The above figures suggest that for the next 5 years-and probably much longer-the old-age and survivors, and disability trust funds will operate with larger increasing surpluses. A larger part of these surpluses will result from receipts that came from the general fund of the Treasury, for interest on trustfund-held securities and other Federal Government payments to those trust funds. Thus, a significant part of the trust fund surpluses derive from outlays of Federal funds.

For the foreseeable future, the OASI trust fund surplus looms so large that the trust fund totals will show a significant-although probably smallersurplus. By the midseventies and later, the highway trust fund and the health insurance trust funds are likely to operate as close to a balance or even with a relatively small deficit, probably causing the total trust fund surplus to be somewhat less than that shown for the OASI fund itself.

Since tax collections-in one way or another-are the basic source of trust fund receipts, fiscal policy will have to reflect the burden of these (as well as other) taxes in relation to trust fund (as well as other) Government payments. The unified budget concept automatically makes this calculation and comparison.

Mr. MAHON. As I now understand it, whether you considered the trust funds or not prior to about 1967 was not so important with regard to the surplus issue. It was not a very large item. But it has turned out to be a large item in the last 2 or 3 years.

DEFICITS UNDER ADMINISTRATIVE AND UNIFIED BUDGETS

It was brought out in the testimony this morning the Government has been operating at a deficit for many years. I wish you would provide information showing how many years the Government has been in the black since 1930.

Mr. MAYO. Yes, sir.

Mr. MAHON. You have to differentiate as to whether you are talking about the unified budget or the administrative budget which was in operation prior to fiscal 1969.

On page 594 of the budget you show the unified budget calculations since fiscal 1954. Of course, we did not have the unified budget in operation during 1954. So I wish you would give us a table showing what the administrative budget was during that period.

The trust funds would have had a relatively unimportant relation to these figures, I would think, prior to about 1967 or 1968.

(The information follows:)

ADMINISTRATIVE BUDGET/FEDERAL FUND SURPLUS OR DEFICIT, 1930 TO 1971

1 1968 through 1971 unified budget, Federal funds only. The surplus or deficit (in millions of dollars) based on the unified budget for these 4 years is as follows:

Mr. MAHON. Now I would like to ask you a few questions in regard to the interest on the debt. What is the present estimate as to what the interest will be on the debt for fiscal 1970?

Mr. MAYO. The exact figure for fiscal year 1970 is $18,800 million. Mr. MAHON. Will you tell us what the increase is over the April 15, 1969 estimate for fiscal year 1970, and over the fiscal year 1969 figure? (The information follows:)

The April 15, 1969, estimate for fiscal year 1970 was $17,300 million. The increase from the April estimate to the current estimate for fiscal year 1970 is $1,500 million. It is an increase of $2.2 billion over fiscal year 1969.

Mr. MAHON. How much is it estimated to go up in fiscal year 1971? Mr. MAYO. $200 million.

Mr. MAHON. Incidentally a total for fiscal year 1971 of $17.8 billion is shown in some places in the budget, and $19 billion in others. In one place in the budget you see a $200 million increase; in another it shows no increase. Would you please clarify this?

Mr. MAYO. $17.8 billion is a net figure for total interest paid less interest receipts. Pages 180-181 of the budget document carries a full discussion.

Mr. MAHON. About what percent of the debt is in short term bills and notes?

Mr. MAYO. Fifty percent of the privately held marketable debt outstanding at the end of January 1970 will mature within 1 year.

Mr. MAHON. About how much of the debt is currently refinanced within a fiscal year?

Mr. MAYO. Excluding bills which are routinely refinanced, $23.7 billion of the outstanding marketable public debt held by private investors will mature in fiscal 1971; if the holdings of the Government investment accounts and the Federal Reserve banks are included, the figure is $29.4 billion.

Mr. MAHON. What are your most recent interest rates?

Mr. MAYO. The interest rates offered in the recently completed refunding operation are 814 percent on a 12-year note, 8% percent on a 32-year note, and 8 percent on a 7-year note.

AVERAGE MATURITY

Mr. MAHON. What is the average "age" or maturity of the debt, and is it shortening in relation to a year or two or so ago?

Mr. MAYO. The average maturity of the privately held marketable debt at selected dates over the past several years is as follows:

Mr. MAHON. What is the average computed interest rate on the whole debt as of some recent date-and how would that compare with recent years?

Mr. MAYO. There follows a table which shows the computed interest rate for each year since 1916 and for each month of this fiscal year.

AMOUNT OF INTEREST-BEARING DEBT OUTSTANDING, THE COMPUTED ANNUAL INTEREST CHARGE AND THE COMPUTED RATE OF INTEREST AT THE END OF EACH FISCAL YEAR FROM 1916 TO 1937 ON BASIS OF MONTHLY PUBLIC DEBT STATEMENT, AND FROM END OF THE FISCAL YEAR 1938 TO DATE ON BASIS OF DAILY TREASURY STATEMENT

Note: For monthly figures from June 1916 to June 1929 see report of the Secretary of the Treasury for 1929 p. 509; from July 1929 to June 1936 see report of the Secretary of the Treasury for 1936 pp. 442 and 443. For monthly revised figures covering subsequent fiscal years see reports of the Secretary of the Treasury for the respective years. "Interestbearing Debt" figures include discount on Treasury bills amount being deducted prior to calculating the average interest

rate.

Source: Treasury Department, Fiscal Service, Bureau of Accounts.

INTEREST RATES FOR SPECIAL SECURITIES

Mr. MAHON. What rate, or rates, are paid on the special securities issued to cover borrowings from the trust funds? Are those rates set, or prescribed, by law, or just what is the situation?

Mr. MAYO. The formula governing the rate on special issues is specified by law in the case of most of the major trust funds. The statute governing the Federal Old-Age and Survivors' Insurance Trust Fund, which is the pattern for most of the other funds, reads as follows:

Such obligations issued for purchase by the Trust Funds shall have maturities fixed with due regard for the needs of the Trust Funds and shall bear interest at a rate equal to the average market yield (computed by the Managing Trustee on the basis of market quotations as of the end of the calendar month next preceding the date of such issue) on all marketable interest-bearing obligations of the United States then forming a part of the public debt which are not due or callable until after the expiration of four years from the end of such calendar month; except that where such average market yield is not a multiple of one-eighth of 1 per centum, the rate of interest of such obligations shall be the multiple of one-eighth of 1 per centum nearest such market yield.

This formula produces a rate of 77% percent for special obligations issued during the month of February 1970.

DEBT CEILING

Mr. MAHON. As I understand it, we have to increase the debt ceiling by $8 or $9 billion under the 1971 budget plans. When will that probbe submitted and when will action probably be required?

Secretary KENNEDY. I think the answer to that will be sometime perhaps in May.

We will need the increase by the end of the fiscal year. We would like to see how the expenditure and revenue figures look over the next few months before we pick a number.

Mr. MAHON. I would like to discuss with you at this point in more detail the precariously balanced budget which has been presented to us. The questions involved here have been covered in a general way, but I would like to have a little more specific answer to some of them.

FISCAL ENVIRONMENT FORECAST, 1971-75

Mr. MAHON. I want to commend you and Mr. Mayo for your discussion in the budget of the fiscal environment during the coming 5 years. You have, I think, performed a service in calling attention to this problem. I assume you, Mr. Secretary, and you, Dr. McCracken, also had a hand in it. I realize it is rough and arbitrary. It is also sobering. It seems to say that unless the people are willing to pay increased tax rates, there won't be much room for a lot of new programs within a prudent budget policy. I think it would be useful to insert pages 57 to 61 of the budget at this point.

(The information follows:)

THE LONG-RANGE OUTLOOK

The President's ability to control budget decisions is limited by the long-range impact of past decisions as to the nature and dimensions of resource allocation. Budget control can be improved by projecting available resources and potential claims on them. Such projections require assumptions about the future course of economic, legislative, international, and other events and are necessarily rough and arbitrary. Nevertheless, they should be undertaken to present a tentative indication of our future fiscal environment.

This portion of the budget presents a projection that sets forth, for the Federal sector of the economy, one possible combination of available resources and anticipated claims during the period fiscal years 1971-1975. The analysis is presented in current dollars, and is on a fiscal year, unified-budget basis. The major conclusion of the analysis is that projected claims leave only modest resources for future initiatives, including tax and debt reduction as well as new expenditure programs, through 1975.

Highlights.—Projections of Federal receipts and outlays through 1975 indicate: Federal receipts under present law and legislation proposed in this budget gross national product-GNP-is likely to be slightly lower in 1975 than in 1970.

Estimated increases in existing and already proposed Federal programs will preempt almost 70 percent of the $67 billion increase in revenues expected between 1970 and 1975.

Funds to cover new initiatives in addition to those already reflected in this budget are projected at $22 billion in 1975. These are the funds that will be available to cover the 1975 costs of all new initiatives that are introduced subsequent to this budget.

This $22 billion is equal to approximately 1.5 percent of the gross national product estimated for 1975. On the basis of present estimates, little, if any, margin is available in 1972 for new initiatives.

The shape of the future. The following discussion is concerned with projections of future revenues and outlays under current and proposed legislation, as well as the assumptions underlying the projections.

The Annual Report of the Council of Economic Advisers describes in more detail the economic assumptions and growth projection as well as the allocation of output among consumption, investment, and Government. The discussion of Federal Government finances, presented below, is consistent with the projection in the Council report.