COMPARISON OF ACTUAL AND ESTIMATED RECEIPTS, 1966-70

Mr. JONAS. Mr. McCracken, will you provide for the record a table showing the track record in each of the last five completed fiscal years comparing projected receipts with actual revenue receipts?

Mr. MCCRACKEN. Yes, sir.

(The information follows:)

A COMPARISON OF ACTUAL AND PROJECTED BUDGET RECEIPTS, FISCAL YEARS 1966-70

Mr. JONAS. I would like to pursue the colloquy between my colleague from Ohio and the Secretary of the Treasury.

You said, Mr. Secretary, that if we attain the goal of $1.065 trillion will depend upon the supply of money. Is that based on an estimated increase in the supply of money of 9 percent, or what percent? Secretary CONNALLY. I don't know.

There are various figures that have been kicked around, Mr. Jonas. I would not personally use a precise percentage, but I think that figure has been one that has been used from time to time.

Mr. JONAS. I noticed an article in this morning's paper alleging that Dr. Burns poured cold water on the administration's appeal for faster growth in the money supply to achieve a target of 9-percent growth rate this year. You can't speak, of course, for the Federal Reserve Board but can you tell us whether the $1.065 trillion is based on an increase of 9 percent or any particular percentage in the growth of the supply of money.

Secretary CONNALLY. Mr. Jonas, let me respond in two ways. I did not hear Mr. Burns' testimony that you alluded to.

Mr. JONES. This is an article in this morning's Washington Post under the byline of Mr. Frank C. Porter. He didn't put it in quotation marks but he does report a hearing at which Dr. Stein testified, and then he goes ahead and makes the comment about Dr. Burns' position.

Secretary CONNALLY. If the Post said that, Mr. Jonas, I certainly would accept it, although I probably should be the last to be giving affidavits to the accuracy of all of the stories that appear in all of the papers in the country.

Mr. JONAS. I am not necessarily accepting it. I am referring to it.

Secretary CONNALLY. If I may seriously respond to your comment, I must say that the Secretary of the Treasury does not determine the supply of money. That is a function of the Federal Reserve Board. Obviously Dr. Burns is the most influential member I know concerned with that institution.

I can't believe that his goals are any different from this administration's goals, which is to see a revitalization of the economy and a reduction in the number of unemployed.

59-467 0-71—5

I do know that whatever figure is necessary in terms of money supply growth it has to be more than the 1.1 percent increase we had in January and the approximate 3 percent we have had since September.

There are disputes among economists as to what is the money supply and how much money supply is needed for expansion. But I don't think there is any question that we are going to require a greater growth in money supply than in recent months.

I don't want to be speaking for Dr. Burns. In addition to being a distinguished economist, he was a very highly regarded member of this administration just prior to becoming Chairman of the Federal Reserve Board.

He is my dear friend and I don't intend to speak for him. I believe that the interpretation given to his remarks must have been exaggerated because I know how he feels. I know he wants what everybody else wants, and I can't believe that the Federal Reserve System is going to adopt a policy that will preclude the achieving of those goals.

Mr. JONAS. You have stated already in your colloquy with Mr. Bow that the projection of $1.065 trillion is based on an ample and sufficient supply of money.

Secretary CONNALLY. Yes, sir.

Mr. JONAS. Whether it is 9 percent or some percentage near that is not so important, although I wish we could have it established for the record the percentage of growth in the money supply upon which that $1,065 million figure was based.

Secretary CONNALLY. I think your 9-percent figure is correct for the growth of GNP. I am sorry I misunderstood you.

Mr. JONAS. I was talking about the money supply.

Secretary CONNALLY. I thought you were. I don't think it has to be a precise figure. It has to be a relatively high figure or probably something a little less than that. It should be a whole lot closer to that figure than 1.1 percent.

Mr. JONAS. The burden of the article in the Post to which I referred talks about 9 percent, and it refers to the testimony of Dr. Stein that the White House is still depending heavily on an increase in the supply of money.

Secretary CONNALLY. This is where we get into trouble when we try to say it as a precise percentage. The 1,065 doesn't even have to be reached to achieve the goal that the administration basically wants, to revitalize this economy. It might well be it would take 1,065. What we want to do is to reduce unemployment to an acceptable level of about 4 percent. We want to do it without again reinstituting inflation in this country. We want to do it by providing the jobs, the equipment, and the starting machinery to get this industrial complex going to where we can again have a favorable balance of trade. The 1,065 in itself is no goal, it is what the 1,065 represents-which is full employment and increased vitality. It may take 1,070 to do it or it may do it with 1,060. Mr. JONAS. You won't get any argument from this side of the table about that. We all have that goal and desire.

There is only one other question I would like to have answered by either one who will answer it.

COST OF REDUCING UNEMPLOYMENT BY 1 PERCENT

How much additional revenue do you estimate will be required to get unemployment down 1 percent? For the purpose of argument, suppose it is 6 now and we want to get it down to 4. What do you think would be required in additional revenues or expenditures to get unemployment down by 1 percent?

Mr. SHULTZ. Mr. Jonas, I think, just to set up some rough equivalencies, that a 1-percent reduction in unemployment would equate itself more or less to a 3-percent increase in real gross national product; roughly a fourth of the nominal gross national product that accompanies the 3 percent in real gross national product would wind up as receipts of the Federal Government.

Mr. JONAS. You estimate you could get unemployment down to 4 percent with an increase in GNP of 6 percent?

Mr. SHULTZ. You are talking about a simultaneous movement here. As time goes along, the potential real gross national product grows at roughly a 4-percent-per-year rate. So, in order to get back to full employment, you have to get the economy growing at a rate faster than 4 percent, and then you start to cut in and gradually work your way back. It is that process that we see as getting underway and by having it be strong enough to get over that 4-percent hurdle, so to speak, in the national growth rate, but at the same time gradual enough, as planned here, not to reignite inflation, that is what we are looking for, but, in terms of rough equivalencies, I think the numbers I gave you would more or less check out.

Mr. JONAS. Thank you.

Mr. MAHON. I yield to the gentleman from Alabama.

COST OF INTEREST ON NATIONAL DEBT

Mr. ANDREWS of Alabama. Mr. Chairman, I have just one or two questions in line with what Mr. Bow asked about on the interest on the national debt.

I noticed something on page 54 of the budget in brief and frankly this frightens me more than anything I have heard yet about the fiscal condition of the U.S. Government.

It shows here that in 1961 the interest on the national debt was $8.108 billion and that figure goes up each year until you hit 1971 at the top of the page where it shows that the interest on the national debt for this fiscal year is $20.8 billion.

Projected for next year at the top of the page there is $21.150 billion. That is an astronomical sum of money, the $20.8 billion is far beyond my conception. So I asked the clerk of the committee to figure it out for me, Mr. Wilson. His figures were that just interest on the national debt is running at the rate of $39,600 a minute, $400 million per week.

Here is what frightens me. This trend is definitely up from 1961, $8.1 billion to the $21.150 billion estimate for 1972. If this trend increases at this rate we might reach the point where it will take all of our revenues to pay the interest on the national debt.

Mr. Secretary, how far do you see this trend going? Will it level off at $21.150 billion or $25 billion or 30 billion?

Secretary CONNALLY. I can't give you a precise answer, Mr. AnDREWS. I have the same basic feeling about it you do. I don't like to see this debt going up as it is but I want to point out just two things

to you.

First, you will notice that interest was 8.3 percent of the total budget outlays in 1961. It is estimated to be 8.6 percent in 1972. So interest as a percentage of the total budget is not increasing as it is in terms of absolute amounts.

Second, as a percentage of the gross national product the debt has actually declined in recent years from 54 percent down to 30 percent. Mr. ANDREWs of Alabama. To what?

Secretary CONNALLY. To about 30 percent.

Mr. ANDREWS of Alabama. What has declined?

Secretary CONNALLY. The Federal debt in 1952, to pick a couple of years, was 62 percent of the gross national product. In 1960 it was 47.9 percent of the gross national product, in 1971 30 percent, and in 1972 it is estimated to be 27.9 percent.

That is small solace when you are looking at a debt of the magnitude of ours that takes $21 billion a year to service, I grant you, but at least there is some hope with the administration and Congress working together in the years to come we can bring the national debt under control.

Mr. ANDREWS of Alabama. I am sure you realize that this $20.8 billion figure is the second highest item in the appropriation bill for fiscal 1971. It is next to Defense.

So I get back to expressing the fear if this trend continues it could mean that we would have to pay all of our income for interest on the national debt.

NATIONAL DEBT LIMIT

One question with reference to the national debt limit.

On page 65 of the budget we have the same brief statement showing the estimated national debt for 1971 at $407 billion. You recently requested from the Ways and Means Committee a bill to increase the national debt limit by $40 billion and they recommended $35 billion. Secretary CONNALLY. Yes, sir.

Mr. ANDREWs of Alabama. Will that $35 billion be added to the $407 billion?

Secretary CONNALLY. Yes, sir; this is what they did. The permanent debt ceiling is now $380 billion and we are operating under a temporary ceiling of $395 billion. We asked the Ways and Means Committee to increase the temporary ceiling to $435 billion. They cut it back to $430 billion. We will be operating under a temporary ceiling of $430 billion which we estimate will carry us through June 30, 1972.

Mr. ANDREWS of Alabama. Next year?

Secretary CONNALLY. Yes, sir.

Mr. ANDREWS of Alabama. I have been in Congress a long time and every year the administration has asked for an increase in the debt ceiling. It has gotten to be a permanent request and each year this is done. But again and again they come back.

Secretary CONNALLY. Mr. Andrews, I can't deny that.

I must say it wasn't a source of great satisfaction to me that my first appearance on the Hill as Secretary of the Treasury was to come