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out it. I am curious to know who the experts are in OMB who erride the people who really know the need and accomplishments these more or less specialized activities.

OVERVIEW OF THE BUDGET

Mr. Asн. One of the points that the President made in his statement the budget may shed some light on the point that you make, and at is that sometimes there are those who have their own interests in ntinuing particular programs and who don't have the perspective at the President has on the total budget. Just as a congressional mmittee is not in a position to consider the whole budget when it kes up an individual matter, so a department in the executive anch lacks the opportunity to view the whole of the budget. Theree, it is necessary at some point to have an overview in the executive anch, just as we are here discussing the need for an overview by the

ngress.

Senator BELLMON. Mr. Ash, what troubles me about this whole siness is that in theory the Congress has the same level of intelligence the executive. Maybe it is not true, but I don't concede that. Yet go ahead and set up something, such as the REAP program, which > were convinced was doing a good job. Now if the President feels should cut spending by 3 or 5 percent, if he wants to cut back on EAP by the same amount he cut back on Defense or Interior, you uld not get a complaint.

I am convinced when someone comes along and says, "Here is a ogram I don't think is serving any purpose any longer," so they ke it clear out of action. To me, I think there is something haywire re. Either we don't need this committee, we don't need the Congress, we ought to have some voice in the decisions that totally eliminate ograms that are doing a very fine service.

Mr. AsH. I think we have had today a very helpful discussion ich may lead the Congress to keep the total in mind when dealing th individual programs.

As to the President's decisions on specific programs, had he taken out Labor-HEW not one-tenth of 1 percent but 5 percent rather than tting the other programs as he did, my guess is that we would be king about a different set of particular programs and particular ues, and maybe with even more people concerned, involved, and orried that the priorities weren't properly alined. It was necessary r the President to make his best judgments under the circumstances. ad there not been the need to do so, to have come to the rescue, effect, I am sure that quite different outcomes might have prevailed REAP or other programs. But at some point the decisions had to made, and the President made them.

Senator BELLMON. If I understood what you said, the President as afraid to tackle HEW because he was going to get so much heat at he could not stand it so he tackled the weak ones where there ere not enough people around to really bear down on him. Mr. Asн. I did not say he was afraid.

Senator BELLMON. You said if he had taken 5 percent out of HEW at he would have had a lot of flack about it.

Mr. ASH. Sure. But the point was, he would take a lot of flak whater programs were cut. There are 900,000 recipients on the REAP ogram, too.

Senator BELLMON. How many recipients in the HEW program? Mr. Asн. I am sure there are more than that. The question is not one of fear, but one of making the best judgement

Senator BELLMON. I think you should let Congress make that judgment.

Mr. АSH. We hope this year that judgment can be made in the Congress, starting with the establishment of a total, and proceeding within that total to set the priorities of the Congress. As these priorities go through the normal process of interaction with the President's own views, that becomes the program for 1974. But we must all remember the position of a few months ago, when the Congress adjourned on October 18 after setting priorities which would have raised outlays to $261 billion for this year.

PROGRAM REDUCTIONS

The President was confronted with the need to act on that total and reduce it, or have a fiscal calamity. He did act on it according to his best judgment. Now he is being criticized. It is almost as if the fire department had put out a fire and saved a house, and after it was over, the complaint is that there was too much water damage, and besides the fire truck crossed a county line in doing it. The President had to run and put out the fire, and I am sure he realized that in the process of doing it some programs had to give.

The alternative was worse. That is really what we are talking about. The alternative was renewed inflation or higher taxes, or both. Senator BELLMON. That was not the only alternative. The President could have made some proportionate reductions in all these appropriations. If you look at the limit on the spending bill, that is what the Senate passed, that is what they said

Mr. Asн. That is right, but the House did not agree with that method of doing it. As a result, there was no agreement by the Congress as to which method would be employed. The President believed, and I am sure that he continues to believe, and I certainly do, that the wisest decisions can be made by looking at each program, assessing its value rather than making it an arbitrary cut on all regardless of their values. An across-the-board, flat rate has the advantage of being simpler, but it does not address the very real problem of determining individual program needs.

Senator BELLMON. You make me wonder whether or not we really need a Congress. If the President, or OMB, or somebody has so much better wisdom as to what programs we need why do we bother out here to go through all the hearings and listen to all the testimony, and decide that these programs are worthy and that they should be funded at a certain level? If you folks down there are going to impose your judgment on ours I don't know why the Congress goes through all the motions here. Is this going to be a continuing process? If we write a program that OMB decides ought to be ended we have just wasted out time?

REQUIREMENT FOR EXECUTIVE CONGRESSIONAL COOPERATION

Mr. Asн. As we discussed at length this morning, if we get right down to the fundamentals here, we probably will find that everything

are talking about is really reduced to a few, relatively simple blems. If Congress does start by establishing a total outlay level the year, and takes actions within it, I think all of this kind of cussion won't be in evidence next year.

We invite, indeed we implore, the Congress to discipline itself, to ablish a total ceiling, and act within it. Then these problems will tually disappear.

Senator BELLMON. You are saying then if Congress sets a spending itation of something close to the total budget which the President s recommended and appropriates within that ceiling, even though sums may be different than those the President has recommended, at OMB will spend the money we appropriate, without withholding, hout cutting back, without stopping programs?

Mr. Asн. When we say appropriate within it, we mean appropriate such a way that the outlays will fall within the total. Assuming at would be done, the President would then apportion funds propy, in accordance with the need to spend money effectively. It is obligation of the President, assisted by OMB, to spend money ciently and effectively. But that is quite different from what we talking about today. We are not talking about reserves as such. ere is less being reserved now, as a percent of the total annual lays, than there has been in any year back to 1960, except for 1964. hat we have now is still a relatively low level of reserves compared to process that normally goes on, even including some of these very usual items.

Senator BELLMON. I don't believe that the Congress is so worked about the withholding. This, as you say, has been a historical ocess. What the Congress is concerned about, as I interpret our ling, is that OMB decides to totally eliminate certain programs. se REAP as an example.

Mr. Chairman, I have no further questions.

QUESTIONS SUBMITTED BY CHAIRMAN MCCLELLAN

Chairman MCCLELLAN. All right.

The Chair does have a few, but he is going to exercise his privilege submitting them in writing and let you respond to them, you and Secretary. There are probably a half dozen I will ask, but I won't x this afternoon. Some of these you may want to give a little study

yway.

The questions and answers follow:]

BILLS REQUIRING AUTHORIZING LEGISLATION

Chairman MCCLELLAN. How much of the $172 billion budget authority which Committee on Appropriations is being asked to provide in fiscal 1974 approations bills will first require authorizing legislation?

My understanding is that approximately 45-50 billion will require authorizing slation before the Appropriations Committee can act.

Mr. Аsн. Of the total $171.7 budget authority requested for appropriations, ut $45.8 billion requires authorization for new programs or extension of going programs.

UNEMPLOYMENT RATE

Chairman MCCLELLAN. What uuemployment rate must be achieved under eipt projections in 1974's "full employment" budget?

s this figure realistic considering last year's full employment budget experience? Mr. Asн. The receipt estimates presented in the full-employment budget are se receipts that are estimated to occur if the economy were at full employment.

Full employment is conventionally defined as a 4.0% unemployment rate. This convention was adopted in the early 1960's, when the actual unemployment rate was in the neighborhood of 7%, and 4% was agreed upon as an interim goal for the economy.

Since full-employment receipts depend on the hypothetical unemployment rate of 4% instead of the actual unemployment rate, no particular actual unemployment rate must be achieved under receipt projections in the 1974 full-employment budget. As implied by the fact that full-employment receipts are estimated to exceed budget receipts by $12 billion in 1974, the expected unemployment rate for 1974 is more than 4.0%.

The unemployment rate in fiscal year 1972 averaged 5.9%. This experience does not provide much evidence to judge the realism of the conventional definition of 4% unemployment as "full employment." The economy has achieved a 4% rate during peacetime years as well as during war years, which supports the continued use of this rate in the definition of full employment.

TRANSFER OF FUNDS

Chairman MCCLELLAN. On page 1074 of the appendix to the budget, unde General Provisions, I notice that you have recommended for the Second Supplemental Appropriations Bill for fiscal year 1973, language to transfer appropriations from one appropriation fund or authorization to another for the costs of the increased pay which went into effect January 1, 1973. If Congress grants you this provision in the bill, would it be possible for you to transfer funds which you have impounded, to pay for increased salary costs in other units or agencies within a department?

Mr. Asн. Yes, it would be possible to transfer funds for this purpose.

MANDATORY SPENDING

Chairman MCCLELLAN. On page 8 of the President's Message in connection with the January budget in discussing "Reforming Congressional Budget Procedures," the President refers to program authorizations "that require mandatory spending, whether or not it is desirable in the light of priorities.” (Third paragraph)

What is meant by "programs that require mandatory spending"?

How do you reconcile such mandatory spending with impoundment procedures? Mr. Asн. By "program authorizations that require mandatory spending," the President means legislation which precludes the exercise of discretion in determining an appropriate level of spending. Once funds are provided under such authorizations, they must be spent under the conditions specified by law, despite any subsequent developments which logically would indicate a lower level of spending.

Such authorizations increase the "uncontrollable" portion of the budget, since spending is not subject to control by the President (or by the Congress) unless subsequent, overriding legislation is enacted. Table 7 on page 333 of the 1974 Budget identifies under "open-ended programs and fixed costs"—the major mandatory spending programs.

Excluding reserves established for savings or other purely routine, financial administration purposes-pending the emergence of specific conditions detailed in legislation—funds for mandatory spending programs may not under present law be withheld, even when an overall spending reduction must be effected to comply with such restrictions as the statutory limit on the public debt. This means, of course, that any such spending reduction will then fall more heavily on those programs for which spending is not mandatory.

IMPOUNDMENT OF FUNDS

Chairman MCCLELLAN. The budget estimates that the public debt as of June 30, 1973, will amount to $462.8 billion. In the Act of October 27, 1972, the statutory debt limit was temporarily increased to $465 billion through June 30, 1973. The argument is sometimes made that funds must be impounded in order to live within the debt limit.

How could this be true in the light of the figures I have just cited?

Mr. Asн. The debt subject to the $465 billion limit is the peak debt at any time, not just on June 30. A peak figure close to the $465 billion level is expected to occur around June 15.

The margin of error permitted by the estimates is extremely small. It therefore imperative that outlays be held to the level proposed by the President if the ot ceiling is not to be breached.

ACCURACY OF JANUARY BUDGET ESTIMATES

Chairman MCCLELLAN. Included in the total outlay figure of $268.7 billion the net interest figure of $24.7 billion. Suppose this interest figure increased a billion dollars and suppose there was a rigid ceiling, as the President has ommended, on outlays of $268.7 billion, would not the Congress be requiring e President to impound $1 billion from the amounts made available in the propriation Acts?

How accurate have been your January budget estimates on interest?

Will you please furnish for the record for the past five years a tabulation ich will show the projected interest outlays in the January budget and the al figure at the close of the fiscal year?

Mr. AsH. If a rigid outlay ceiling were enacted, and interest costs (or any
er uncontrollable spending) were to increase, it probably would be necessary
make reductions in other areas to avoid breaching the ceiling. The exact
count of authority which would have to be withheld to achieve a specific re-
ction could not be determined in advance, since the relation of authority-to-
ending in a given year rarely is 1:1, and varies widely from program to program.
Of course the necessity for taking action would also be affected by any shortfalls
Low the spending estimates for other programs.

The following table compares, for the last five years for which complete data
è available, actual interest payments on the public debt with previous estimates
these payments.
INTEREST ON THE PUBLIC DEBT, 1968–72

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Chairman MCCLELLAN. Why do you not plan to propose amendments to the 74 budget for the 1974 costs of the January, 1973, civilian and military pay crease? (The Budget contains a lump sum of $3.935 billion for this purpose, t it is not distributed.)

Wouldn't the Fiscal 1974 appropriations bills be underfunded to the extent of ch pay raises?

Mr. Аsн. The $3.935 million referred to covers not only the 1974 costs of the nuary 1973 pay raise, but also the possible costs of the next comparability pay

se.

At the time the budget was submitted, the exact costs of the January 1973 y raise were still uncertain; the costs of the next raise are, of course, highly njectural. Rather than transmitting amended requests to cover the January 73 raise, and later transmitting supplemental requests to cover the next raise, propose to wait until the costs of both raises have been determined precisely, d transmit a consolidated supplemental request to cover them, to the extent at absorption is not possible.

As Senator McClellan points out, this will mean that regular appropriations y be enacted which will fall short of full-year needs. However, at least to the tent of the unabsorbed costs of the next pay raise, this would have been true any case.

SPECIAL REVENUE SHARING FUNDS

Chairman MCCLELLAN. Do you propose to make the special revenue sharing nds referred to on pages 13 and 14 of the Budget ($2.3 billion for urban comunity development; $2.5 billion for education; $1.3 billion for manpower training

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