and a health crisis of epidemic proportions, we launched an all-out war on drug abuse. With the 1974 budget, we will continue to press that attack aggressively. Budgeted expenditures of $719 million, an increase of $64 million over 1973, will permit continued strong support for interdiction of drug traffic and for the treatment and rehabilitation of drug users.

CIVIL RIGHTS.--The protection of each citizen's civil rights is one of the highest priorities of my Administration. No American should be denied equal justice and equal opportunity in our society because of race, color, sex, religion, or national origin. Toward this end, the Department of Justice and other Federal agencies will be able under the 1974 budget to increase their civil rights enforcement efforts aimed at upholding this fundamental principle as follows:

--The Department of Justice will expand its efforts to coordinate the enforcement of equal access to and equal benefit from Federal financial assistance programs.

--The Community Relations Service will expand its crisis resolution and State liaison activities.

--The civil rights performance of Federal agencies will be monitored and reviewed throughout the year.

--The Equal Employment Opportunity Commission will receive additional resources to carry out its expanded responsibilities.

--The Civil Service Commission will expand its monitoring of Federal service equal opportunity.

--The Commission on Civil Rights will receive additional resources to carry out its newly granted jurisdiction over sex discrimination.

In addition, the Small Business Administration will expand its loan program for minority business by nearly one-third.


The balanced development of our natural resources is essential to a healthy economy and an improved standard of living. Development inevitably brings change to our natural environment which, if not properly controlled, could impair the health and welfare of our citizens and the beauty of our surroundings. Balancing the need for development and growth with the need to preserve and enhance our environment has become a major challenge of our time.

Meeting this challenge is not solely the responsibility of the Federal Government. Heavy responsibilities fall on State and local governments, private industry, and the general public as well. This budget reflects my determination to seek a proper balance between development and preservation. It contemplates neither blind or insensitive exploitation of our natural resources nor acceptance of a no-growth philosophy. It avoids such a spurious choice and plots an orderly and reasoned course toward sensible development and environmental enhancement.

The forward thrust of our environmental programs has not been altered. We will continue vigorous enforcement of laws and Federal regulations. The Environmental Protection Agency has allotted to the States $5 billion of new authorizations to make grants for waste treatment construction. With $5.11 billion in additional funds already available for payment on new projects and projects for which the Federal Government had made prior commitments, a total of $10.1 billion has been set aside in a short period of time for waste treatment facilities. I believe that more funds would not speed our progress toward clean water, but merely inflate the cost while creating substantial fiscal problems.

Adequate supplies of clean energy are a vital concern. The resources devoted in this budget to energy research and development are one important element of the response to this problem. My initiative to demonstrate a large-scale fast breeder reactor by 1980 will be continued; and funds have been significantly increased to develop means of using other energy resources--particularly our abundant coal resources. At the same time, this budget provides funds to carry out a program for regulation of strip mining activities to minimize their adverse environmental impact.

I have long been committed to sound, multiple-use management of public lands consistent with long-term environmental preservation. My 1974 program provides both for development of new outdoor recreation opportunities accessible to our large population centers and for new wilderness areas. In addition, the budget includes funds for a program providing incentives to States to undertake regulation of private land use. This program would encourage establishment at the State level of open decisionmaking processes to insure proper consideration of the long-term environmental implications of major land use decisions.

THE ROLE OF AGRICULTURE.--The American farmer wants to raise high quality products in the most efficient manner, and to receive prices that provide him a fair return on his investment. He wants a minimum of Government regulation, and recognizes the need for some protection from events beyond his control. We are working to create conditions favorable to the American farmer by expanding our world markets, stabilizing the domestic economy, and tailoring farm programs to provide both freedom of choice and reasonable earnings for farmers.

We have made some impressive progress toward these objectives. Farm income has improved; more freedom to plant has been achieved; and the costs of price support are down. Americans and the entire world have benefited from the extraordinary productivity of American agriculture. In the period ahead, we seek to use this productivity in domestic and world marketplaces in order to maintain both high farm income and reasonable consumer prices.


My deep commitment to providing change that works is, and must be, matched by a total determination to identify and reform or eliminate programs that have not worked. It would be irresponsible to continue spending taxpayers' money for programs that have long since served their purpose, are not working at all, or are not working sufficiently to justify their costs.

I began my efforts in community and area development with proposals for general and special revenue sharing. In 1971, I proposed a reorganization of the executive branch agencies responsible for community and area development programs to consolidate related functions and thereby assure better management. Substantial progress in furthering community development was made last year when General Revenue Sharing became law.

The 1974 budget reflects my determination to accelerate major reforms of programs for urban development and housing, rural development, transportation, and crime prevention and criminal justice.

URBAN DEVELOPMENT AND HOUSING. During the past 4 years, the private housing industry reached, and has maintained, an unprecedented level of housing production. Early in this period the downward trend in housing production that existed in 1969 was reversed. New housing starts rose 60%, from 1.5 million in calendar year 1969 to nearly 2.4 million in calendar year 1972, a new record. While federally subsidized starts were 11% of the 1972 total, it is clear that our broad fiscal and monetary policies are the dominant factors that determined the overall level of housing production.

Throughout this period, federally assisted housing programs have been plagued with problems and their intended beneficiaries have thus been shortchanged. As a result, new commitments under those programs which have not worked well enough have been temporarily halted, pending a complete reevaluation of the Federal role in housing and of alternative ways to provide housing.

In addition, no new projects will be approved under several outmoded and narrowly focused community development programs which have not produced benefits that justify their costs to the taxpayer. Continuing to channel resources into these programs can only delay the initiation of more effective programs and policies.

The 1974 budget will:

--honor those commitments already made under housing and community development programs; continue the .evaluation of alternative ways to help the private market satisfy the Nation's need for housing;

--continue to seek congressional approval of the Administration's Urban Community Development Revenue Sharing proposal so that new funds can begin to flow to State and local governments on July 1, 1974; and

--emphasize those programs that help State and local officials strengthen their decisionmaking and management processes, allowing responsibility to be shifted increasingly to these officials, while the Federal Government concentrates on those activities which cannot be accomplished more effectively by the private sector or other levels of government.

Despite the halt in new commitments, federally assisted activity will continue at a high level. Subsidized housing starts in calendar year 1973 will increase over the previous year, totaling 270,000. Approximately 1,800 urban renewal projects will still be active. Federal outlays on these uncompleted housing and community development projects will rise from $4.0 billion in 1973 to $4.9 billion in 1974.

RURAL DEVELOPMENT.--The 1974 budget consolidates and reorients our rural development programs.

While I would have preferred that the Congress enact special revenue sharing for rural development, the Rural Development Act of 1972 provides a basis for beginning efforts consistent with the revenue sharing concept. In particular, State and local officials will have greater control in project decisions. Rural development programs as a whole will increase over last year, with loan programs growing particularly rapidly.

I intend to watch closely our experience with this new approach and then consider whether additional legislation may be needed to make it more effective.

The counterpart to proceeding with the new authorities is the consolidation, termination, or reorientation of older programs. Public works and related economic development programs of the Department of Commerce will be phased out in favor of pt%rains established under the Rural Development Act and Small Business Administration authorities. Loans to improve rural electric and telephone service will be available on an even larger scale--but at reduced cost to taxpayers--through the loan authority of the Rural Development Act and through the new Rural Telephone Bank.

TRANSPORTATION.--The Federal role in transportation is significant but limited. It must insure that national needs, such as the Interstate Highway System and airway control, are met. Otherwise, the primary responsibilities rest with the States, local governments, and the private sector, while the Federal Government provides financial support.

Last year, the Administration supported legislation that recognized this proper Federal role. It proposed providing flexibility at the State and local level in meeting mass transit and highway needs and avoiding narrow categorical grants. The legislation narrowly failed to be enacted.

I will propose legislation incorporating the same principles again this year. The legislation and this budget propose a broad $I billion program to aid urban mass transit capital investment and sufficient funds for the Interstate Highway System to insure completion of the system in a reasonable time.

The safety of our transportation systems is a matter of paramount importance. I have directed that Federal safety efforts for all modes of transportation be intensified.

CRIME PREVENTION AND CRIMINAL JUSTICE.--Helping State and local criminal justice agencies fight crime in our cities and towns continues to be a major commitment of my Administration.

Outlays for law enforcement activities will be $2.6 billion in 1974, a 7 1/2% increase over 1973. This increase reflects my determination to enforce the laws of this country and protect the safety of all our citizens. We must make certain, however, that the programs which assist State and local criminal justice systems are not only expanded, but reformed, and that we do a better job of reducing crime and rehabilitating criminal offenders. To accomplish these goals, ,I propose in this budget that:

--the grants to State and local governments for law enforcement assistance be converted to a law enforcement revenue sharing program with additional funding;

--the Law Enforcement Assistance Administration continue and strengthen its national research, demonstration, and dissemination efforts to develop more effective ways of preventing crime; and

--Federal agencies intensify their efforts to fight organized crime. Further, new and improved measures to prevent airplane hijacking will be put into effect in cooperation with the airlines and airport operators.


The respect given to the common sense of the common man is what has made America the most uncommon of nations.

Common sense tells us that government cannot make a habit of living beyond its means. If we are not willing to make some sacrifices in holding down spending, we will be forced to make a much greater sacrifice in higher taxes or renewed inflation.

Common sense tells us that a family budget cannot succeed if every member of the family plans his own spending individually-which is how the Congress operates today. We must set an overall ceiling and affix the responsibility for staying within that ceiling.

Common sense tells us that we must not abuse an economic system that already provides more income for more people than any other system by suffocating the productive members of the society with excessive tax rates.

Common sense tells us that it is more important to save tax dollars than to save bureaucratic reputations. By abandoning programs that have failed, we do not close our eyes to problems that exist; we shift resources to more productive use.

It is hard to argue with these common sense judgments; surprisingly, it is just as hard to put them into action. Lethargy, habit, pride, and politics combine to resist the necessary process of change, but I am confident that the expressed will of the people will not be denied.

Two years ago, I spoke of the need for a new American Revolution to return power to people and put the individual self back in the idea of self-government. The 1974 budget moves us firmly toward that goal.


January 29, 1973.

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

Richard Nixon, Annual Budget Message to the Congress, Fiscal Year 1974 Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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