I will ask you if you will agree with me that the foreign aid program as is presently submitted to the Congress and as it might be anticipated with respect to Indochina would be approximately $10 billion. Mr. Asн. There is no anticipated level for any redevelopment in the Indochina area.

Senator MONTOYA. Mr. Kissinger just made some pronouncements out of Hanoi that this administration was going to help and the figure of $10 billion has been thrown around for Indochina, and a figure of $6 billion has been thrown around by administration sources. What is right?

Mr. Asн. Secretary Shultz answered it a little while ago, this morning, saying that until there is an agreement as to how much will be spent, an agreement as to when, and an agreement as to which countries may participate in multilateral programs, there is no particular amount that is contemplated for the Southeast Asia redevelopment program.

Senator MONTOYA. Would you agree with me that on a very conservative basis that the foreign aid program this year will call for expenditures of close to $8 billion including food for peace and what have you?

Mr. Asн. Let us see which programs you have here in your definition. The estimated outlays for 1974 under the heading "International Affairs and Finance" is $3.8 billion. That is further broken down on pages 84 and 85 of the budget, as to what comprises that total. You may have a different definition in mind.

Senator MONTOYA. What is the foreign aid budget including military assistance?

Mr. ASH. This includes security supporting assistance and military assistance, except that the latter is shown under the "national defense" function, and is administered by the Defense Department. Senator MONTOYA. You have a total of $4,465 million recommended with respect to international affairs and finance.

Mr. Asн. Yes, sir, for 1974 budget authority.

Senator MONTOYA. This does not contemplate the expenditure for military assistance under NATO and under our other military programs; is that correct?

Mr. ASH. That is right. Those are independent of this.

Senator MONTOYA. And it does not contemplate the expenditure of funds for food for peace or the international food program?

Mr. ASH. Food for peace is in that total, in the amount of $654 million.

Senator MONTOYA. But there is more expenditure than this under direct loan program repayable in soft loans?

Mr. ASH. There is under a different program-under the "national defense" function-more to be spent, but I don't believe it adds up to $8 billion you mentioned.

Senator MONTOYA. I have in mind approximately $2 billion including transportation costs.

Mr. ASH. Then that is about right.

Senator MONTOYA. I have in mind approximately $2 billion in expenditures by the Defense Department which are not within the category of foreign aid or specific military assistance programs. Mr. ASH. $1.9 billion of that; yes, sir.

Senator MONTOYA. Now let us get to another facet of this available resource. How much has been impounded to date by the President or, to use a better vernacular, how much has been reserved out of the current appropriations by the President?

Mr. ASH. You are talking about just out of these funds or total reserves of all kinds?

Senator MONTOYA. Total reserves of all kinds, in all appropriations. Mr. Asн. $8,700 million.

Senator MONTOYA. When was it reduced from 12?

According to estimates gathered by Representative Joe L. Evins, Democrat of Tennessee, made public January 15, the administration had impounded $12 billion in funds appropriated by Congress.

Mr. Asн. I assume that Mr. Evins' data relates to an earlier date, rather than the date of the current report, which is January 29. The number I have given you is the correct total as of January 29.

Senator MONTOYA. Does this figure that you now give me include the $6 billion which was impounded by the President out of the sewage treatment funds voted by Congress over his veto?

Mr. ASH. No, sir; it does not.

Senator MONTOYA. That would be additional then?
Mr. Asн. If it is defined that way; yes.

Senator MONTOYA. So it is 8 plus 6 then?
Mr. Asн. Under that definition; yes.

Senator MONTOYA. Then there are $14 billion in impounded funds at the present time.

Now I have come up with a total of $10 billion in nonobligated foreign aid, $13 billion in obligated but unexpended foreign aid and approximately $8 billion in the budget request for foreign aid and other foreign programs and then $14 billion in impounded funds of the President.

So, here we have a reserve I would call it of $45 billion which could be tapped for domestic programs if we decided in the Congress to establish domestic priorities rather than foreign expenditure priorities.

FOREIGN AID COMMITMENTS

Mr. Asн. No, sir, I don't believe it could at all. The $13 billion which is obligated but unexpended represents legal obligations already made and outstanding, set aside for particular projects; as soon as the work is done, these will become expenditures. They are obligated, and I see no way they could be diverted to other purposes.

Senator MONTOYA. Mr. Ash, I served on the Foreign Operations Committee in the House, and I serve on the Foreign Operations Committee here in this committee. The administration has deobligated many funds throughout the years. Would you agree with that?

Mr. ASH. I don't know the history of all of that, Senator, so I am not in a position to agree or disagree.

Senator MONTOYA. Now to go back to another question

Mr. Asн. Should I finish the answer as to the $10 billion in unobligated balances?

By far the biggest part of the unobligated balance, $8.5 billion out of the $10 billion, are U.S. subscriptions to the international financial institutions. These callable guarantee capital subscriptions cannot be removed. To do so would certainly shatter the confidence that all of the other participants have in the U.S. position in these U.S.-financed institutions.

Senator MONTOYA. These are commitments that were made privately without the consent of Congress in many cases. Secretary SHULTZ. I don't believe that is true, Senator.

Senator MONTOYA. Let me give you some examples. In the Asian Bank the Congress did pass the authorization authorizing the Government to subscribe to so much of the capital of that Bank. Now some of the nations that subscribed initially under the agreement have not complied with their subscription pay-in. They have not subscribed. Why should we, if they have not?

Why should we continue to provide capital, because I find some glaring experiences under the Asian Development Bank where we contribute approximately 26 percent of the capital into the Bank, Japan contributes approximately 11 percent, and the money that is loaned to different undeveloped countries there is expended to the tune of 56 or 57 percent with Japan. We only get back in expenditure from those loans approximately 8 percent.

Now is that good business?

Mr. Asн. Actually, Senator, Japan has contributed about as much to the Asian Development Bank as has the United States.

Senator MONTOYA. I happen to know that we are being suckered into these international lending institutions and we are not getting too much; we are helping other countries. The point I want to make is this: We are spending too much in foreign aid. We are spending too much for foreign programs; and we are deemphasizing our domestic priorities.

It is about time that the Congress take the bull by the horns and set these priorities through appropriations, even at the expense of doing away completely with foreign aid and foreign lending institution funds.

PURPOSES OF FOREIGN AID

Secretary SHULTZ. Could I say just a word on that, Senator?
Senator MONTOYA. Yes.

Secretary SHULTZ. Without arguing that all of our foreign assistance is necessary and expended in just the right way, nevertheless, I think to a very considerable extent this is an investment in peace.

Senator MONTOYA. That is what they have said for 25 years. And we have had no peace.

Secretary SHULTZ. I think we have a little more peace right now than we have had in the past. It seems to me this is a top domestic priority. If we can make an investment in something that will be helpful toward peace, that seems to me to be a very worthwhile expenditure. Senator MONTOYA. I now that is a noble purpose, Mr. Shultz, but it has not worked out that way. We have lost the friendship of most of the nations of the world because of foreign aid. We have lost almost every nation in Latin America because of foreign aid. We have been spat upon throughout the world, especially by recipients of foreign aid.

Now, the biggest benefactor under our foreign aid program has been India. Look what India does to us in the United Nations. Look at what India does to us on the international scene when we take a position with respect to our own security.

I think the American people are tired, I know the constituents in my State are tired, of giving of their dollars for these foreign aid programs to nations that don't appreciate our friendship and our beneficence.

INCREASED REVENUES

Now with respect to the GNP which you projected a few minutes ago under questioning from the chairman, you projected the GNP for 1973 at $267 billion, if I remember correctly

Secretary SHULTZ. I believe that is projected Federal revenue. The GNP for 1973

Senator MONTOYA. I beg your pardon. You projected an increase of GNP by $115 billion.

Secretary SHULTZ. Right, $115 billion.

Senator MONTOYA. Over 1972?

Secretary SHULTZ. Yes, sir.

Senator MONTOYA. Now what do you estimate to be the revenue for every $100 billion of increase in GNP?

Secretary SHULTZ. You mean in individual income and corporate income taxes?

Senator MONTOYA. Yes, overall.

Secretary SHULTZ. I can compute that. We have about a $24 billion increase, not counting the social security increase. Some of that gain is also in excise taxes.

Senator MONTOYA. So, you anticipate that much more revenue this year over last year?

Secretary SHULTZ. We anticipate about $31 billion more altogether.

CONGRESSIONAL AUTHORIZATION TO USE IMPOUNDED FUNDS

Senator MONTOYA. Then do you intend to use the impounded funds through congressional authority?

You are asking in this budget that we give you authority to use reserve funds; are you not?

USE OF RESERVE FUNDS

You are in some cases. I don't know to what extent. Can you furnish for the record to what extent you are asking the Congress to enact authority to use reserve funds?

Mr. Asн. We will.

[The information follows:"

Of the $8.7 billion currently in budgetary reserve, some $0.4 billion is in accounts for which the authority to obligate will expire at the end of the fiscal year. A small, as yet undetermined, portion of these funds will be released as warranted by subsequent developments in this fiscal year. In a few cases, appropriation language has been proposed which would transfer part or all of the amount now reserved to another account. In addition, general transfer language has been proposed to cover increased costs due to recent pay raises (page 1074, The Budget of the United States, Appendix), and some reserves may be used in connection with this authority when enacted.

In most cases, the 1974 budget contemplates the use in 1974 of those reserved funds which are available beyond fiscal year 1973; such funds comprise $8.3 billion of the total $8.7 billion in reserve as of January 29, 1973. Except where specific transfers to other accounts are involyed, Congress is not being requested to take further action. In a number of instances, the funds are being used to reduce the need for new budget authority in 1974.

RESERVED FUNDS REDUCE NEED FOR NEW AUTHORITY

Mr. Asн. I will ask Mr. McOmber here to answer that technically. Mr. MCOMBER. Senator, it is true that in some instances the funds that are carried over as a result of reserves from 1973 into 1974 offset the appropriations that we might otherwise request, that is, we are asking for a lesser amount of appropriations because of that carryover. Senator MONTOYA. In some instances you will have to request authority to carry over those funds, will you not, because otherwise they will lapse?

Mr. MCOMBER. Offhand, I know of no instance in which we are specifically requesting authority to carry over funds because they would lapse. There might be one or two, but they would be rare, indeed.

Senator MONTOYA. Then what would be the credit from those reservations to the entire budget picture?

Mr. MCOMBER. We don't have an answer to that specifically. You are asking, as I understand it, how much is being carried over and applied to next year's needs?

Senator MONTOYA. Right.

Mr. MCOMBER. I don't know the precise answer. I can probably get it for you.

Senator MONTOYA. Let me assume this. Assuming that your budget deficit is going to be $12.7 billion which you have projected it to be, is that on the basis of actual revenues received against outlays?

Mr. MCOMBER. It is on the basis of actual receipts compared with actual outlays.

Senator MONTOYA. Assuming that you do not spend $10 billion of reserve funds, would those $10 billion be used to offset the $12.7 billion deficit, or is this deficit premised on the existence and the use within the budget for this next year of that $10 billion?

Mr MCOMBER. I assume your $10 billion is hypothetical. We don't know precisely what the figure is.

Senator MONTOYA. You have more than that now according to the question before us.

You ask for $14 billion and impoundment of reserve funds.

Mr. MCOMBER. It is true that the outlays in the budget take into account the reserves that have been established, that is specifically the $8.7 billion reserves. It takes into account the action we have taken with respect to the Water Pollution Control Act. All of that affects the total outlays.

Senator MONTOYA. Do I understand you to say that if you did not have these reserve or impounded funds and it was not your intention to spend them after such reservation, that your budget deficit would be, assuming they are $10 billion, that your budget deficit would be $22.7 billion?

Mr. McOMBER. Sir, it would certainly be higher. Exactly how much higher depends on the rate of spending for each of the individual programs for which money is being withheld.

Senator MONTOYA. That is all, Mr. Chairman.