1 Compares with new obligational authority of $6,982 million enacted for 1959 and $2,697 million (including $49 million of anticipated supplemental appropriations) estimated for 1969. The 1959 authorization included $3,175 million for the International Bank for Reconstruction and Development and $1,375 million for the International Monetary Fund.

For the fiscal year 1961, new obligational authority of $206 million is requested, which is $25 million over the amount enacted for 1960, in order to permit an increase in the bilateral programs. It will also permit a higher contribution to the United Nations technical assistance program and the related special fund; as other governments increase their contributions for the United Nations programs, the U.S. contribution, which is two-fifths of the total, also increases.

Defense support: Many of the lessdeveloped countries participating in the common defense maintain large military forces whose cost imposes a severe strain upon their limited economic resources. In order to help maintain political and economic stability and to prevent the cost of necessary defensive forces from unduly hindering economic development, the United States provides economic aid principally by supplying commodities for consumption and raw materials and machinery for industrial production. For the fiscal year 1961, new obligational authority of $724 million is requested, an increase of $29 million over the amount enacted for 1960.

Special assistance: New obligational authority of $268 million is requested for economic assistance to promote economic and political stability in various countries of the free world where the United States is not supporting military forces, and for certain other special programs. In several instances, this assistance indirectly relates to military bases maintained by the United States.

The appropriation recommended for special assistance in 1961 is $23 million above the amount enacted for 1960. Additional programs are proposed to help improve conditions in Africa, largely for education, public health, and administration.

Increased funds will also be devoted to certain worldwide health programs in conjunction with the World Health Organization of the United Nations. The largest of these is the malaria eradication program, now in its fourth year. In addition numerous public health

Budget expendi- Recomtures mended

new

obliga1959 1960 1961 tional actual esti- esti-author

1961

$2, 340 $1,800 $1,750 $2,000 1,524 1, 550 1,700 2, 175 3,864 3, 350 3,450 14, 175

1 Compares with new obligational authority of $3,448 million enacted for 1959 ($1,515 million military, $1,933 million economic) and $3,226 million enacted for 1960 ($1,300 million military, $1,926 million economic).

year 1961, new obligationsl authority of $101 million is requested, an increase of $1 million above the amounts enacted for 1960.

Contingencies: Experience has shown that economic and military assistance is also required in some international situations which cannot be foreseen or for which it is not possible to estimate in advance the specific amount needed. To cover situations of this type, new obligational authority of $175 million is requested.

Other economic and technical development: More resources from countries of the free world are being channeled into economic development by increasing the capital funds of international organizations. In the past year the capital of the International Bank for Reconstruction and Development was doubled and that of the International Monetary Fund increased by half.

Development

The Inter-American Bank, with planned total resources of $1 billion, including $450 million from the United States, is expected to begin operations before the close of this fiscal year. Expenditures of $80 million are estimated in the fiscal year 1960 as the first installment of the U.S. cash investment in the Bank. In addition, guarantee authority of $200 million will be made available, on the basis of which the Bank can sell its bonds to private investors.

Last October the Governors of the International Bank for Reconstruction and Development unanimously approved in principle a U.S. proposal for an International Development Association, which will be closely affiliated with the Bank. Under this proposal, the Association will make loans on more flexible terms than the Bank is able to offer under its charter, such as loans repayable in the currency of the borrowing country. In addition, it is expected that the charter of the Association will contain provisions under which a member could provide to

Private investment: The United States is trying to encourage more reliance on private enterprise in foreign economic development. During the past year, the Department of State and the Business Advisory Council of the Department of Commerce have both completed special studies on ways to increase the role of private investment and management abroad. Tax treaties, with investment incentive clauses, are now being negotiated with many countries. More trade missions are being sent abroad. Several of the less-developed countries are opening business information offices in this country. As a result of these various activities, more private investment in the less-developed areas should be forthcoming. To provide an additional incentive, U.S. taxation of income earned in the lessdeveloped areas only should be deferred until repatriated.

Export-Import Bank: The oldest Federal agency specializing in foreign lending and the largest in terms of foreign loan volume is the Export-Import Bank. In the fiscal year 1961 the Bank plans to devote an increasing share of its program to transactions which support economic development abroad. At the same time the Bank plans to finance its operations without requiring net budgetary expenditures by encouraging more participation by private lenders in its loan program and by using funds obtained from repayments on its large outstanding portfolio.

Eligibility for assistance: Amendments to the Battle Act to revise the eligibility requirements for assistance to certain countries are pending before the Congress. It is highly desirable that they be enacted.

Conduct of foreign affairs: The Department of State is making plans to strengthen further the administration of foreign affairs in the fiscal year 1961. The disarmament staff is being expanded in preparation for discussions on disarmament soon to begin in Geneva and for the continuation of the negotiations on the suspension of nuclear tests. guage training programs will also be expanded. New diplomatic and consular posts will be opened in Africa, Latin America, south Asia, and Eastern Europe. For these and other activities, new obligational authority of $205 million is requested for the fiscal year 1961.

Lan

Legislation is recommended to remove certain reservations on acceptance by the United States of jurisdiction of the International Court of Justice (the World Court).

Legislation will be requested for payment in the fiscal year 1961 of certain war damage claims of the Philippine Government against the United States in

the amount of $73 million. These claims will be partially offset by an amount, now estimated at approximately $24 million, owed to the United States by the Philippine Government. Pending legislation should be enacted in fiscal year 1960 to authorize compensation of $6 million to displaced residents of the Bonin Islands.

Foreign information and exchange activities.-New obligational authority totaling $168 million is requested for foreign information and exchange activities in the fiscal year 1961. The U.S. Information Agency plans to expand its programs in Africa and Latin America, including construction of a new Voice of America transmitter in Africa. The Agency will make greater use of the growing number of television facilities overseas. The expansion of domestic radio transmitting facilities, begun last year in order to improve oversea reception, will continue. Exchanges of key persons with about 80 other countries will be increased, with special emphasis on leaders and teachers.

COMMERCE AND HOUSING

The improvements made in recent years in Federal programs for outer space exploration, aviation, highways, in postal service, housing, urban renewal, and small business will be further extended by this budget.

Expenditures for all commerce and housing programs in the fiscal year 1961 are estimated at $2.7 billion, which is $293 million less than the estimated expenditures for 1960. Proposed legislation to provide adequate postal rates will reduce sharply the net budget expenditures of the Post Office Department. Expenditures for other programs, however, especially space exploration and the promotion of aviation, will increase substantially.

Space exploration and flight technology: The National Aeronautics and Space Administration is carrying forward the nonmilitary space projects started by the Department of Defense and has initiated additional programs that will lay the foundations for future exploration and use of outer space. Estimated expenditures of $600 million during the fiscal year 1961, nearly double the expenditures in 1960, will carry forward the programs now under way and those becoming the agency's responsibility in 1961. Appropriations of $802 million for 1961, together with anticipated supplemental appropriations for 1960 of $23 million to restore substantially the congressional reduction in the space program last year, are recommended to finance these programs. Legislation is being submitted to authorize the appropriations required for 1961 and to provide permanent authorization for later years.

I am assigning to this new agency sole responsibility for the development of space booster vehicles of very high thrust, including Project Saturn. This assignment includes the transfer of certain facilities and personnel of the Army Ballistic Missiles Agency. With the imminent completion of the Jupiter missile

project this outstanding group can concentrate on developing the large space vehicle systems essential to the exploration of space. Certain amendments to the National Aeronautics and Space Act of 1958 will be proposed to clarify the organization and streamline the management of the space programs.

At the present time Soviet scientists have the advantage in the weight of the payloads that they can hurl into space. This weight advantage stems from the earlier start of the Soviet development of very large rocket boosters that they considered necessary for their intercontinental ballistic missile program. Because of the relatively advanced state of our nuclear warheads, however, we were able, after a much later start, to develop an effective ICBM using a smaller rocket booster.

Commerce and housing
[Fiscal years. In millions]

strable achievements. Project Mercury has a high priority and we should be ready to attempt actual manned space flights within the next 2 years. Progress on the development of very high thrust engines and the vehicles to use them will make it possible, in the not too distant future, to launch much larger space vehicles and thus extend the conquest of space.

For the near future satellites and space probes will continue to depend primarily on Thor and Atlas missiles as boosters, with the Delta and Agena upper stages providing improved performance and reliability. These vehicles will make possible a wide variety of highly useful scientific experiments which will provide essential information for future exploration of outer space by manned and unmanned vehicles. Somewhat later the Centaur project will provide an Atlas-boosted space vehicle with further improved capabilities and establish the technology of very high energy propulsion for space vehicles. In all of these projects, the success of the space vehicle launchings depends on a strong continuing program of supporting research and ground testing.

Transportation and communication: The detailed review of transportation problems and policies which I requested last year is now nearing completion in This the Department of Commerce. study should provide a sound basis for administrative actions and for legislation that may be needed to assure adequate and balanced growth of all branches of the Nation's transportation system.

now

Aviation: Primarily because of the airways modernization program under way, expenditures of the Federal Aviation Agency will increase by $114 million to an estimated $681 million in fiscal year 1961. New obligational authority of $717 million is requested mainly for procurement and operation of radar equipment, airport landing aids, communications, and other facilities needed to handle the rapidly growing volume of air traffic safely and efficiently and for establishment and enforcement of air safety standards. Research and development activities are being accelerated to insure the future improvements in equipment and techniques required to meet future aviation needs.

The Federal Aviation Agency is already making increasing use of military facilities, and steps are underway to achieve a closer integration of air defense and civil air traffic control networks. Over the next few years the Agency will also assume traffic control functions now performed by military personnel at airbases throughout the world, with significant savings in cost.

Expenditures for subsidy payments to the airlines by the Civil Aeronautics Board are estimated at $69 million in 1961, an increase of $31 million, or 80 percent, over the $38 million actually spent in 1958. Almost all of the subsidy will go to local service airlines, including helicopter operations in three major metropolitan areas and intra-Alaska service. This rise and the prospect of even higher subsidies in the future make nec

essary the consideration of proposals to reduce the dependence of these airlines on the Government.

Airway user charges: Consistent with the principle that special beneficiaries of Government programs should pay the cost of those benefits, the users of the Federal airways should ultimately be expected to pay their full share of rising capital and operating costs. Accordingly, the effective tax on aviation gasoline should be raised from 2 to 41⁄2 cents per gallon and the same tax should also be levied on jet fuels, which are now tax-free. Receipts from all aviation fuel taxes should be retained in the general fund rather than transferred to the highway trust fund as at present. These actions will increase revenues to the general fund by an estimated $89 million in fiscal year 1961.

Promotion of water transportation: Expenditures of the Department of Commerce to aid water transportation will be sharply higher in both 1960 and 1961 than in 1959, primarily because of higher levels of payments required under past commitments for ship operating and construction subsidies. A supplemental appropriation of $32 million will be requested for the current year to meet increased operating subsidy obligations caused by lower earnings of the shipping industry and to permit prompt payment of subsidies accrued.

Efforts to maintain a U.S. merchant fleet adequate, along with the ships of our allies, to meet national defense requirements are seriously hampered by high operating costs. To preserve the capability of our merchant fleet without placing an undue burden on the taxpayer will require willingness by ship operators, maritime labor, and the Government to explore and adopt new solutions.

This budget provides for expanded work on advanced ship designs that could bring sharply reduced operating costs. By extending the operation of war-built vessels, which comprise more than 70 percent of the subsidized fleet, over a somewhat longer period, the results of this research can be more fully exploited in replacement plans. The Secretary of Commerme is also undertaking a special study of sailing requirements and competitive conditions of maritime trade routes and services, in the hope of discovering opportunities to increase the benefits flowing from the public investment in this area.

I repeat the request made last year that the 32-percent interest rate ceiling on ship mortgage loans made by the Maritime Administration be replaced by authority to charge the Government's full cost for such loans.

Work will continue on widening sections of the Panama Canal from 300 to 500 feet to facilitate the movement of increased ship traffic. Largely as a result of this program and the increased disbursements for the $20 million Balboa Bridge, which is being built to fulfill a treaty commitment with the Republic of Panama, expenditures of the Panama Canal Company in 1961 will be $10 million higher than in 1960.

Highways: Federal payments of $2,728 million from the highway trust found in 1961 will enable the States to proceed with construction of the Interstate System at a level consistent with the pay-asyou-build principle established by the Highway Revenue Act of 1956 and reaffirmed by the Congress in 1959. Last year I recommended that highway fuel taxes be increased by 12 cents per gallon for a period of 5 years to meet estimated expenditures requirements. The Congress after months of delay enacted an increase of only 1 cent for less than 2 years.

As a result of both the delay and the failure to provide the full amount of revenue requested, the roadbuilding program has been slowed below a desirable rate of progress. The apportionments to the States for future construction had to be reduced and a plan had to be established to time reimbursement to the States so that the trust fund could be kept in balance. By timely action and planning, however, potential failures to reimburse State promptly for want of funds in the trust fund have been avoided, and equitable and proportionate programs in every State have been established.

I urge the Congress again to increase the highway fuel tax by another onehalf cent per gallon and to continue the tax at 42 cents until June 30, 1964.

This will permit the construction program for the Interstate System to proceed at a higher and more desirable level. I request repeal of the diversion of excise taxes enacted last year for the period July 1, 1961, to June 30, 1964. New reports giving estimates of the cost of completing the Interstate System and recommendations on the allocation of costs among future highway beneficiaries will become available in 1961. At the appropriate time, further recommendations will be made to the Congress for the ensuing conduct and financing of the program.

A temporary advance of $359 million from the Treasury to the trust fund was necessary in fiscal 1960 to balance out the monthly flow of revenues and expenditures within the fiscal year, but this will be repaid by June 30, 1960. A similar temporary advance of $200 million will be required in the fiscal year 1961, repayable before the end of that year.

During this session of the Congress, funds should be authorized for 1962 and 1963 for regular Federal-aid highway programs and for forest and public lands highways. In view of the limited resources available to the trust fund and the priority requirements of the Interstate System, it is recommended that authorizations for the regular programs for each of these years be reduced to $900 million from $925 million provided for 1961. Annual authorizations of $33 million for forest highways and $3 million for public lands highways are also recommended.

Finally, I again request that the financing of forest and public lands highways be transferred from the general fund to the highway trust fund. Most of

these highways are integral parts of the Federal-aid systems, and they should be financed in the same way.

Postal service: The Post Office Department is intensifying its efforts to improve service and to hold down the persistent postal deficit while handling a growing volume of mail. Initial steps have been taken to mechanize mail processing and to reduce serious congestion at major distribution centers. Ultimately, modern mail processing plants will be established in all principal urban areas to assure prompt and efficient deliveries.

The Postal Policy Act of 1958 established the policy that postal rates should be adjusted whenever necessary to recover postal expenses, excluding the costs of certain public services as fixed by appropriation acts. Over the past 13 fiscal years, 1947-59, the Federal budget has had to finance postal deficits totaling $6.8 billion, which is almost half of the increase in the national debt during that time. At the average rate of interest on the outstanding debt the taxpayers are paying well over $200 million annually in interest for the unwillingness of the Congress to take timely action to increase postal rates.

For fiscal 1961, a postal service defict of $554 million is estimated with postage rates now in effect or scheduled, after designating $49 million as attributable to public services. Rate increases enacted in 1958 were substantially less than needed to meet the deficit at that time and made no allowance for the pay increase for postal employees then enacted. Since then, increased railroad rates (up $55 million), costs of modernization (up $80 million), and the new employee health insurance program ($39 million) have widened the gap between revenues and expenditures.

Accordingly, legislation is again proposed to increase first-class and airmail rates by 1 cent and to raise other rates and fees by enough to cover the postal deficit. I urge the Congress to act promptly on these proposals, which will be submitted in the near future.

Housing and community development: I have presented to each of the past two sessions of the Congress a comprehensive program of legislation for the Government's housing and community development programs. Some of these recommendations were enacted in the Housing Act of 1959. This year, legislation will be requested only for the authority necessary to continue important existing programs and provide necessary flexibility in interest rates. The authorization of additional funds for these programs should be subject to appropriation action.

Urban renewal: In the decade since Federal grants were first authorized, urban redevelopment has become recognized as essential to the future vitality of our cities, and planning has been initiated on 647 projects in 385 communities. However, only 26 projects have been completed. An additional 355 projects for which Federal funds have been obligated are now under way, but progress on many of these has been slow.

The budget, accordingly, places major emphasis on accelerating program progress. Sixty-five projects are scheduled for completion in 1960 and 1961. At the same time, the number of projects under way is expected to increase from 355 at the end of 1959 to 510 at the end of 1961. The acquisition of land for these projects in 1961 is estimated at more than double and the sale of land to redevelopers at nearly triple, the 1959 amounts. As a result of the increased rate of activity, a supplemental appropriation of $50 million will be necessary in the current year to pay capital grants for projects nearing completion under prior contracts. Since the Housing Act of 1959 provided new contract authority for capital grants of $350 million for 1960 and $300 million for 1961, no additional obligational authority will be necessary for this program for 1961.

Public facility loans: The authority of the Housing and Home Finance Agency to borrow $100 million from the Treasury for loans to small communities for needed public facilities will be exhausted early in 1961. An additional $20 million will be required to meet loan applications through the end of the fiscal year 1961. Legislation is recommended to authorize the provision in annual appropriation acts of this amount and such future increases as may be necessary.

Public housing programs: By the end of fiscal year 1961, about 500,000 federally aided public housing units will be occupied and an additional 125,000 units will be under contract for Federal contributions. In the allocation of new contracts authorized in the Housing Act of 1959 emphasis is being given to projects which will be constructed in the near future. The 1959 act authorized 37,000 added units of public housing, to be available until allocated. Accordingly, no additional authorization is requested. Increases of $18 million in 1961 expenditures result primarily from rising Federal contributions to local authorities under past contracts.

Federal Savings and Loan Insurance Corporation: The share accounts of savings and loan associations insured by the Federal Savings and Loan Insurance Corporation have increased fivefold over the past 10 years. With a continuation of this rate of growth, the insurance reserve of the Corporation cannot reach levels commensurate with the mounting insurance liability without an increase in the present premium rate. I am, accordingly, recommending legislation to restore the higher premium rate in effect prior to 1949, to remain in force until the reserve exceeds 1% of the share accounts and borrowings of insured institutions. At the same time, the statutory goal of a reserve equal to 5% of such accounts and borrowings exceeds potential needs and should be reduced to 2%. In addition, the Corporation should be given authority to borrow from private sources, both to increase the available sources of funds to levels adequate to meet any temporary borrowing needs and to reduce its potential dependence upon the Federal Government. 49100-S J-86-2-4

Insurance of private mortgages: The mortgage insurance programs of the Federal Housing Administration will continue in 1961 to underwrite a substantial share of the mortgages on residential housing. While it is difficult to forecast mortgage insurance requirements, the general mortgage insurance authorization of the Federal Housing Administration now appears to be adequate to meet demands for mortgage insurance until the next Congress is in session.

Sharp fluctuations in the demand for mortgage insurance during recent years have caused the funds available for personnel under appropriation act limitations to be inadequate in periods of heavy demand to provide the staff required by the Federal Housing Administration for prompt service on applications. Supplemental funds are usually not made available in time to meet this problem. To correct this situation, appropriation language is being requested to permit use of additional income for such expenses when actual demand exceeds the budget estimate.

Legislation should also be enacted to extend the authority for insurance of loans on home improvements. This program, which makes a major contribution to modernization of existing homes, would otherwise expire on October 1, 1960.

Last year legislation was recommended to provide some flexibility in maximum interest rates on mortgages originated under the housing loan and guarantee programs of the Veterans' Administration and under certain mortgage insurance programs of the Federal Housing Administration. The action taken by the Congress was inadequate and some of these programs are now seriously hampered by their inability at present maximum interest rates to attract adequate private capital. The Veterans' Administration should be given the same flexibility to adjust its interest rates to market conditions which is now possessed by the Federal Housing Administration in its basic mortgage insurance programs. In addition, the maximum interest rate of 42% on insured mortgages on armed services family housing should be removed.

Veterans housing loans: The direct housing loan program of the Veterans' Administration, which has been extended several times, terminates July 25, 1960, and I am asking for no further authorization. At that time, over $1 billion of loans will be outstanding, and the program will have provided over 150,000 loans to veterans. There is no longer justification for continuing this readjustment program.

Mortgage purchases: The authority of the Federal National Mortgage Association to borrow from the Treasury to purchase mortgages under its special assistance program will be exhausted during 1961. I am recommending legislation which would permit future increases in authorization to be subject to appropriation review. An additional $150 million is requested for 1961 for this

program. The additional funds will be used chiefly to buy mortgages on housing in urban renewal areas, on housing for the relocation of displaced families, and on housing for the elderly.

Special assistance for these mortgages is intended to be transitional, and an increasing proportion of total financing should in the future be obtained from private sources. With annual financing requirements in excess of $1 billion already in sight for these programs, the need can be met only with the full and active support of local communities and private financial institutions.

At the same time, mortgage purchases by the Association's secondary market operations trust fund will continue at high levels. Expenditures for such purchases are estimated at $1,047 million in 1960 and $975 million in 1961. These purchases will be almost wholly financed through the sale of debentures to the public and the purchase of common stock by mortgage sellers. Budget expenditures of $50 million, however, will be necessary for the additional Treasury purchases of the preferred stock of the Association required to support the mortgage purchase program.

College housing: No additional authorizations are proposed for the existing college housing direct loan program. The housing needs of our colleges and universities represent only a part of the need for new university facilities of all types. These needs should be considered as a whole and within the framework of the general problems of education. I have, accordingly, recommended the termination of the college housing program and the enactment of legislation authorizing a new program of grants and loan guarantees for college facilities, to be administered by the Department of Health, Education, and Welfare (discussed under labor and welfare programs).

Small business: The increase in financial assistance to small businesses under the Small Business Investment Act of 1958 will continue in 1961. I recommend the enactment of legislation previously proposed to the Congress to encourage the formation of additional investment companies by liberalizing the authority of these companies, thus expanding the supply of private capital available to small businesses. Other loans by the Small Business Administration will continue at a high level, but less new obligational authority is recommended because repayments on outstanding loans will increase. Efforts to assist small businesses in obtaining a fair share of Federal Government procurement and surplus property will also continue. In order to facilitate small business financing, the Securities Act of 1933 should be amended to extend the privilege of simplified filings to a wider range of security issues.

Area assistance: Despite the rapid economic recovery in the Nation as a whole, unemployment remains high in a relatively small number of local areas. The chronic problems in these communities reflect primarily basic changes

in consumer buying habits, production methods, and industry location patterns. Some localities and States have properly taken the initiative in measures designed to meet these problems. In addition, the Department of Commerce, with the cooperation of 13 other Federal agencies, is intensifying existing Federal programs to encourage and support this local initiative. More help is required. Therefore, for the past four years I have requested expanded legislative authority, primarily for loans and grants, to supplement existing Federal, State, and local programs. Prompt enactment of this legislation is important. The budget includes an estimated $57 million in appropriations as the initial amount necessary to provide the proposed additional Federal aid.

Regulation of commerce and finance: The general growth of the economy, newly legislated responsibilities, and the increased complexity of the problems which confront the regulatory agencies require increases in funds for most of them. The largest single increase in this category will permit the Federal Communications Commission to make a thorough study of ultra-high-frequency television to determine whether channels in this range can be used to meet the needs of the expanding television industry.

I again recommend legislation to strengthen the antitrust laws, including extending Federal regulation to bank mergers accomplished through the acquisition of assets, requiring businesses of significant size to notify the antitrust agencies of proposed mergers, empowering the Attorney General to issue civil investigative demands in antitrust cases when civil procedures are contemplated, and authorizing the Federal Trade Commission to seek preliminary injunctions in merger cases where a violation of law is likely.

Civil and defense mobilization: Preparations for nonmilitary defense have been seriously hindered by the unwillingness of Congress to provide appropriations to carry out programs authorized by the 1958 amendments to the Federal Civil Defense Act. Funds are again being requested for 1961, as well as in a supplemental appropriation for 1960, to help States and localities strengthen their full-time civil defense organizations. Increased funds are also required to finance greater purchases of radiological instruments for donation to the States; for expansion of the emergency preparedness activities of other Federal agencies; and to carry on the national fallout shelter policy.

In accordance with the national fallout shelter policy, the Federal departments and agencies have been directed to include fallout shelters when appropriate in the design of new buildings for civilian use, and funds for such shelters are included in the budget requests of the various agencies. In addition, the

budget of the General Services Administration includes $6 million for a new fallout shelter program at certain Federal relocation sites and in some existing Federal buildings.

AGRICULTURE AND AGRICULTURAL RESOURCES

In the fiscal year 1961, Federal programs for agriculture will again have a heavy impact on the budget, primarily because of continued high agricultural production and the past unwillingness of the Congress to make appropriate modifications in the long-established price support laws. The longer unrealistic price supports are retained, the more difficult it will be to make the adjustments in production needed to permit relaxation of Government controls over farm operations.

Last year I proposed to the Congress urgently needed legislation relating to price supports. Very little of that program was enacted. I recommend that the Congress give this important matter early consideration.

Particularly urgent now is legislation to put wheat price supports on a more realistic basis. Stocks of wheat are continuing to rise in spite of our efforts to move wheat abroad through the International Wheat Agreement, sales for foreign currencies, and grants to disaster victims and needy people. The carryover of wheat stocks is expected to rise to almost 1.4 billion bushels by July 1, 1960, an amount that would provide for more than 2 years of domestic consumption without any additional production. Agriculture and agricultural resources [Fiscal years. In millions]

I Compares with new obligational authority of $5,421 million enacted for 1959 and $5,099 million (including $704 million in anticipated supplemental appropriations) estimated for 1960.

The wheat surplus problem has been a long time in the making and cannot be solved overnight. In fact, wheat legislation enacted in this session cannot be made applicable before the 1961 crop, The fact that any significant effect on the budget would be delayed until the fiscal year 1962 underlines the need for prompt action at this session of the Congress.

Authority to bring additional land into the conservation reserve expires after the 1960 crop year. Legislation is proposed to extend this authority through the 1963 crop year and to expand the program by increasing the basic limitation on the amount of payments that may be made in any calendar year from $450 million to $600 million. Specific authority will be requested for the Secretary of Agriculture to give special consideration, in allocating conservation reserve funds, to those States and regions where curtailment of production of wheat or other surplus commodities is consistent with long-range conservation and production-adjustment goals. The rental rates needed to induce farmers to withdraw cropland from production under the conservation reserve depend on the income prospects from farming, which in turn are a reflection of the levels of price supports. Therefore, the future authorization for the conservation reserve program should not be increased above the 1960 level unless needed price-support legislation is enacted for wheat.

Estimated expenditures for agricultural programs in fiscal 1961 are $5.6 billion, which is $510 million more than the estimate for the current year but $907 million less than was spent in 1959.