expenditure rates, and a major portion of the authority is spent in future years.

This chart gives you an understanding for where the money comes from, where the sources of spending authority comes from, the payout, $195.3 billion, and what will be carried forward into fiscal year 1971.

RESCISSION OF UNSPENT BALANCES

This whole subject is a fairly complex one. As you know, the Revenue and Expenditure Control Act required an analysis of these balances and a recommendation for $8 billion worth of rescissions. That analysis has been made and it is in the special analysis G of the special analyses series of budget documents. I commend it to you all.

I also warn you that it is really very tough going. I think that is an area in which there is a great deal of uncertainty. People cannot understand why there are requests for new authority when we have $226 billion of unspent authority. That special analysis indicates that of $226 billion in total unspent balances available in 1970 roughly $140 billion is unobligated balances; of the $140 billion of the unobligated balances, $90 billion are in the trust funds. So you get down to about $50 billion of which a significant amount is for backup capital for international organizations, for Federal Deposit Insurance

Corporation, and for the Federal Home Loan Bank Board. In this way you find that $226 billion gets down to consideration of very small numbers in individual programs. This is a point which is nc well understood. I would encourage you sometime when you have time, because it is hard going, to try to work your way through special analysis G.

CHANGE IN BUDGET OUTLAYS 1969-1970

Very quickly now, lets examine three charts on expenditures to give you some understanding as to where the expenditures are going.

The fiscal 1970 budget is up $11.6 billion over 1969. Four and a half billion of this increase is in the social insurance trust funds. Of the rise for social insurance trust funds $2.9 billion are automatic increases in expenditures under existing legislation. Another $1.6 billion represents the proposed social security increase that the President indicated in the state of the Union message and in the budget request.

Again, we have continued the major effort under social programs. The big increases in housing, education, community and area development, and so forth. Shown also are increases for pay of $2.8 billion, interest, $800 million and national defense, half a billion. Defense, military and military assistance are up $600 million, but other national defense programs are down $100 million. All other programs are up only $200 million, but that is a little deceptive because there are a number of pluses and minuses included within that figure. There are

Change in Budget Outlays, 1969-1970

gross increases of about $2.2 billion and decreases of $2 billion. Some big increases occur in the highway program, FAA and the safe streets program which is fully funded at $300 million. These significant increases are largely offset by significant decreases in the space program and in agriculture, because of the reduction of CCC expenditures. Then also decreases appear for the effect of the postal rate increase, foreign economic assistance programs and Public Law 480 programs.

TRENDS IN FEDERAL BUDGET OUTLAYS, 1964-1970

We thought it was appropriate in the last budget of President Johnson to give you an understanding of what happened in the six budgets he submitted.

This next chart compares 1964 and 1970 budget outlays. The bold, black line labeled "Total Outlays" indicates that over those 6 years expenditures have gone up 65 percent. From $118.6 billion in 1964 to a projected $195.3 billion in 1970, assuming the budget for 1970 is enacted as requested.

You will see again the same pattern you did in the last chart-the major social programs have been growing most rapidly with interest next. National defense has risen not quite as fast as the budget as a whole, with the major part of the rise for Vietnam. The veterans programs are up 36 percent, all other programs are up 13 percent.

Trends in Federal Budget Outlays, 1964-1970

FEDERAL AID TO STATE AND LOCAL GOVERNMENTS

One last chart which I think is interesting, involves the question of Federal aid to State and local governments, that is, the whole issue of revenue sharing at State and local government levels. I think you can see that over the period of the Johnson administration these programs have gone up considerably. They are now projected at $25 billion as compared to $10.1 billion in 1964.

So there is two and a half times as much money going to State and local governments as was the case in 1964. We have continued that trend in the 1970 budget. The amount for fiscal 1969 was $20.8 billion. The number for 1970 that we are projecting is $25 billion. In other words, there is a $4.2 billion increase in programs directed to State and local government requirements.

The biggest increases are in health and welfare, and education programs. Again the emphasis is on social programs as you saw on the previous chart.

There is another relevant observation. If we look at the revenues available to State and local governments, in 1964, 14.8 percent of the revenue they had available to them came in the form of grants-in-aid from the Federal Government. That proportion is now increased to about 18 percent. So State and local governments are now getting almost one-fifth of the revenues that they turn around and spend for their programs through the Federal Government. So there has been a significant increase in the proportion of revenues available to State and local governments coming from the Federal Government. There Federal Aid to State and Local Governments

has been also a major expansion in revenues going to urban areas in contrast to some impressions.

If you split Federal-aid outlays between urban and nonurban recipients, you will find urban areas now are getting roughly two-thirds of these grant-in-aid programs in the 1970 budget compared with 55 percent in 1964. So there has been a shift toward the urban areas.

Lastly, President Johnson has recommended in his last budget the creation of an urban development bank which will not be established in time to show up in the 1970 budget totals. The general scheme would be to create an institution which could raise money by selling taxable bonds, supported by the back-up credit of the U.S. Government. Then the U.S. Government would provide an interest subsidy so these funds could be loaned to State and local governments at reduced rates. This would permit a significant increase in the moneys available to your State and local governments for physical facilities, whether they are schools, hospitals or water or sewer systems. We think there has been a major emphasis on expansion of Federal aid to the State and local governments, increases in proportion to State and local government contributions. There has been a significant shift in this period to the urban areas.

I think that is enough of an introduction to the subject, Mr. Chairman.

INCREASES IN BUDGET AUTHORITY

Mr. MAHON. Thank you very much, Mr. Director. The $11.6 billion projected increase in spending in 1970 over 1969 was referred to. Then there is a projected $15.5 billion increase in new budget obligational authority. Will you put these figures in some perspective for us? Mr. ZWICK. Yes, sir.

Again I go back first to the comment I made earlier. Because of the Revenue and Expenditure Control Act of 1969, I do believe you have some distortions if comparisons are made between 1969 and 1970. If you look at the 2-year period, 1968 to 1970, you will see the following patterns. Over the 2 years we are asking for a $19.5 billion increase in budget authority. Net obligations-and that is when we commit the Government, when in fact the executive branch enters into an obligation-go up $20 billion over that 2-year period, and expenditures go up by $16.4 billion, an amount I mentioned earlier. If you look at those three indicators-budget authority up $19.5 billion, obligations up $20 billion, expenditures up $16.4 billion-it is clear that in 1971, 1972, or somewhere downstream, some additional spending will occur. In other words, the obligations in fiscal 1970 as we project them, are up more than the spending.

Of course, a great part of that is in the Defense Department where we are projecting some new weapons systems which spend out slowly in early years, but the major expenditure impact will be in 1971-72.

RELATIONSHIP OF BUDGET ESTIMATES TO DEBT CEILING

Mr. MAHON. You are projecting a balanced budget, a surplus for the current fiscal year 1969 and for the forthcoming fiscal year 1970. Will you discuss that fact in connection with the debt ceiling? If we