I think there is general agreement that the engine is going a little too fast right now, but the point you are making, very correctly, is that in slowing things down we had better be careful we do not slow them down too rapidly and throw ourselves back in a recession. Of course, the big challenge facing the incoming administration is to be able to slow the economy down, but don't slow it down so rapidly as to cause a recession. Mr. MAHON. Any questions on my right? Mr. Bow. May I make one statement before we close, which we must do. FINE COOPERATION IN CHANGE OF ADMINISTRATION I should like to say to Secretary Barr and to Mr. Zwick that I have been told of the fine cooperation in this transition period between the gentlemen who are appearing before us today and the Treasury Secretary-designate and the Director of the Bureau of the Budget-designate. On behalf of our side over here, I should like to say how much we appreciate the work that has been done and the cooperation. I think it has made for a very smooth transition. We deeply appreciate it. I might also point out. Mr. Chairman, that during these hearings in the past we have usually ended up with very interesting comments about the Defense Department. We had one member who always used to go into great detail about the way they were budgeting for the Defense Department. That voice is not here this morning. His transition expert is here. Perhaps we will be able to discuss that with him across the table before too long. We do miss Mel Laird. Mr. MAHON. We do miss him. Any further questions? REASON FOR REVENUE INCREASE IN 1969 Mr. CEDERBERG. I would like to get some clarification on this: On one of your charts I note that receipts for fiscal 1968 are $153.7 billion. Receipts in 1969, which I assume are estimated to date, are $186.1 billion, which is an increase in receipts of $32.4 billion in 1 fiscal year. I recognize a large portion of this arises from the surtax, but could you tell me exactly what that receipt increase is made up of? Secretary BARR. If I could supply this table for the record, I think it would provide the answer. Mr. CEDERBERG. That will be fine. (The table follows:) Unified budget receipts, fiscal year 1969: Increase in receipts due to legislation, economic growth, and other factors Legislation : [In billions] Surcharges, enacted and proposed--- Acceleration of corporation payments and 1968 act Social security legislation__ Excise tax extension_-_. Total Miscellaneous (prior legislation, changes in payment patterns). Economic growth-- +$12.7 +1.0 +4.0 +.2 +17.9 +.6 +13.9 Total increase_- +32.4 Source: Office of the Secretary of the Treasury, Office of Tax Analysis, Jan. 17, 1969. Mr. Bow. I would like to carry that one step further. I notice in 1969 Secretary BARR. May I say, sir, normal economic growth accounted for nearly $14 billion of this increase. Legislative action, tax action, and other things accounted for the balance. PROJECTED INCREASE IN REVENUES IN 1970 Mr. Bow. This leads to my next observation. The increase in receipts from 1969 to 1970 is $12.6 billion in 1 fiscal year. Secretary BARR. Right. Mr. Bow. Is it correct that $11.9 billion of the revenue increase is in the form of user charges and extension of the surtax? Secretary BARR. No. Of that amount, sir, first of all, as you correctly point out, there is a much slower, much smaller increase between 1969 and 1970 than between 1968 and 1969. There are two reasons for that. No. 1, we are projecting a slightly slower growth rate for calendar year 1969 than we experienced in calendar year 1968. The second factor is that we are asking that the surtax be continued. In other words, there would not be a big swing in 1970 there from the surtax. There is one in 1969 since there was no surtax in fiscal year 1968 but there is no big swing in 1970 since the surcharge is only being continued. Mr. Bow. How much do you estimate the surtax Secretary BARR. The surtax is worth $9 billion in 1970. The extension of the excise is worth $500 million, for a total of $9.5 billion. Mr. Bow. Do not the user charges which you have figured in here in the way of receipts, which I think you said were Mr. ZWICK. $400 million. Mr. Bow. Only $400 million are reflected in the $198.7 billion? Mr. Bow. The postal rate increase is $500-and-some million in itself. Secretary BARR. By user charges, what we are referring to are the gasoline tax, the diesel fuel tax and the truck use tax. The other big one is taxes on passenger tickets on aircraft. Mr. CEDERBERG. You have projected a slower economic growth rate, and that is why there is not as much increase? Secretary BARR. That is part of the reason; yes, sir, plus the retroactivity of the 1968 surcharge which increased fiscal year 1969 receipts. Mr. MAHON. Mr. Lipscomb had a question. SUPPLEMENTAL FOR SOUTHEAST ASIA FOR 1969 Mr. LIPSCOMB. Mr. Director, what is the total new obligational authority for Vietnam and Southeast Asia area in the supplemental which will be coming up? Mr. ZwICK. For Southeast Asia it is $1.632 billion. Mr. LIPSCOMB. Have you an estimate of the expenditures proposed for 1969 fiscal year? Mr. ZWICK. For Vietnam, Southeast Asia, Department of Defense, $28.8 billion. Out of this supplemental? Mr. LIPSCOMB. Yes. 24-475 0-89- -6 Mr. ZWICK. No. I can get you one, but I do not have one. Mr. LIPSCOMB. Would you say at this time that all of the expenditures estimated for Southeast Asia are included in the fiscal year 1969 budget? Mr. ZWICK. For fiscal 1969 ? Mr. LIPSCOMB. Yes. Mr. ZWICK. Yes. Mr. LIPSCOMB. Some of the expenditures for fiscal year 1969 supplemental will be spent in fiscal year 1970? Have you included those expenditures in the budget estimate? Mr. ZWICK. Yes. Mr. LIPSCOMB. In what amount? Mr. ZWICK. The $1.6 billion supplemental for fiscal 1969 will be spent in 1969, 1970, and 1971. The appropriate estimates have been included in the total expenditure estimate for fiscal 1969, and the expenditure estimate for fiscal 1970. Mr. Cohn has a breakdown of the figures. Mr. COHN. Of the $1.632 billion Southeast Asia supplemental, $1.061 billion will be spent in 1969; and $550-odd million, in 1970. Mr. ZWICK. And a little left over Mr. СOHN. A little more in 1971. Mr. ZwICK. $1 billion of the total supplemental request will be spent in 1969. Mr. LIPSCOMB. In arriving at your proposed surplus for 1970, you can assure us that you have taken those expenditures into consideration? Mr. ZWICK. That is right. Mr. COHN. In 1969 we have put a little over a billion dollars of expenditures from this supplemental in computing the $2.4 billion surplus. In 1970, we put in $550 million in computing the 1970 surplus. Mr. LIPSCOMB. Thank you very much. Mr. MAHON. Mr. Boland. MEDICAID INCREASE Mr. BOLAND. The budget projects $7.4 billion for public assistance grants, including medicaid, for 1970. This is an increase of $1.1 billion, of which $660 million of the increase is due to the cost of the medicaid program. Mr. ZWICK. That is right. Mr. BOLAND. Does the budget see this as a real problem? Does the budget see this as an escalating problem with respect to medicaid in the years to come? Mr. ZwICK. There are two sorts of problems here. If Mr. Laird were here, I am sure he would have talked about this subject, also. One is the estimating problem and the other is just the resource requirements for these programs. On the estimating problem, the record, of course, is that we have done a poor job of estimating spending for medicaid in the past. In fact, because of that experience, President Johnson last February, when the Governors were here, recommended that HEW, Bureau of the Budget, State budget officers, and health officials, get together and work out a new procedure to obtain better estimates. They have done that. However, it will be a year before the new system is implemented. What we did for the budget this year, since our track record has not been good up to date, was to go to the States in December and ask, "What is your best estimate now?" and add them up. That is the estimate that you will find. We will still have a problem in terms of a completely accurate estimate. I think that is a genuine problem of uncertainty. It is a very difficult problem. The second issue is where are we to go in the whole income maintenance area? That is a very fundamental question. We took the tack that this was something, certainly, for the outgoing administration not to change in a major way. President Johnson appointed the so-called Heinemann Commission a year ago and asked it to report in 2 years so it would not get caught in the political changeover. So, the whole question of income maintenance, the role of the Federal Government and of the State and local governments, is a very critical one, and it is a growing area and needs clearly to be studied. Mr. BOLAND. The real problem is that the standards in the States vary to an appreciable degree. The real problem is due in many States to the States themselves, and not so much the Federal Government. The States are establishing the standards for this type of assistance-medicaid assistance. Is this true? Mr. ZwICK. That is true. Most of the States now have medicaid, but you find very wide disparities among States. Therefore, you find significant differences in the medicaid funds being allocated to the States. CHANGE OF FISCAL YEAR TO CALENDAR YEAR BASIS Mr. PRYOR. As outgoing Budget Director, have you any observations or recommendations concerning the idea that we coincide our fiscal year with our calendar year? Have you any statement along that line? Mr. ZWICK. I do this with great trepidation. I am a heretic in the Budget Bureau. I am leaving in 4 days, so I can state that my own personal opinion is that we ought to look seriously at this possibility. reach that conclusion for the following reason. My impression is that Congress is staying in session longer and longer and, as they stay in session longer, the appropriation bills are later and later, and we are operating essentially on a continuing resolution. If we went on a calendar year basis, every 2 years at least, the Congress would act on time. Before you do that, I think there is a very serious problem, and that is the reason I am not more positive. I would like to look very seriously at how that change would affect State and local financing, school districts, and so on. Eighteen percent of the revenue of State and local governments now comes from the Federal budget, and the States and local governments are really sitting out there at the end of this line, trying to anticipate what will happen at the Federal level. I think the time to reconsider the question of the fiscal year is here. What the right answer is, I do not know. INTERNATIONAL SHORT-TERM CREDIT AVAILABILITIES Mr. WYMAN. In the chart at page 18, indicating the resources the incoming Secretary of the Treasury might have available to meet a fiscal crisis, you show $10.5 billion in a "swap reserve." Who are the debtors in that table? Secretary BARR. Let me tell you how this works, Mr. Wyman. These are short-term credit arrangements among countries. For instance, we have a billion dollar swap line with the Federal Republic of Germany. These are normally 90-day credit arrangements. Say we need deutsche marks. The Federal Reserve Bank just writes a check on the Bundesbank for up to a billion dollars worth of deutsche marks. We have an automatic right. On the other hand, let us say the Bundesbank needs dollars. It has the right to write checks up to a billion dollars on our facilities in the Federal Reserve Bank of New York. The way it stands at the moment over $10 billion, these credit facilities are not being used by the United States. In other words, if Secretary-designate Kennedy needs dollars, lira, yen, pounds, or deutsche marks, he has credit facilities available to him for periods of a minimum of 90 days, and longer periods up to a year, automatically, up to $10 billion. That is the way it works. Mr. WYMAN. For the purpose of meeting a crisis then this is really short-term money? Secretary BARR. Yes, but it has been very valuable. For instance, I could tell you one story. We have talked a lot in this committee over the years about France. The French would never want us to enter into a swap arrangement of more than $100 million. In other words, we could not draw on them for more than $100 million, and they could not draw on us for more than $100 million. After the events of last May, they came to us and asked us to increase the swap line, because they needed dollars desperately, from $100 million to $700 million. Then later they came in and asked to increase it to where it should be, a billion dollars. France is roughly equivalent to West Germany, and that is where it should be. We were delighted to comply, and I must say generously, after some of the pounding we took, was very pleasant, indeed. It behooves a great government. BUDGET ESTIMATES AND RESULTS, 1960 TO PRESENT Mr. MICHEL. Could we have supplied for the record the official budget estimates of expenditures and revenues and the actual results for the years 1960 up to the present date? |