This is a prudent budget. It is as lean as we could make it. We might have produced a budget of under $200 billion for public relations effect. We chose instead to present a responsible budget.

As Secretary Kennedy pointed out in his statement, the budget surplus will be achieved despite an $8.5 billion loss of receipts resulting from the termination of the income tax surcharge. Other tax rate changes under existing law will result in a loss of about $0.1 billion. These losses will be offset by $9.7 billion of higher receipts from economic growth and accelerated collections of income and excise taxes, and proposed legislation will produce an additional $1.6 billion. Thus, total receipts will increase by $2.7 billion.

Because Secretary Kennedy has already discussed the receipts side of the budget in some detail, my statement will deal largely with outlays and budget authority.

BUDGET OUTLAYS

The 1.5 percent increase in budget outlays in fiscal year 1971 is less than the expected increase in prices over the same period. This means that in real terms outlays will actually decline.

This chart contrasts the rate of change in the consumer price index with the rate of change in budget outlays. Precisely because prices have been increasing at such a rapid rate-5.5 percent (June 1968 to June 1969) and 6.1 percent (December 1968 to December 1969)—it is imperative to hold Federal expenditures to as low a level as possible in the coming year. This is what we have done. Changes in budget outlays

The total increase in budget outlays in 1971 is $2.9 billion. More than double that amount-in fact, $6.8 billion-is accounted for solely by increased public assistance and social security benefits, of which $2.8 billion is for the 7 additional months the recently enacted 15 percent increase in social security benefits will be in effect.

We know that the needs of the Nation are many. We also know that we cannot rely entirely upon the availability of increased tax receipts to finance new initiatives. Indeed, new initiatives-as we view them-include tax reduction and debt reduction as well as new or expanded programs.

Guided by the principle that we cannot rely entirely on increased tax receipts to pay for new programs, we examined the base of the budget along with proposed additions to the base. The results of our philosophy and our efforts to find ways to reduce the base are reflected in this chart.

Defense and space programs are estimated to decrease by $6.3 billion in 1971, and by $8.5 billion from 1969 levels.

A net decrease in other programs of $800 million, was made, even after allowance of $1.4 billion for a pay increase for Federal employees to move toward comparability with private industry.

New initiatives of $3.2 billion are proposed. Some of these were announced last year; others are new in this budget.

We believe in a strong national defense, and we are committed to maintaining one. This position is not inconsistent with a comprehensive reexamination of our defense needs-and a consequent restructuring of our defense programs. The reductions in defense programs in 1971 were based on such a reexamination. The reduction in outlays for space research and technology reflect both hard choices to defer or eliminate programs and completion of the expensive development phase of the lunar landing program.

Our examination of the budget base also produced the list of proposed terminations, restructuring, and reductions of programs that, however worthy, are no longer of high enough priority to justify the burden they put on the taxpayer. These proposals are itemized on pages 52 through 56 of the budget document. The largest items are shown in the following table:

Program terminations, restructuring, and reductions—fiscal year 1971 [In millions of dollars]

Sale of excess strategic and critical materials now stockpiled___. Education aid to federally affected areas more closely related to need___

(751)

(196)

Reforms in veterans benefits..

(106)

436

Program reductions__.

Postponement of additional procurement (launch vehicles and spacecraft) and lunar flight schedule._.

(402)

Total, program terminations, restructuring, and reductions_ 2, 132 These reductions will help pay for proposed new initiatives of $3.2 billion, including long-overdue reforms and improvements in several Government programs, such as:

The family assistance program, supplemented by the food stamp program;
Revenue sharing with State and local governments;

Programs to improve the quality of our physical environment;

A vigorous attack on crime;

Modernization of the Nation's system of airports and airways, and

An expanded rural housing program to help families with low-to-moderate incomes obtain adequate housing.

Changing priorities

The 1971 budget provides for a considerable shift in priorities. For the first time in two full decades, the Federal Government plans to spend more on human resources programs than on national defense. This shift was, as the chart shows, gradual throughout the 1960's, with defense-which was 62 percent in 1953dropping from 50 percent to 44 percent between 1960 and 1969 and human resources programs rising from 28 percent to about 34% percent. The shift from 1969 to 1971 will be as great as during the preceding 9 years. Defense outlays will drop to slightly over 361⁄2 percent in 1971, while outlays for human resources programs will rise to 41 percent.

Two of the programs receiving special emphasis in the 1971 budget are: improvement of the quality of the environment and crime reduction. The chart on major environmental quality programs shows Federal outlays for these programs for 1961 and 1969-71. Outlays in 1971 are expected to be $471 million higher than in 1969 an increase of 73 percent-as we step up our efforts to control air and water pollution and develop our recreational resources. Under the program proposed in the budget, 1972 outlays will reach $1.5 billion.

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