Authorizations take various forms. Sometimes they name a maximum amount of budget authority that can be enacted each year; sometimes they name a maximum amount that can be made available over a period of years; sometimes they contain a fixed terminal date for an activity without naming dollar amounts. Many of the more recent authorizations contain dollar limitations. Most of the older authorizations name no amounts and no expiration dates. Where dollar limitations are established in authorizations, they serve as ceilings on the amounts of budget authority that may be made available, under the rules of Congress, through appropriations or other financing techniques. The Appropriations Committees and the Congress, in acting on requests for budget authority, are not bound to provide the same amount as may be specified in the substantive authorizations.

Authorizations for programs generally are enacted without explicit consideration of overall fiscal policy or of possible constraints on the allocation of resources. Action on appropriations for authorized programs, on the other hand, must take into account current overall fiscal policy and financing constraints. In addition, the allocation of available resources must give due regard to priorities of competing programs. These kinds of factors contribute to the situation where the financing provided for a given program usually is less than amounts authorized.

There is a second reason for differences between authorizations and budget authority. Some authorizations are enacted in a lump sum without regard to fiscal year, while the related budget authority may be spread over a period of years. For example, authorizations for public works projects in the field of water resources usually cover the total estimated cost of the project. Generally, appropriations for such projects are made on an incremental basis to pay contractor expected earnings during the year. The financing for a large project thus may be spread over a 5 to 10 year period. Furthermore, in some cases, authorized projects may never be initiated due to lack of resources or change in conditions after the authorization was enacted.

Within the executive branch, amounts of budget authority made available for authorized programs are apportioned by the Director of the Bureau of the Budget, and allotted by agency heads to program managers to permit them to incur obligations and spend funds. Amounts apportioned may not exceed the budget authority made available through appropriations or other financing techniques; and amounts allotted and spent may not exceed apportionments. In either case, they may be less.

Within the budget process, therefore, the authorization, financing, and spending for a given program generally will vary at a specified point in time. For a water resources public works project for example, the authorization almost invariably will be greater than the initial appropriation; depending upon fiscal and program considerations, the apportionment may be less than the amount appropriated; and constraints in work programing and spending within the responsible agency may result in an allotment and outlays that are less than the amount apportioned. It is apparent, therefore, that there can be different answers to a question concerning amounts authorized, available, and spent for a given program, depending on how and when the question is asked.

FINANCIAL ASSET SALES

Mr. MAHON. Mr. Mayo, in the 1970 budget, you had figured on sales of certain Federal loan papers.

Mr. MAYO. Yes.

Mr. MAHON. There has been some considerable slippage because of the money market situation.

Mr. MAYO. That is correct.

Mr. MAHON. What are you assuming in the 1971 budget along this line?

Mr. MAYO. We have moved many of the sales, Mr. Chairman, into 1971 because of adverse money market conditions in the present year. I will be glad to supply the precise figures that tie to the budget for the record.

Mr. MAHON. Do you think these figures will be reasonably valid? Mr. MAYO. We are in high hopes that the money markets will be in much better shape in 1971 than they are this year.

Mr. MAHON. Mr. Mayo, "relatively uncontrollable" is a term and a fact of budgets and appropriations that has caused us some concern and continues to. It is not a new problem, but it is one that is growing. You address this in your charts and in the budget. You say it has caused you to breach the spending ceiling.

You indicate that on an outlay basis, 69 percent of the $200.8 billion for 1971 is relatively uncontrollable. I believe that about one-third of that 69 percent, about $43 billion-is "from prior year contracts and obligations.”

Obviously, when an obligation becomes due and payable, the expenditure or outlay is at that point, "relatively uncontrollable." But maybe a good deal of the $43 billion relates to obligations that were made under appropriations that in the first instance were relatively controllable not the other way around. Would that be a fair Assumption !

Mr. Mora Of the $138.4 billion shown as "relatively uncontrollable outlays under present law" in the 1971 budo-n 44 $43.3 billion31 percent of the total-represents outlays from prior year contracts and obligations. All of this $4.3 billion resalts from appropriations what won in the fix mean r'anyeir controllable. However, anar the Gerveemment has signed a contract or obligated funds for any DU TOURA, DATE is must be ronde as the terms of the commitments are

M: MAHON. They was prohrbh no good way the aồm nistration and probable ng vịt the Congress, varig, hare expered that sort of

increase over the estimates in these uncontrollables. Interest on the debt, for instance, went up more than had been anticipated.

Mr. MAYO. We have detail we can read to you or supply for the record.

Mr. MAHON. Supply that for the record.

Mr. MAYO. Basically the $4.3 billion, just taking four items, social security, medicare, and other social insurance trust funds up $1.7 billion, interest $1.4 billion, the sale of financial assets that you are referring to, $0.9 billion, and the lease of lands on the Outer Continental Shelf $0.3 billion.

They add to the $4.3 billion overage on the uncontrollables designated in Public Law 91-47.

DIMINISHING 1970 BUDGET SURPLUS

Mr. MAHON. You projected in April of last year, for fiscal 1970, a surplus of $5.8 billion.

Now you come back and project not $5.8 billion but $1.5 billion. We understand the reasons for this. If there was a miscalculation or a misestimate last year, how much more confident can we be this year than we were last year that a similar situation would not occur in respect to fiscal 1971?

The point is that uncontrollables did unhorse us last year. I think if the uncontrollables had not gone up so much, we would not be in the difficult situation we are in now. Do you agree?

Mr. MAYO. I agree, Mr. Chairman.

POTENTIAL EFFECT OF UNCONTROLLABLES ON 1971 BUDGET

Mr. MAHON. Now, what can we expect in fiscal 1971? Do you think anything like this is likely to happen, and if not, why not?

Mr. MAYO. There is always a chance that it could happen, sir. If you and I had been sitting here a year ago, we would have, I think, probably agreed that it is very unlikely that interest rates would have gone up to what you and I can read in the newspaper today. That acounts for one-third of this increase of $4.3 billion. I think it unlikely, as a personal opinion, that we would have any such overage in interest in the 1971 estimate, for example.

As far as the sale of financial assets is concerned, as I indicated, I think this ties in again with the interest problem. These are both the products of the very inflation that we not only seek to get under control, but I sincerely believe we are getting under control, $300 million of the $4.3 billion increase was the result of lower receipts from leases of land on the Outer Continental Shelf. That was a reduction of $600 million receipts to $300 million. Your margin of losing much more there is pretty slim.

We are pretty much to rockbottom. The big question still relates to our ability to estimate successfully medicare and other social insurance trust funds. Medicare estimates have always, shall we say, depressed us when they come through higher than expected. I think we have learned enough more about it this year to at least make a better estimate. I cannot promise you that it will be anywhere near a perfect estimate, but I think we do have the benefit of another year's experience. Regardless of administration, the early estimates of medicare just did not have much basis on which to be made.

Mr. MAHON. They have never been very reliable?

Mr. MAYO. They have been very poor.

Mr. MAHON. Are they going to be reliable in 1971?

Mr. MAYO. We have more experience now. We are a year smarter than before. We hope we have gotten better figures out of the States. They know a little more about what they are doing. Therefore I am confident that the estimate is better. I cannot guarantee that it will not run over. It might run under. Then you and I might go home happy.

COST-OF-LIVING INCREASES

Mr. MAHON. Mr. McCracken, how much did the cost of living increase from January 1 to December 31, 1969?

Mr. MCCRACKEN. I can give you that. The Consumer Price Index in December 1968 was 123.7, and in December 1969, it was 131.3 (195759-100). That is 7.6 points, or an increase of 6.1 percent.

Mr. MAHON. This, then, was a considerable increase. You think it will be about half that much in fiscal 1971.

Mr. MCCRACKEN. I hope it will be not over half that.

In any case, it is certainly going to be a smaller increase.

Mr. JONAS. Right at this point, will you list the items that currently go into the consumer index?

Mr. MCCRACKEN. I would be very glad to.

(Note: See subsequent discussion under "Consumer Price Index Increases," p. 99.)

PURCHASING POWER OF THE DOLLAR

Mr. MAHON. Mr. Secretary, we talk about the value of the dollar. One reason why we do not want to overspend is that when we overspend the dollar does not buy as much as it should.

Secretary KENNEDY. It depreciates in value.

Mr. MAHON. If we look back to 1939, the pre-World War II period, and if we consider the dollar being worth 100 cents then, what is the dollar presently worth? I think it is aproximately 37 cents, but I want to have the exact figure supplied for the record.

Secretary KENNEDY. Yes, sir.

(The information follows:)

Purchasing power of the dollar (1939=$1,000)

Source: Bureau of Labor Statistics, U.S. Department of Labor.

Mr. MAHON. Mr. McCracken, you say that the increase in the price index was about 6 percent in the last 12 months.

Mr. MCCRACKEN. That is right.

Mr. MAHON. Does that means that the dollar generally speaking lost 6 percent of its value?

it.

Mr. MCCRACKEN. Yes, that would be an alternative way of putting

Mr. MAHON. If the dollar was worth 40 cents and it lost 6 percent

Mr. MAYO. About two and a half cents more.

Mr. MAHON. About two and a half cents is what the dollar lost last year. Is that a fair statement?

Mr. MCCRACKEN. Of its remaining value relative to 1940. I think the easiest way is to say that the dollar last year will now buy roughly 94 cents worth of stuff in terms of last year's prices.

Mr. MAHON. I have a series of questions, Dr. McCracken, I would like to ask you.

REAL GROWTH IN GNP

Mr. MAHON. You estimate GNP "money" growth in calendar 1970 at 5.5 percent above 1969, compared to a growth in calendar 1969