[Excerpts from the President's 1966 State of the Union Message, H. Doc. 321, 89th Cong., 2d sess.]

STATE OF THE UNION MESSAGE-THE ADDRESS OF THE PRESIDENT OF THE UNITED STATES

Mr. Speaker, Mr. President, Members of the House and Senate, My Fellow Americans:

I come before you tonight to report on the state of the Union for the third time. I come here to thank you and to add my tribute once more to the Nation's gratitude for this, the 89th Congress.

I recommend that you make it possible to expand trade between the United States and Eastern Europe and the Soviet Union.

Because of Vietnam we cannot do all that we should or all that we would like to do. We will ruthlessly attack waste and inefficiency. We will make sure that every dollar is spent with the thrift and with the commonsense which recognizes how hard the taxpayer worked in order to earn it.

We will continue to meet the needs of our people by continuing to develop the Great Society.

Last year alone the wealth that we produced increased $47 billion, and it will soar again this year to a total over $720 billion. Because our economic policies have produced rising revenues, if you approve every program that I recommend tonight our total budget deficit will be one of the lowest in many years. It will be only $1.8 billion next

year.

Total spending in the administrative budget will be $112.8 billion. Revenues next year will be $111 billion. On a cash basis, which is the way that you and I keep our family budget, the Federal budget next year will actually show a surplus.

That is to say, that if we include all the money that your Government will take in and all the money that your Government will spend, your Government next year will collect one-half billion dollars more than it will spend in the year 1967.

I was informed this afternoon by the distinguished Secretary of the Treasury that his preliminary estimates indicate that our balance of payments deficit has been reduced from $2.8 billion in 1964 to $1.3 billion or less in 1965.

This achievement has been made possible by the patriotic voluntary cooperation of businessmen and bankers working with your Government.

We must now work together with increased urgency to wipe out this balance-of-payments deficit altogether in the next year.

I believe it desirable because of increased military expenditures that you temporarily restore the automobile and certain telephone

excise tax reductions made effective only 12 days ago. Without raising taxes or even increasing the total tax bill, we should move to improve our withholding system so that Americans can more realistically pay as they go; speed up the collection of corporate taxes; and make other necessary simplifications of the tax structure at an early date. I hope these measures will be adequate, but if the necessities of Vietnam require it, I will not hesitate to return to the Congress for additional appropriations or additional revenues if they are needed.

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For those who labor I propose to improve unemployment insurance, to expand minimum wage benefits, and by the repeal of section 14(b) of the Taft-Hartley Act to make the labor laws in all our States equal to the laws of the 31 States which do not have tonight right-to-work

measures.

And as the process of election becomes more complex and more costly we must make it possible for those without personal wealth to enter public life without being obligated to a few large contributors.

Therefore, I will submit new legislation to revise the present unrealistic restriction on contribution to prohibit the endless proliferation of committees, bringing local and State committees under the act, to attach strong teeth and severe penalties to the requirement of full disclosure of contribution, and to broaden the participation of the people through added tax incentive, to stimulate small contributions to the party and to the candidate of their choice.

We will work to strengthen economic cooperation, to reduce barriers to trade, and to improve international finance.

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We follow this principle by building bridges to Eastern Europe. I will ask the Congress for authority to remove the special tariff restrictions which are a barrier to increasing trade between the East and the West.

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Thank you and good night.

[Excerpts from the President's Budget Message]

BUDGET MESSAGE OF THE PRESIDENT

To the Congress of the United States:

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The budget for 1967 bears the strong imprint of the troubled world (7)* we live in.

It provides the funds we now foresee as necessary to meet our commitments in Southeast Asia. If our efforts to secure an honorable peace bear fruit, these funds need not be spent. Yet it would be folly to present a budget which inadequately provided for the military and economic costs of sustaining our forces in Vietnam. And those costs are substantial.

In this setting I have sought to frame a balanced program.

We are a rich nation and can afford to make progress at home while meeting obligations abroad-in fact, we can afford no other course if we are to remain strong. For this reason, I have not halted progress in the new and vital Great Society programs in order to finance the costs of our efforts in Southeast Asia.

But even a prosperous nation cannot meet all its goals all at once. For this reason, the rate of advance in the new programs has been held below what might have been proposed in less troubled times, many older and lower priority activities have been reduced or eliminated, and economies have been sought in every operation of the Government.

At the same time, I want to insure that the necessary increase (8) in budget expenditures is so financed as to promote economic stability. For this reason, I am proposing several tax measures designed to increase Federal revenues.

With this balanced program we can:

Meet our international responsibilities with firmness.

Maintain continued prosperity and economic stability at home. Raise the productivity, earnings, and living standards of our poorer citizens.

Improve the quality of life for all citizens.

Preserve and protect our national resources for the generations

to come.

And we can achieve these ends without unduly straining our economic resources or impairing our steady economic expansion.

This budget presents a responsible fiscal program. It accom- (9) modates our foreign and domestic responsibilities in an environment of strong but noninflationary economic growth.

*Bold face figures in outside margins indicate page numbers in original documents.

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The 1967 fiscal program consists of the following elements:

Second, I propose to supplement the expansion of Federal revenues which is a consequence of economic growth by a series of tax measures which will yield $1.2 billion in fiscal year 1966 and $4.8 billion in 1967:

A plan for improving the pay-as-you-go effectiveness of the withholding system on personal income taxes.

A corresponding plan to accelerate the transition of corporate income tax payments to a full pay-as-you-go basis.

A temporary reinstatement of the excise taxes on passenger automobiles and telephone service which were reduced at the beginning of this claendar year and deferral of the further reductions scheduled in the future.

Third, the combined increase in revenues from economic growth and from my tax proposals will amount to $11.0 billion in 1967. This is substantially larger than the growth in administrative budget expenditures. In fact, it virtually covers the total special costs of operations in Vietnam as well as the small increase in regular budget expenditures from 1966 to 1967.

Fifth, on a consolidated cash basis-which is the most comprehensive measure of budget totals-the 1967 budget will show a surplus of $0.5 billion.

No one can firmly predict the course of events in Southeast Asia. They depend not only upon our own actions but upon those of our adversaries. As a consequence, ultimate budgetary requirements could be either higher or lower than amounts I am now requesting. Prior experience shows that such estimates are extremely difficult to make. During the Korean war, for example, actual military expenditures fell substantially below the original budget estimate. The amounts which I am presenting here reflect the best judgment which can be made at this point in time.

Because of the uncertainties inherent in this situation, the 1967 budget is designed to provide flexibility of response to changing conditions. In the new programs authorized by Congress in the last several years, we have an effective array of weapons to attack the major domestic problems confronting the American people in the fields of health, education, poverty, housing, community development, and beautification. The 1967 budget provides funds to press forward vigorously with these new programs. But because of the costs of maintaining our commitment in Vietnam, those funds are, in many cases, less than the maximum authorized in the enabling legislation. Should our efforts to find peace in Vietnam prevail, we can rapidly adjust the budget to make even faster progress in the use of these new programs or the solution of our domestic problems.

If, on other hand, events in Southeast Asia so develop that additional funds are required, I will not hesitate to request the necessary sums. And should that contingency arise, or should unforeseen inflationary pressures develop, I will propose such fiscal actions as are appropriate to maintain economic stability.