Lyndon B. Johnson photo

The President's News Conference

January 17, 1967

[ Held with Charles L. Schultze, Director, Bureau of the Budget ]


THE PRESIDENT. [1.] We have our Budget Message about in shape. It will go up on Tuesday, the 24th. You will be briefed Monday afternoon, a full day before it goes up.

The Economic Message will go up on the 26th unless something unforeseen develops. We have been working this afternoon on the details of the deferments and the withholding that we indicated to Chairman Mills 1 and others back in September we would attempt to make from last year's authorizations and appropriations.

1 Representative Wilbur D. Mills of Arkansas, Chairman of the Ways and Means Committee of the House of Representatives.


[2.] You will recall that we stated at that time that we would attempt, along with the investment credit legislation, and as soon as appropriations bills were passed and were reviewed by the various departments, to try to withhold or defer or stretch out and postpone the equivalent of $3 billion, or at least $3 billion. It was $3 billion in Federal programs, and not expenditures.

Most of the articles were written on expenditures. There is a good deal of difference between the two. I am not criticizing. I want to point that out so we don't make the same error again.

When we did make the announcement, in order to get the $3 billion in expenditures which the stories had indicated, it was necessary to go to $5 billion-something in programs. We are still working to that end. We have gone over various items this afternoon.

Just as a little more background for you-this is on the record, but it is a little background on the subject--the Congress increased my budget recommendations by $3 billion 202 million. The last figure we have on the expenditures increase is $2 billion 600 million. That is what we estimated would be the increase in expenditures.

We propose to reduce the program level not by $3 billion, but by $5.3 billion. We propose to reduce the expenditures by $3 billion.


[3.] One of the bigger items is the obligation for roads. As we have previously told you, that was $1.1 billion. We have under consideration an additional $400 million. That is not included in any of these figures. No determination has been made on it.

I will want to review that with the successor to Mr. Whitton and some details with the Budget Director and with Mr. Boyd.2 But we do plan definitely to withhold $1.1 billion, or to defer it. How long, I don't know, but that depends on the economic situation.

2 Rex M. Whitton, Federal Highway Administrator, Department of Commerce. With the transfer of that position to the new Department of Transportation, the White House on January 17 announced the appointment of Lowell K. Bridwell, Deputy Under Secretary of Commerce for Transportation, as Federal Highway Administrator in the Department of Transportation (3 Weekly Comp. Pres. Docs., P. 52). Alan S. Boyd, until then Under Secretary of Commerce for Transportation, was sworn in on January 16 as the first Secretary of Transportation (see Item 5 above).

For your background, our road program in 1967 was estimated to be $4 billion 440 million. From that we are withholding $1.1 billion at the moment, and considering another $400 million.

Q. These are expenditures?

THE PRESIDENT. These are obligations.

Q. What fiscal year is this, Mr. President?

THE PRESIDENT. This is fiscal 1967. I will take questions after this is over, if I may give you this now. I think that I can make it clear.

As an illustration, in 1960 we had $2 billion 610 million in road obligations. In 1961 we had $3 billion 187 million. In 1962 we had $3 billion 34 million. That jumped from $3 billion 34 million to $4 billion 1.

We think it is a very desirable program. We are very anxious to carry it on, but if we do have tight labor supplies and if we do have tight problems such as we have had with our economy, we would like to release this under different conditions. We would feel free to do it at any time if we felt those conditions were justified. We expect to get about $400 million in expenditures from that item.


[4.] In addition, the Congress appropriated about $1 billion to purchase various housing paper over and above our request. We have released $250 million of that. We have impounded, or withheld, $750 million. Those are the two bigger items.

A good many people are anxious to get more details on more detailed programs. We have those. They will be submitted to the Congress very shortly. Mr. Schultze will go over some of those now with you.


[5.] One is the Corps of Engineers, which they call the public works program. I think you refer to them as "pork barrels." They are the dams and the post offices and things like that under GSA. Dams and irrigation are under Interior and the Corps of Engineers. He can review the exact figures on those. I think that they will be interesting.

MR. SCHULTZE. Starting with the Corps of Engineers, there are some illustrations of the kinds of things that are involved in cutting back programs by $5 billion and expenditures by $3 billion.

For the Corps of Engineers in the 1967 budget, we asked for 25 new starts. The Congress gave us 58. What we are doing is taking every one of those and deferring them from 3 to 6 months, depending on the nature of the project.

Q. including the 25?

MR. SCHULTZE. All 58. In other words, they will be deferred from 3 to 6 months, depending on the nature of the project. In addition, we have gone down the list of ongoing work in the Corps of Engineers. Where it is physically possible and economically possible to defer new components, and new parts of an ongoing project, we have done that. Altogether the value of contracts involved that will be deferred under this procedure comes out to about $4.36 million. The value of expenditures that will be cut in the fiscal year 1967 from that is about $60 million.

These, as you know, are long-term projects. You cut a $100,000 contract and you get about $10,000 to $20,000 the first year.

THE PRESIDENT. I could make one point. One of the handicaps we have is the appropriation bills came the latter part of the year. Almost 6 months of the fiscal year had gone.

MR. SCHULTZE. A good example of that is the highway program. Given the fact we were well into the year, we started with October 31. From October 31 we told them to take $1 billion 100 thousand off.


[6.] In the Department of Health, Education, and Welfare we cut back, or deferred, or postponed contracts on obligations and commitments amounting to $590 million, approximately, in such areas as the following: for example, deferring or postponing construction contract awards in various health and education areas amounting to some $200 million-odd. This leads to expenditure cuts in this year of $100 millionsome, and cutting back on some research facility grants.

In other words, it was simply postponing things that would have been done in December, and pushing them over to January and February.

This sort of postponement within the year on about $60 million worth of work can save us about $45 million in actual expenditures simply because you are starting them later in the year.


[7.] In the case of, for example, the General Services Administration, which builds most Federal buildings--we are deferring and postponing those buildings to the tune of some 85-odd million dollars, giving us an expenditure saving of $20 million.

The next is a small item. It indicates the fact that you have to go through hundreds of items to do this. We have issued new standards to the purchase of automobiles, which will cut back about $8 million worth of automobile purchases this year.

It is my recollection of those standards that they used to be that you would run the car for 6 years or 60,000 miles. Now I think it is 7 years or 72,000 miles. We calculated how many cars were involved. It comes to $8 million.

That is a small item but it is indicative.


[8.] In another case, in the Agriculture Department, we are taking the so-called small watershed project, which is another form of public works, the small upstream public works of one kind or the other, dams and embankments and the like, and postponing, deferring, and stretching those out, and saving us some $17 million in expenditures this year.

In that particular case, for example, we started the year in terms of our own budget recommendations, asking for 35 such small watershed starts. We got 80 from the Congress. There are others in various FHA loan programs and similar loan programs of the Department of Agriculture.

THE PRESIDENT. That is farmers' home loan program.

MR. SCHULTZE. We are again deferring and cutting back oil those loan programs, giving us altogether in the loan programs combined a saving up to about $90 million in expenditures for the year.

THE PRESIDENT. We hope if money continues to get easier, the drain on those loan programs, or the demand, will be less. As they tightened they couldn't get money at the bank. They could come to the Government agencies to get it.


[9.] MR. SCHULTZE. In the case of the Atomic Energy Commission again, scattered throughout the Commission's program, we are deferring or postponing some construction and other projects worth about $85 million in contract value, saving us about $30 million in expenditures.

These are the kinds of items. Obviously, it is not a complete list and it won't add up to the totals. We are preparing the totals in usable and assimilable form which we will submit to the Congress shortly. This gives you an idea of the kind of things involved across the board.

I tried to give you illustrations of the different kinds of items. You see they are heavily in terms of deferring and stretching out and slowing down and postponing wherever possible rather than cutting whole Programs out.

THE PRESIDENT. I think we should emphasize to all of you, so you don't misunderstand, that we are making no claim or no pretense. We have made no promise to kill any one of these items.

They all remain authorized where that was the action, or authorized and appropriated. But because the economy at that time was heating up, and because we were asking the Congress to suspend the investment credit and to ask the States and the cities and the private people to withhold their construction and their plant and equipment investment, we agreed with Chairman Mills to withhold and postpone or to defer for the time being $3 billion worth of programs.

We are shooting now at in excess of $5 billion in 'programs. We hope $3 billion in expenditures. The economy will come and go and change. That is our breakdown as of today. That is what we are shooting at.

In addition, we have in all of the departments other items under consideration and we have not made judgments on them.

For example, there are $400 million in obligations that won't mean near that much in expenditures. But would you guess $100 million in expenditures?

MR. SCHULTZE. For this year, it will probably be less than $100 million.

THE PRESIDENT. But we have that under consideration. In other departments we are reviewing to see if there are any other places that we can take action.

MR. SCHULTZE. One point is very important, if I may add. In the President's September 8th Economic Message, we indicated that when we went at this business of reducing expenditures, we would essentially do it in three ways. That is exactly what we have done:

First, we would withhold or postpone or defer funds that we had requested in the budget.

Secondly, we would withhold, defer, or postpone in areas where the Congress had added appropriations to our recommendations.

Thirdly, we would reduce in cases where the Congress, as they did in a number of cases, substantially increased our substantive legislative authorizations--we would not send up appropriations to cover that.

THE PRESIDENT. That is it in the supplemental. A good many times the Congress will pass a bill and say, "We authorize you to spend $50 million." Then, they will come right down and say, "Now that we have passed the legislation, send up a supplemental so we can get it this year."

So we said, "We will do it in three ways." Some of those would be withholding authorizations that had been passed, not asking for supplementals. Although we think they are desirable and we would like to do it, we are withholding some.

MR. SCHULTZE. Last September, when we sent the supplemental up, we did not include such items and again when we went up--whatever supplementals we have to send this year we will not include those.

THE PRESIDENT. We will take any questions.


[10.] Q. Sir, as to the $400 million additional program withholding on highways, it is not included in the $5.3 billion program you have given us?

THE PRESIDENT. No, nor in the $3 billion expenditures.

Q. What you have been doing is mainly today hardening up these $5.3 billion and $3 billion figures which you told us about down in Texas earlier, getting down to specific programs where that will come from?

THE PRESIDENT. We have been pretty specific. This is somewhat more detailed. We will see if there have been any changes from what we thought and what extra items should be considered, like the road program.

Basically, this is what we have planned: The two big items, as you must see, are the $1 billion for roads and $750 million for purchases of housing, the public works and the Corps of Engineers and Interior. Those are the really big ones. HEW has some.

We have, on new construction, tried to postpone new construction wherever we could. That means new buildings, new post offices, new HEW research centers, and new things of that nature. That is what we had in Texas. But we are now just trying to take a good look and see if there is anything else that can be added.


[11.] Q. I am not clear yet on this $750 million and $250 million figure that you used.

THE PRESIDENT. Congress appropriated $1 billion not requested by the administration for the administration to use in purchasing housing paper. We have decided that we would get the Federal Home Loan Bank Board, because of the conditions in the market, to make available more money to savings and loans.

The legislation we passed up there last year has improved their situation some. They have reduced their interest rates to the borrowing persons by one-quarter of 1 percent, as I announced the other day.

We are trying to withhold the appropriated funds that Congress gave us to the extent of $1 billion. We have already authorized the expenditure of $250 million. It is conceivable that we would have to release other amounts of it, but we have not done so. We hope we do not have to. That will depend on the economic situation.

Housing had a big jump again in December. We had one in November. We don't know how permanent that is. That is one of the major items that we did not ask for and Congress gave us. We are not going to use it, as of this time, in light of the conditions today.


[12.] Q. Mr. President, would it be fair to say that all of these programs would have gone ahead under the original figures if it were not for the war in Vietnam?

THE PRESIDENT. No, I wouldn't say that.

Q. Then could you explain why you are cutting down on all of these?

THE PRESIDENT. I have done that two or three times. It is the economy. There are a lot of people employed, a tightness of labor. We are over our budget figures. We are running in excess. Congress added about $3 billion in programs from what we asked. Presidents pretty generally have tried to hold back additions when Congress exceeded them.

Q. If the economy should turn around, would these withholdings be reversed?

THE PRESIDENT. They could be very easily. We are now studying it every day. There are some funds in the past several years that have been authorized and appropriated. We have given serious consideration to releasing those at the appropriate time. They may very well be released any day. That depends on the conditions in the particular department.

We think that you can get by, at least for a few months, on new Federal buildings and post offices. We may not think that we can get by on a very important ammunition depot that has been authorized. It depends on the department. It depends on the situation.

But we are now studying what we can do. In this year's budget, we will include a request for new obligational authority for $1 billion for defense facilities over and above what has already been authorized and appropriated for.

In case we wanted to, or in case we needed to, if the men should come home and we should have a need for extra jobs, we could immediately come up to Congress and say: "You have already authorized this. Give us some money now, we will come in with a supplemental for it."

We are now prepared. In case we do need jobs for our men, we will have projects that are available to them. We will not have to work them up overnight.


[13.] Q. In your mind, does this buttress your case for a 6 percent tax surcharge?

THE PRESIDENT. This just carries out a commitment that we have made at the time. We sent up the investment credit request and the accelerated depreciation request. We believed that would temper the economy--in some degree cool it.

We told them that with the announcement of this, which we did announce, and which we had withheld, and which we did not put into the economic bloodstream, that we thought that would be helpful to the economy.

Now, we think that in the light of the expenditures we are going to have next year, and in the light of the fact that $20 billion have been rebated to the taxpayers, over what they would have paid had we not had three tax repealers, that this is prudent and good, sound fiscal policy to go ahead with the budget that we have.

We will ask married people with two children who earn over $5,000 to make some modest contribution. I believe the schedule showed yesterday, if you have two children and make $10,000, you would pay $67 a year. That is about $5 a month with a $10,000 income.

With a $15,000 income, it is $10 or $20 a month. It is a very nominal amount.

As to a corporation, I had better not get in to corporation figures, but I saw one schedule where I believe with $500,000 it is $14,000. So we think it is a very small part of what has already been rebated.

We think it is fiscally desirable so we don't have to pay interest on this amount of money, to try to raise at least a part of it, or $4 billion, or $5 billion, or $6 billion. We think we can do it.

We hope with social security we will pay out to the lower groups in the neighborhood of $4 billion plus. We would expect to take from those making above $10,000 and up a little over $4 billion. So it kind of balances off.

We think that is desirable rather than have a deficit of the magnitude we would have. However, in all of the wars we have had we have not only had tax bills and controls, but we have had deficits.

During World War II, we had deficits that ranged up in the dozens of billions of dollars.

During Korea, we had rather high deficits, too. You know we look at it as to how it affects the economy. We hear our people say, "If you bring these people back from Europe, we will save money that way. You will reduce expenses here and there."

Well, that is fine. If they can reduce expenditures that the Congress is willing to vote, we will gladly consider their judgments. We invite them.

Someone said today at lunch that they seriously thought it would cost us as much if we brought them back. So where they are going to reduce, I don't know.

What happened last year? At one time that figure was up from $3 billion to $8 billion. But we had conferences with the leader-

ship, several times, of both parties. We had . conferences with the members of the Appropriations Committees of both parties. We pied with them to stay within the budget estimates.

We have a budget estimate in here for $1 billion for a pay raise that would give our Federal people some increase to come close to as much as private industry is getting.

A good many items in the budget they may raise, instead of reduce. I am sure they will reduce some.

My judgment is if we can judge it further by the past, you can see what will happen. We have tried to reduce everything and postpone everything that we could reduce which we thought was in the national interest.

I don't think we can reduce the Teacher Corps. I don't think we can postpone the Head Start projects. I don't think we can postpone what we are doing in the cities.

I know we have our interest bill. I know we have our defense bill. The increase is $5 billion for defense and $700 million for interest, and $1 billion for the pay raise. That makes $6.7 billion. The total increase was $8.3 billion. So there is $7 billion of the $8.3 billion there.

Some people say that they can reduce other items.

In most instances those items were increased rather than reduced. I don't want to make a judgment on what they want to do. I am trying to tell you what we are trying to do. We may not be able to do everything that we hope.

This is what we hope. There it is spelled out in just about as much detail as we can give it to you by department.

There are about five principal items. There are roads, housing, agricultural loans, and so-called public works projects in both the Corps of Engineers and in Interior. They may all be AA-plus projects. We are trying to hold them back until we have a stronger need for them than we had last September and October.

I want to emphasize that nobody said we are going to save this much money ultimately. We are trying. I went over all of this list with the leadership several times. It has been reviewed with them. They understand it. They did not endorse it item by item, but they generally are familiar with it. They generally approved it. I would hope that all of them would try to stay within the budget this year.


[14.] Q. Are you sending a detailed list of these proposals to Chairman Mills?

THE PRESIDENT. We have. I am giving it to all of you now. I can't get much more detailed than to point out 85 projects in the various areas, the new construction in hew and things of that kind. We have watched the construction angle very closely because of the tightness of the labor market and because of the overhearing there.

I will be glad to answer any other questions if you have them.


[15.] Q. Are some of these HEW Projects the heart and cancer and stroke centers that were under construction?

MR. SCHULTZE. Yes, a small amount. That was about $10 million. It is a small amount.

THE PRESIDENT. I will take any other question on any other subject if you have them.


[16.] Q. When is the budget going up?

THE PRESIDENT. On the 24th, on Tuesday. By law it is due there the 25th.

The Economic Message we would expect the 26th, unless something unforeseen develops. We will try to brief you on Monday afternoon. You will have Monday afternoon and Tuesday morning before it goes up at noon.

Q. Mr. President, do you plan to tie your supplemental in with your Vietnam message, and if so, can you say when that is coming up?

THE PRESIDENT. We don't have a schedule on messages. We won't have until they are ready to go. Often after the recommendations get here there have to be changes.

I think it is bad to schedule or promise something and then miss it. We will give you advance notice. We will brief you just as soon as they are available.

Speculations and predictions on them do not get us anywhere. We are working on a number of messages. We are working around the clock.

Q. How about putting those together? Can you say whether you plan to do that, the supplemental and the Vietnam message?

THE PRESIDENT. I think we will have some reference to the amount of money. One of them will be a statement of the situation. The other will be the amount of money.

You pretty well know how much money we will need. We have given you that figure exactly.

MR. SCHULTZE. In expenditure terms, it is $9.6 billion. I believe that is right.

THE PRESIDENT. That is Secretary McNamara's figure, $9.4 billion.



[17.] Q. Have you had any reading yet from people in the House particularly, on when and whether you are going to get the tax increase you asked for?

THE PRESIDENT. I don't think anyone will know that until the bill comes to us. I would think that they would have their own views, and make their own contributions. We expect them to. It is a fine committee.

Last year, we asked them for a tax bill and to restore some excise taxes and accelerate some payments. We had nothing that was urgent on the agenda that had been scheduled. They were very cooperative, as were Senator Long and Senator Williams in the Senate?3

3 Senator Russell B. Long of Louisiana, Chairman of the Senate Finance Committee, and Senator John J. Williams of Delaware, ranking Republican member of the Committee.

We received it here and signed it on March 15th. We took about $11 billion out of the economy last year. We are asking them to take out about $4 billion this year. We did it by accelerated payments and excise taxes.

In September, we asked for the investment credit and the accelerated depreciation and changes in certain corporate rates. We got it before the Congress adjourned. So they were very cooperative.

Now, we do have something that has a high priority. We have a debt limit. We are running very close to it. The Congress cut our figure last year and reduced it by $2 billion, as you recall. So we must have hearings on that.

We must get action on that in the Congress if we are to pay our bills and not violate the law.

Before it was determined what our budget would be, or what our tax situation would be, we committed ourselves to the social security program. When we talked to Chairman Mills and others, they agreed that early in the session when we got the debt limit out of the way we would take up social security.

I made a speech in Baltimore, 4 as you may remember, and outlined some objectives we had. That will take some time. How long, I don't know.

4 See 1966 volume, this series, Book II, Item 509,

I reviewed this schedule with Mr. Mills on December 12th. I asked him to come to the ranch, but he had a family situation. Some of the other leaders came. Senator Mansfield, Mr. Boggs, and others came, as did Senator Dirksen. 5

5 Senator Mike Mansfield of Montana, Majority Leader of the Senate, Representative Hale Boggs of Louisiana, Majority Whip of the House of Representatives, and Senator Everett McKinley Dirksen of Illinois, Minority Leader of the Senate.

Mr. Mills could not come on that occasion, so we came back. I asked Mr. Mills to come to Washington. He met with us at some length on December 12th. We reviewed the various alternatives following the debt limit and social security, if we sent up a tax measure, and the various percentages that he would consider and so forth.

Then on December 13th, we met from 2:30 until about 5:30. We spent all afternoon with the Acting Secretary of the Treasury 6 and the Council of Economic Advisers, Mr. Califano,7 and the Director of the Budget, Mr. Schultze.

6 Under Secretary Joseph W. Barr, who was Acting Secretary during Mr. Fowler's attendance at the NATO meeting in Paris, December 12-16, 1966.

7 Joseph A. Califano, Jr., Special Assistant to the President.

We reviewed this with him then. We received his ideas and his general impressions. We had Senator Long here. We asked him to come from Louisiana. We sent them both back that night by plane. They left here about 6:30 after reviewing the possibilities.

Then Secretary Fowler came back from Europe. We had the Secretary of the Treasury and Mr. McNamara, the Secretary of Labor, Secretary of Commerce, and the Council of Economic Advisers together. They had a series of meetings and made their recommendations to me.

I considered those recommendations. Then I exchanged views with each of these executive people before I wrote my message.

Now, no one wants a tax bill unless it is in the national interest. We think it is. We may not be persuasive but we are going to give our views and we are going to respect theirs. We believe if we have a tax bill that we will have an easier money situation.

So we are not asking too much. We hope that this will reduce the deficit. We have had deficits in other wars--rather substantial ones--in Korea, and extremely substantial ones in World War II.

We just think that while we have 2,900,000 new jobs, with very high employment and very high wages, it is time to defer some of this.


[18.] Q. You mentioned easier money. What do you hope the Federal Reserve will do in the face of this tax increase?

THE PRESIDENT. We think that the Federal Reserve has been cooperating and working very well. We are very glad to see the 90-day bill rate down. It is 4.60 or 4.70 compared to almost 6 percent at one time.

Since we are asking for a tax increase, and since we are trying to exercise prudence, such as withholding these things we have here today, and applying some restraints ourselves, Mr. Martin 8 and his colleagues have been very cooperative. They work with us very closely. We don't always agree on everything in the Government, even among the Cabinet members.

8 William McChesney Martin, Jr., Chairman of the Board of Governors of the Federal Reserve System.

As all of you know, we hoped we would all agree before the decision of the Federal Reserve last December. We didn't. In the light of all that has happened, I think that the Government is in pretty general agree. ment. I think Mr. Martin favors a tax increase. He recommended it to me. The Secretary of the Treasury recommended it. The Chairman of the Economic Advisers recommended it. The Secretary of Defense recommended it. The Secretary of Labor recommended it. The Secretary of Commerce recommended it.

They reviewed it from all possible angles. None of us really wanted it. But we didn't think it was too much to ask.

The gross national product has been going up. We think tax repeal contributed to that and brought about good conditions. Now we think we ought to adjust ourselves and try to pay for some of these things.


[19.] Q. Is the Ways and Means Committee going ahead with social security ahead of the tax bill?

THE PRESIDENT. They have not told me. That was their plan, though, before we ever decided on a tax item. I think the best announcement on that would be from Mr. Mills.

Q. You wouldn't object to that?

THE PRESIDENT. That is their program. That is what we agreed to. It is not for me to set their agenda. I know from my 30 years there that I would get in trouble if I started to try to list the priorities under which they should proceed.

It was their plan. It was agreeable to the administration before we ever made a tax recommendation, for them to take up the debt limit and then social security. We decided back in September that we would have these meetings before Congress returned and try to explore the desirability of a tax increase. If one were decided upon, I would recommend it. That is what we did.


[20.] Q. Can you say what the Defense Department budget will be?

THE PRESIDENT. Yes, but I think it is just as well we wait. It is up approximately $5 billion. It will be in the neighborhood of $73 billion-plus. However, you have to give me a few hundred million leeway on that. It has already gone to the printer. k can't be changed.

Miss Helen Thomas, United Press International: Thank you, Mr. President.

Note: President Johnson's ninety-fourth news conference was held in his office at the White House at 5:45 p.m. on Tuesday, January 17, 1967. As printed above, this item follows the text of the Official White House Transcript.

Lyndon B. Johnson, The President's News Conference Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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