d

tionary

1975 PROJECTIONS IN THE 1974 BUDGET

This year's budget presents, for the first time, a deta preview of next year's. This step was taken to demonstrate we stay within the 1974 and 1975 estimated outlays presented budget, we will prevent a tax increase--and to demonstrate t 1974 budget is a sound program for the longer range, not sim today. This innovation in budget presentation is a blueprin avoiding inflation, higher interest rates, and tax increases framing more responsive instruments of government and mainta prosperity.

Careful consideration of the longer-range implications o budget decisions is essential if we are to insure a reasonabl of continuity of policy from one year to the next, avoid beco prisoners of the unintended consequences of past decisions, a maintain consistency between fiscal and other policies in the We must plan ahead if we are to keep the budget under c We must have the capability to anticipate and prepare for for difficulties if we are to avoid painting ourselves into a cor

run.

The exercise of such foresight provides a welcome correc the temptations of expediency which could lead to cumulative increases that the Nation can ill afford. The program reduct terminations taken and proposed in the 1974 budget illustrate Administration's determination to exercise this foresight. TI will result in more significant savings in 1975 and later yea in 1973 and 1974. We know that the Federal spending pipeline very long one in most cases. And we know that the sooner we reducing costs, the better for the Nation.

The estimated 1975 outlays for the various Federal agenc of course, tentative.

The outlay total, however, is the appr

92-821 O-73-2

be found in others. As the projections indicate, this is necessary

for both 1974 and 1975.

This sober examination of the budgetary realities we will face in 1975 is advance notice to all concerned as to the general directi programs must take--the constraints within which they must operate. Unrealistic expectations and aspirations of advocates of special interests must be set aside if the overriding public interest in a noninflationary prosperity and stable tax rates is to prevail.

CHANGING PRIORITIES

Changes in our national priorities are reflected in the composition of the Federal budget. Significant shifts in these priorities have occurred during this Administration's tenure.

Outlays for human resources programs are expected to double between 1969 and 1974, while national defense outlays are roughly same in 1974 as in 1969. As a result, defense outlays will decline from 44% of total Federal spending in 1969 to 30% in 1974; outlays for human resources will rise from 34% of the budget in 1969 to 471 in 1974. Outlays for pollution control in 1974 will be seven times the 1969 level, and low- and moderate-income housing aids will more than double between 1969 and 1974.

These changes reflect the shift in national priorities toward peacetime domestic concerns that has been underway since this Admin stration took office. The 1975 estimates published in the current budget show a continuation of this shift in relative priorities.

f

must

ry

The following table shows another way of looking at

priorities, and illustrates the Administration's commitme

power to the States and localities and to the American pe

le

hly the

line

lays

o 47%

times

more

ward

Admini

rent

8.

Grants to State and local governments will more than doub

between 1969 and 1974 and will, in 1974, account for one-sixth total Federal budget. The percentage increase in direct benefit to individuals has been almost as great. These payments, under major retirement and social insurance programs (but excluding military retired pay), will grow from one-quarter of the budget 1969 to one-third in 1974. Together, these grants and transfe payments will increase from 35% of the budget in 1969 to almost

in 1974.

These projections demonstrate that we can afford to conti worthwhile ongoing programs and to increase spending for the mo important while staying within the constraints of sound fiscal policy. We can maintain the military strength that is needed

support our negotiations for a lasting peace. At the same time, we can permit high-priority domestic programs to grow.

To make this possible, however, we must persist--vigorously and with great determination--in our efforts to reduce or eliminate ineffective and lower-priority programs.

BUDGET AUTHORITY

Budget authority is of special interest to this committee. For fiscal year 1974, a total of $288 billion is estimated, about

$7-1/2 billion more than in 1973.

Of the total, congressional action is required on $173 billion-$10 billion less than a year earlier. This is the recommended current budget authority. (All but $1.1 billion of this amount is proposed for inclusion in appropriation bills.) The remaining $115 billion consists of $146 billion of permanent budget authority, which will be available under existing laws without additional action by the Congress, and $31 billion in offsetting receipts. Permanent budget

authority is composed mainly of trust fund receipts and interest on the public debt. Under existing law, these trust fund receipts are appropriated automatically, and interest on the public debt is automatically provided under a law enacted in 1847.

Current budget authority increases by $18 billion from 1972 to 1973, from $165 billion to $183 billion, and then decreases by $10 billion to $173 billion in 1974. This pattern is caused largely by two nonrecurring items in 1973: about $3 billion for urban mass transportation programs and $5 billion for Environmental Protection Agency authority to make waste treatment grants to State and local governments. When adjusted to eliminate the effects of these two items, a pattern of rising current budget authority emerges, but with a slower increase in 1974 than in 1973.

the transactions of Federal funds.

Federal funds outlays in 1974 are estimated at $199 billion, about $10-1/2 billion higher than in 1973. Federal funds receipts are expected to be about $171-1/2 billion, $17 billion higher, so the Federal funds deficit of slightly under $28 billion will be about $6-1/2 billion lower in 1974 than in 1973.

A large and growing part of the Federal funds deficit is associated with Federal funds payments to trust funds. In fact, three-fourths of the Federal funds deficit in 1974 will be attributable to this source. Three types of Federal funds payments make up virtually all of these transactions: the payment to the General Revenue Sharing trust fund, interest paid on debt securities held by trust funds, and the Government's contribution to the social security and civil service retirement trust funds. The Federal funds deficit in transactions with the public will decline modestly in 1973, from $16 billion in 1972 to $13 billion, and then drop by nearly a half, to $7 billion, in 1974.