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Economy - Meeting on New Spending Moratorium, March 14, 1975
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Economy - Meeting on New Spending Moratorium, March 14, 1975
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The original documents are located in Box 12, folder "Economy - Meeting on New
Spending Moratorium, March 14, 1975" of the James M. Cannon Files at the Gerald R.
Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 12 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
James M. Cannon - 2PM meeting
No New Spending - Fri, March 14
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
MAR a 7 1975
GERALD FORD LIBRARY
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES LYNN
SUBJECT:
Meaning of "New Spending Initiatives" Action
Background
You have made the following formal statements on the moratorium on
new spending:
BUDGET MESSAGE:
"I am proposing no new spending initiatives in this budget
other than those for energy."
LIBRARY SPEECH:
"In my State of the Union and subsequent messages, I will
aot
not propose any new Federal spending programs except for
with
energy, and the Congress --- your representatives in Wash-
ington -- share an equal responsibility to see that no new
spending programs are enacted.
quen
"I will not hesitate to veto any new spending programs the
Congress sends to me. Many proposed Federal spending
They
programs are desirable and have had my support in the past.
They cost money --- your tax dollars. Mainly it is time to
Begin
declare a one-year moratorium on new Federal spending
programs."
770.78
'78
STATE OF THE UNION MESSAGE:
"I am now in the process of preparing the budget submissions
for fiscal year 1976. In that budget, I will propose legis-
lation to restrain the growth of a number of existing
programs. I have also concluded that no new spending
programs can be initiated this year, except those for energy.
Further, I will not hesitate to veto any new spending
programs adopted by the Congress."
We are at a point on various pieces of legislation where further
guidance is needed as to the meaning of the moratorium.
2
Discussion
Although there are others, we face four basic types of problems in
interpreting the moratorium:
Deferred Effective Date
These are proposals for legislation that would go into
effect subsequent to FY 1976. Perhaps the most important
legislative initiatives where this question has arisen
involve National Health Insurance and Welfare Reform.
Tab A attached sets forth the relevant portions of your
Budget Message on these two items. However, the principle
also extends to other initiatives.
Administrative Costs Only
These also cover a wide range of initiatives, from a
Commission on Observance of National Holidays and
FORD is LIBRARY 076839
Commemorative Occasions to the Consumer Protection Agency,
Toxic Substances Act, and Federal No-Fault Insurance
legislation. Further listings are set forth at Tab B.
Costs Covered by Fees
IL appeals that the Toxic Substances Act could be designed
in a way that administrative costs would be fully covered
by fees from those regulated.
Consolidation, Restructuring or Reform Proposals
The budget includes a number of these, as shown by Tab C.
I understand Tab C is a listing Roy Ash discussed with you
to obtain clarification as to whether any of the items
shown represent new spending initiatives to be deleted from
the budget. Although a number of the items on the list are
easily explained as being consistent with the moratorium,
on the basis that they are simply extensions of old programs
(e.g., the defense and construction programs on page 3), it
is difficult to explain some of the other items on a basis
that excludes some of the initiatives now being proposed,
e.g., the biological services initiative in Interior.
Options
1. Oppose, for one year, any new legislation contemplating
any unreimbursed Federal expenditures, even though the effective
date would be subsequent to June 30. The rationale would be
3
--- the top priority of Congress should be initiatives that
deal with recession and energy problems and reforms that
reduce, rather than increase, expenditures outside of
these fields; and
-- it is undesirable to lock in new spending laws now, even
with a deferred effective date, because we should determine
the scope of new spending programs only when we have a
better picture of the total economic scene, budget deficits,
etc. at the time the laws are to become effective.
Pros
-- Would be the "toughest" position on trying to hold down
expenditures to make room for only those initiatives that
are targeted on the recession and our energy problems.
------------------------- Would be a convenient "out" to explain lack of support for
particular initiatives, e.g., Consumer Protection Agency,
perhaps Land Use, etc.
--- Might hold down budget deficits.
Cons
--- Difficult to rationalize some initiatives already in the
budget, e.g., Child nutrition program consolidation,
FORD & LIBRARY 976870
allied services and Library resources demonstration
proposals, etc.
Adopt this option
Reject this option
2. Eliminate initiatives involving administrative expenses
except those that are directed at coping with serious human safety
problems, e.g., Toxic Substances Act, where delay could conceivably
mean substantially increased hazard exposure. Where outlay impact
of the initiative is very small, many would perceive the ban as
unreasonable.
Adopt this option
Reject this option
4
3. Construe the moratorium as not being applicable to
initiatives involving administrative costs, whatever that cost
may be.
The rationale would be that the moratorium was only on grants-
in-aid and various financial assistance such as Federal loans,
loan guaranties and the like. This does not mean, of course, that
certain of these types of initiatives could not be opposed on
grounds other than the moratorium, e.g., the Consumer Protection
Act or the Toxic Substances Act.
Pros
--- Would focus the attention on the need to constrain the
big ticket items, e.g., domestic assistance programs such
as National Health Insurance, increased spending for
welfare reform, and other forms of assistance to State and
local governments.
-- With such focus, greater acceptance of the principles of
the moratorium.
Cons
---- OF course: this option would increase the deficit.
Although initial year expenses might be low, past
experience indicates administrative expenses for any
program can grow substantially in the out-years. For
example, although EPA's estimate of first-year costs of
the Toxic Substances Act would be $3 million, OMB's guess
is that the costs could easily rise to $30 million by 1980.
Adopt this option
Reject this option
FORD
4. Same as Option #3, but interpret the moratorium to apply
to any program where annual costs in any of the first three years
of the program might exceed a specified amount.
LIBRARY
Pros
--- A compromise that preserves some of the pros and dampens
some of the cons presented in Options #1 and #2.
5
Cons
--- Extremely difficult to predict administrative costs of a
program in advance and would bend estimate to the low
side.
-- Once the programs are in effect, extremely difficult to
eliminate them later and, although initial aggregate
budget effect may be small, it can be much more material
in the out-years.
If you accept Option #4, what expenditure amount should be
the dividing line:
$10 million per year
$25 million per year
Other
($
million)
5. Exclude from the moratorium programs that are paid by
user fees as is possible for the Toxic Substances Act.
Adopt this option
Reject this option
Attachments
FORD is LIBRARY 077870
TAB A
From the 1976 Budget Message
National Health Insurance
"America needs to improve the way it pays for medical care. We
should begin plans for a comprehensive national health insurance
system. However, in view of the economic developments and the
measures I have proposed to combat recession and inflation, I
cannot now propose costly new programs. Once cur current economic
problems are behind us, the development of an adequate national
medical insurance system should have high national priority. I
urge the Congress to work with my Administration in order to devise
a system that we will be able to afford."
Welfare Reform
"Our present welfare system is inefficient and inequitable. It is
wasteful not only of tax dollars but, more importantly, of human
potential. Left unchanged, over the long run the situation will
almost surely continue to deteriorate. I urge the Congress to work
with my Administration to develop reforms that make the system
simple, fair, and compassionate. This approach need not cost more,
but rather can use our welfare dollars more effectively."
TAB B
New Programs Requiring
Only Administrative Costs
Approximate
Annual Cost
(In millions)
Health, Education, and Welfare
Food and Drug Administration:
Food registration
2
n
Medical devices
4
Office of Education:
Library resources integration and
demonstration (identified in budget)
20
Treasury
Customs: New Trade Act
12
olds
Community Services Administration
Proposed incentives, community food and
nutrition research and demonstration bill
50
old
GERALD LIBRANY FORD
TAB C
January 2, 1975
New Programs in the 1976 Budget
that May Be Considered Initiatives
1976
Outlays
Affected
(in millions)
A.
Consolidation, restructuring or reform of existing
programs:
Agriculture - Child nutrition programs consolidation
1,476
Transportation:
Aviation ----- Comprehensive proposal which would:
(1) convert present airport grant program into
block grants to States and local airports;
(2) provide additional long-term authorization for
new airway facilities;
(3) restructure aviation tax system to provide
FORD LIBRARY
more equitable charges (decrease overall air
carrier fees and increase general aviation
charges) ; and
(4) open trust fund to permit funding of FAA
maintenance costs, +$30M outlay and +$17M
receipts in 1976.
648
Highways --- Comprehensive long-range proposal which
would:
(1) provide long-term highway funding through 1980;
(2) extend highway trust fund, but restrict trust
funded programs to interstate highway system and
reduce trust fund receipts by returning 2¢ of
gas tax to general fund and rescinding 1¢ of gas
tax (if States pick up) in 1978 and beyond;
(3) prioritize completion of interstate segments and
reduce categorical funding programs; and
(4) rescind all unobligated contract authority as of
October 1, 1976.
None
2
1976
Outlays
Affected
(in millions)
A.
Consolidation, restructuring or reform of existing
programs - Continued:
Veterans Administration:
To carry out recommendations of Quality Survey of
VA hospitals
212
Activation of ten new outpatient clinics
9
Interior ------------------------- Consolidation into a new Office of Water
Research and Technology functions of the Office of
Saline Water and the Office of Water Resources
Research
19
B. New programs appearing in the budget for the first time
but previously announced:
Treasury - Petrodollar facility
1,000
Labor, HEW and Commerce - Program announced at
Columbus, Ohio on August 30 for "partnership of labor
and educators, including grants to provide data on
available occupations and a Federal-State-local part-
nership of fellowships
5
Interior:
Plan to lease all promising Outer Continental Shelf
oillands by 1978 announced in November 1974
85
Trust Territory initiatives under pending legislation
88
Veterans Administration ---- Grants for State veterans
cemetaries
5
C. "New" programs not previously announced:
Interior --- Biological services are planned for the
Fish and Wildlife Service. The Service will study
the resource programs of the entire Department to
understand adverse effects on fish and wildlife and
their habitats
9
SBA - Legislation is proposed to permit full cost
recovery interest rates on SBA direct loans
200
3
1976
Outlays
Affected
(in millions)
D. New Defense programs:
Operations:
Two new Army divisions
70
Increased Air Force tactical air crew ratios
100
Procurement:
Contingency stockpiling for allies:
(1) 30-day stockpile for Asian allies
5
(2) Inventory replenishment fund in advance of
foreign sales
30
Navy Captor Mine
5
Navy trainer aircraft
2
B-1 Bomber
15
Air Force Modular Guided Glide Bomb
2
K&U:
Airborne Intelligence System (Navy)
12
Navy air combat fighter - major development
66
Short-Range Air Defense Missile (Navy)
10
Various Army ordnance and missile programs
7
Advanced Air Defense Supression System
12
Air Force air combat fighter - major development
120
Construction:
DIA building
4
Diego Garcia expansion
10
Jane
THE WHITE HOUSE
WASHINGTON
March 11, 1975
my Jeres domber
MEMORANDUM TO:
JIM CANNON
se
below
FROM:
DICK DUNHAM RD
Jun
SUBJECT:
Lynn Memo - New Spending Initiatives
Option 1.
Reject
Option 2.
Reject
Option 3.
Reject
Option 4.
Reject
FORD LIBRARY 976839
Option
5.
Adopt
In view of the strong public position and statements
that the President has already made concerning "new
program initiatives," I do not see how he can publicly
change his position at this time.
I do not think, however, that a program which is
self-supporting by fees or charges need fall within the
proscription against new spending. The Toxic Substances
Act is the example cited in the memo.
There are two other alternatives that should be
considered if the President decides to stay with the
"no new spending" initiatives.
The first is new spending programs could be approved
if they are offset by savings or reductions in some other
programs. That is no net change in the budget.
The second alternative is to consider new spending
programs which begin after June 30, 1976 or the last
quarter of 1976. These exceptions could be made only when
projections. long range savings can be imputed from the five-year
An example here would be new programs such as
Universal Health Insurance which may cost more in the
first year or two of operation but would reduce govern-
ment expenditures over a longer period.
[3/14/75]
No new Seart-m and program
Hatny in '76
Any wel R
(fewth In -
secom ~ 76 workd
not contemplete am new
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when in tate if min
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No 6. To luke of part patien
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FORD is LIBRARY
political dew Cudits, R lity
tn ? the we - I'm uppeard."
NOT talu he will
Veto.