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Statement About Congressional Actions Affecting the Federal Budget

July 18, 1970

I AM ISSUING this statement today because I view with deepening concern the course of events in the Congress affecting the expenditure of the taxpayers' money. There is a persistent and growing tendency on Capitol Hill to approve increases in expenditures without providing the revenue to pay the costs. For just one example, the Congress seems on the verge of approving an education appropriation bill that provides nearly half a billion dollars more than I requested.

Given this situation, it is time to face some hard figures and some troublesome possibilities and to strive for solutions.

Our Federal budget totals over $200 billion. If we allow these outlays to overshoot the basic revenue-producing capacity of our tax system--as happened particularly in 1967 and 1968--we will produce the same result: inflation of a magnitude that will take difficult and painful measures to eliminate.

In fiscal year 1970, which ended June 30, we worked very hard and effectively-in the midst of continuing controversy-to hold the expenditure line. As a result, any deficit will largely reflect a shortfall of revenues from the adjustment of the economy to policies designed to combat inflation.

For fiscal year 1971, which began July 1, this administration transmitted to the Congress a budget calling for expenditures of $200 billion, and estimating revenues at $202 billion. If the Congress continues in its present pattern of proposed increases in expenditures, the total for this fiscal year will actually reach a substantially larger figure.

Some $3.5 billion of increases are caused by mandatory and virtually uncontrollable rises in costs--such as increases in the interest on the national debt ($1.8 billion) and in public assistance (over $500 million). The major pay increase for Federal employees added $ 1.4 billion over the amount originally budgeted. Some increases are the result of necessary new programs. But much of the total increase is due to threatened congressional action or inaction.

On the receipts side of the ledger, the Congress has failed to provide necessary revenue. By its action on the tax bill last year, the Congress had already reduced projected revenue for fiscal year 1971 by $3 billion and for fiscal year 1972 by $5 billion below my request. Beyond this, the Congress has as yet failed to take action on my proposals for a tax on lead used in gasoline, an advance in the time of collection of estate and gift taxes, and an increase in postal rates. The Congress must produce action on these measures, or we can expect to collect much less than the $202 billion estimated in February.

And that is not all. The 1971 expenditures are an inevitable springboard for the budget of 1972. Unless the present trend is corrected by the Congress, the resulting 1972 spending could produce a massive deficit.

It has become almost a cliche to say that all we need do to resolve this dilemma with regard to our Federal budget is to cut space and defense oatlays and "change our national priorities." Let's set the record straight. We have changed our national priorities.

In the budget that I proposed for fiscal 1971, spending for defense is exceeded by spending for human resources for the first time in 20 years. In all of the last three administrations, military spending ran far above spending for other purposes. In 1962, under President Kennedy, the Federal Government spent 48 percent of its budget for defense and only 29 percent for human resources. By 1968, the comparison was 45 percent to 32 percent. My budget for 1971 sharply reversed these priorities. It calls for spending 37 percent for defense and 41 percent for human resources programs. To accomplish this massive change in emphasis, military and space expenditures were cut by some $6 billion.

As a former Member of the House and the Senate, I fully understand that the Members consider appropriations and spending bills one at a time. The trouble is that the total of the parts, each in itself attractive and even meritorious, is too large a figure. Unless the Congress makes a very special effort to look at the total picture, the Members may not fully appreciate the overall effect of their fiscal actions.

In raising the issue of budget deficits, I am not suggesting that the Federal Government should necessarily adhere to a strict pattern of a balanced budget every year. At times the economic situation permits--even calls for--a budget deficit. There is one basic guideline for the budget, however, which we should never violate: Except in emergency conditions, expenditures must never be allowed to outrun the revenues that the tax system would produce at reasonably full employment. When the Federal Government's spending actions over an extended period push outlays sharply higher, increased tax rates or inflation inevitably follow. We had such a period in the 1960's. We have been paying the high price--and higher prices--for that recently.

We must not let that happen again. It need not happen. Responsible government cannot let it happen. This is a time when the taxpayers of the United States will not tolerate irresponsible spending. The Congress should ask itself in every case: Will this new expenditure, when tied to all the others, require increased taxes or cause a deficit which would bring about an increase in prices? The Congress must examine with special care those spending programs which benefit some of the people but which really raise taxes and prices for all the people.

Recently I signed into law a bill fixing a "ceiling" on Federal spending for the current fiscal year1. I accept that ceiling and intend to live under it. But the Congress, by making exceptions and approving measures with mandatory spending provisions, has made a travesty of this legislation.

1 Titles IV and V of the Second Supplemental Appropriations Act, 1970 (Public Law 91-305, 84 Stat. 376).

I now ask the Congress to establish a firm ceiling on total expenditures--a ceiling from which only specific and genuine "uncontrollables" such as interest on the public debt would be exempt; a ceiling within which the President can determine priorities; a ceiling that would apply to the Congress as well as to the Executive. This will require of the Congress, as well as the President, the hard task of adjusting and pruning individual program outlays to hold their total within this ceiling. With this we can reassure citizens generally that Washington will not take spending actions that will impose on their future incomes the burdens of ever increasing tax rates. With this we can pursue vigorous policies of expansion to achieve full employment, rapid improvements in our material levels of living, and a more stable dollar.

Note: On the same day, the White House leased the transcript of a news briefing on the President's statement by George P. Shultz, Director, Office of Management and Budget and Dr. Paul W. McCracken, Chairman, Council of Economic Advisers.

Richard Nixon, Statement About Congressional Actions Affecting the Federal Budget Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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