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White House - Congressional Leadership Meeting, 3/25/69 (includes minutes and Ford notes)
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White House - Congressional Leadership Meeting, 3/25/69 (includes minutes and Ford notes)
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Robert T. Hartmann Papers
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1990
CONGRESSIONAL LEADERSHIP AGENDA
delow
March 25, 1969
21970
8:30-9:00 a.m.
I. The Budget
9:00-9:30 a.m.
II. Surtax
agreement
9:30-9:45 a.m. III. Senate
9:45-10:00 a.m. IV. House Report
X
Report wage Price never
1968 - 25.2
1969 - 2.4
1970 3.4
"185
1969 - Gop - $183.7 +1.3 reduction
FORD i 07V830 LIBRATION LIBRAR
Upo - agenous + $100 BOB - $ 100
4
Downo -
- 200
Saving - $200 net
1970 - Gop 195.3 1994 "1.7 medication m surplus.
BOB "1.2
alps - agencies it 199.4 82.4
Downs -
militory wilfore Pay
- 1.4
These documents were scanned from Box 106 of the Robert T. Hartmann Papers at the Gerald R. Ford Presidential Library.
DIARY OF WHITE HOUSE LEADERSHIP
MEETINGS -- 91st CONGRESS
March 25, 1969
Upon entering at 8:35, RMN announced that a message
is scheduled for delivery to the Congress tomorrow
calling for both budget cuts and extension of the full
amount of the surtax for another year. Quoting from
memory from the message draft (which Harlow later read
in full), the President said that careful studies now whow
that the Johnson spending budget for FY69 was underestima-
ted and the surplus overestimated for FY69 by $1.3 billion
and for FY70, the figure is $1.7 billion.
Referring to what he called "Mel's very effective testimony
last week," he said that the public understands the need
for major defense expenditures. The cuts that are being
made in defense were carefully selected so that they could
not be interpreted at home or abroad as cutting our muscle
while Russia is flexing her muscle. "Inflation psychology"
has gripped the business community. Since inflation is
now in its fourth year, businessmen are assuming that
government intends it to continue, and they project their
business plans, both capital and operating, with that factor
in mind. This in turn feeds the flames of inflation. Search-
ing for checks on inflation, RMN said that we must discard
the technique of interest rate increases because rates are
already as high as they can be if they are to operate as a
restraint without producing an undestrable counter effect.
He said that so far as monetury supply is concerned, there
is nothing more the Federal Reserve can reasonably do. He
also rejected the device of calling upon business and labor
to follow artificial guidelines. Where self-interest is involved,
neither business nor labor pays much attention to the Presi-
dent or anyone else. This leaves only one alternative solution
to the inflation problem and that is a strong budgetary policy
of holding down expenditures and continuing surtax revenues.
LIBRARY GERALD R. FORD
2
He said that this year is the time to make budget cuts
rather than next year. He recalled that the cuts made
in 1954 and 1958 precipitated mild recessions which
cost Republican seats in Congress. It is better now to
take the heat and get our house in order for next year.
Kennedy complimented the President's statement and
agreed with him that guidelines are not workable. A
busy businessman will understand the policy which
this decision seeks to implement and he feels that it
will be warmly welcomed by the foreign financial world.
McCracken said that the economy is moving entirely too
fast, currently at an annual rate of 8%. This is compared
to an increase in the capacity to produce of only 4%.
The differential is inflation. He called guidelines "jaw-
boning" and the 'open-mouth policy."
Mayo used charts prepared by the LBJ Administration show-
ing the anticipated changes from a deficit budget to a
surplus budget. The first Nixon Administration chart showed
the conclusions flowing from agency reappraisals of the
Johnson budget. For FY69, the Johnson budget showed
$183.7 billion in spending. This is underestimated by
$1.3 billion, bringing the total of the real budget to $185
billion. The underestimations principally are in farm
price supports and national debt interest payments and
the overestimation of revenues from offshore oil royalties.
The goal for FY69 will be $184.7 billion. While this is
less than the real Johnson budget, it is $1 billion more
than the printed Johnson budget.
For FY70, the Johnson budget was $195.3 billion. To this
must be added $1.7 billion of underestimations. For the
funding of new programs previously authorized, the agencies
are asking increases of $2.4 billion. Set off against this are
agency cuts of $1.4 billion and Bureau of the Budget cuts of
$1.2 billion, making a net cut of some $200 million. The goal
is to get total spending under the $195.3 billion Johnson
printed budget.
FORD & GERALD LIBRARY
3
The next chart concerned FY70 budget authorizations.
The LBJ budget authorization figure was $210.1 billion.
The underestimation raises that to $211.5 billion.
Agency requests for increases total $3.4 billion, offset
by agency cuts of $3.3 billion and Bureau of the Budget
cuts of $2.1 billion. The net effect would be to increase
the $3.4 billion surplus projected by Johnson.
Byrnes inquired if the Aid to Dependent Children Program
was included on the charts as part of the underestimation in
the Johnson budget or as a part of the agency requests for
increases. Mayo replied that it was the latter. Byrnes
suggested thattthe figure more properly belongs in the
former on the grounds that it was unrealistic for the
Johnson budget to empect that these funds would be frozen
in FY70.
Arends asked the President how he stood on wage and price
control. Firmly, RMN said that he would not resort to them;
that they worked poorly enough in war time and not at all
in peace time; and that he was adamant in his position.
The VP suggested that attention be given to the semantics
involved in redirection of program expenditures, particularly
in the welfare categories. Instead of calling the old dis-
credited programs by their old names, we should talk about
funding new programs with new directions and with new names.
Ford inquired if there wasn't an inconsistency in two news-
paper headlines in the morning paper, one of which speaks
of a freese on public works while the other concerns a HUD
demand for a substantial increase. RMN and Mayo said that
there would be no new starts in public works. Cramer suggested
that here again semantics is important. It is not necessary to
talk about "no new starts," which inflames constituents. If
the policy is to be no new starts, it can be accomplished
quietly by careful money cutbacks. Rhodes said that an
FORE
4
announcement of no new starts would kill the party in the
West. Young suggested that any announcement make it
plain that emergency exceptions could be made.
RMN said that the budget plan is tight and that the figures
are as hard as they can be made. However, he reminded
us that the financial picture could improve if the economy
remains strong and fevenues are greater than anticipated
or if programs in foreign affairs permit a more dramatic
reduction in defence expenditures. Bow asked if the
$1 billion commodity price support plan under debate on
the Floor today had been taken into account in the budget
charts. Mayo said that it had and that its passage would
not unbalance predictions. Bow asked if Members of
Congress should begin publicizing the Johnson budget as
a false budget. RMN answered in the affirmative and
said, "You don't mind being that political, do you, Frank?"
Bow also asked Mayo to come to the Hill and brief ranking
Members.
Young called attention totthe fact that about $1.5 billion in
the Commodity Credit Corporation spending schedule goes
to alleviate hunger. Taft said that ADC is unpopular and
urged the President not to defend it but to announce in the
budget message that it would be restructured. The VP
asked if he should write to the Governors asking their
advice about ADC. RMN answered "yes." Ford inquired
&
FORD
what level had been given to foreign aid in projecting the
budget. Mayo said that they had tried to recoggize the
GERALD
realities of Congressional life.
LIBRARY
Dirksen suggested that instead of talking about a blanket
moratorium on public works, we should speak about selective
cuts. RMN agreed and said that this rationale would give
the Democrats no obvious targets and leave us some running
room. He said further that the issue of economy in government
was not much of a factor in close races. Aside from politics,
he said that we simply have no option but to do the responsible
thing, to make the hard decision simply because it is right.
RMN is at his most effective when he speaks in this vein.
5
In response to the President's invitation, Tower said that
he felt that whatever arrests cost-of-lising increases is
good politics. Wilson said that the people want to keep
the economy moving even when taxes are burdensome. He
cited a personal experience he had with a Life magazine
reporter some years ago when the reporter asked 100
constituents in his presence whether they favored a reduction
in income taxes. Only 1 polh of 100 answered in the affirma-
tive.
Parenthetically, RMN commented that Perkins is trying to
force out a bill extending OEO for 5 years rather than 1 year,
as the President recommends. He urged the Leadership to
fight it.
Discussing the message the Leadership would give to the
news conference to follow, Dirksen suggested 3 main themes,
viz, 1) inflation must be controled; 2) this requires both
spending outs and surtax extension; and 3) the outs will
bring the spending budget for FY70 below the Johnson printed
budget and substantially below the true Johnson budget.
RMN spoke his gratitude for the sizeable Republican vote in
the House in support of the debt ceiling increase. He said
that he admired those who had the courage to "turn around
and stand up" to the realities of the problem. He further
said that the Presidential-message-to-Congress-flow would
begin in earnest next week. The first Reorganization Plan
can be expected within 3 weeks.
After the President had thanked the Leadership and rose, he
remembered to report on President Eishnhower's condition.
The present prognosis is bleak.
F3R0 is LIBRARY 078859
RICHARD H. POFF
FOR IMMEDIATE RELEASE
MARCH 25, 1969
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
SENATOR EVERETT MCKINLEY DIRKSEN,
AND CONGRESSMAN GERALD R. FORD
THE ROOSEVELT ROOM
AT 10:30 A.M. EST
SENATOR DIRKSEN: We had a two hour fiscal and
monetary session. Everybody sat quietly for two hours.
That is in violation of what I saw in "Nation's Business,"
by the doctor who said, "Don't sit longer than 30 minutes
without getting up and walking around your desk." But
everybody stayed right in place for two hours.
The emphasis this morning was, of course, upon
inflation and how you effectively restrain it. I think
there is general agreement that that is a foremost
problem and that it can be restrained only by finding
cuts in spending and protecting your revenue. In other
words, dealing with existing taxes, including the surtax.
Now then, in order to do the job effectively,
you have to start with a budget, of course. I go on the
theory that you have got to have a refined sense of the
budget. It has to be a true budget. And therein lies the
problem. Taking the last Johnson budget, it is a true
budget in one sense, but in another sense it isn't.
When I say this, I impute nothing to the Johnson
Administration or to the predecessor President with
respect to that budget. I simply say that in the making
of the budget, you may have your choice of one, two or
three figures: as for example, the interest on the public
debt.
At the time of making the budget, they will come
up with a figure, and they may stay with that figure and
then you discover, because of a rising interest rate, that
you are a couple of hundred million dollars out of line.
Well, you have to compensate for it, because events
simply overtake theory, and overtake calculations, and
you are going to be $200 million in the hole.
That would be true, I suppose, about receipts,
like oil leases, where they have not actually been issued.
It would be true in the case of the commodity credit
corporation, and price supports. If you underestimate
and you find that you have got to add to it, there it is.
That is why I say you have to find a true budget from which
to work. That is what we are in process of doing.
MORE
(OVER)
GERALD FORD
- 2 -
Then, of course, you determine where you can cut
and what you are going to save. I give you no figures
this morning. I simply say to you that there will be a
substantially larger saving, larger surplus, after we
get through than the one that was estimated by the prior
Administration.
So, generally, that is the whole story.
Q
You are talking about fiscal 1970 when you
make that statement?
SENATOR DIRKSEN: 1969 and 1970.
CONGRESSMAN FORD: I would simply add that it was
the feeling on the part of the President and his advisers
that we had reached the high-water mark of inflation in
this country last year. As you know, it was about 5 percent.
The whole effort from the fiscal point of view
is to try and moderate and reduce the inflationary impact.
In the process of going through the budget and taking a
realistic look at the anticipated revenues, and taking
a more realistic look at the expenditures through the
various agencies and through the Bureau of the Budget,
there will be significant savings in fiscal 1970. There
will be some savings in fiscal 1969.
These will be reflected in the various actions
taken by the agencies and will be reflected in the message
that will come to the Congress tomorrow in reference to
the fiscal picture.
The whole attempt is to do what the Administration
can in the area of fiscal control through the budgetary
process.
Q
What is the message tomorrow, Mr. Ford?
CONGRESSMAN FORD: The message tomorrow will be
the request for an extension of the 10 percent surtax,
but at the same time pointing out that there are adjustments,
and significant adjustments downward in fiscal 1970,
related to the anticipated and hoped for extension of the
surtax.
The net result is that we hope to have a budget
surplus and realistically as much as that anticipated in
the January budget sent up by former President Johnson.
Q
In what areas do you expect these significant
savings?
CONGRESSMAN FORD: The specifics were not laid out.
They were lumped in as to reductions that had been achieved
or hoped to be achieved by the various agencies and the
add-on reductions that would be imposed by the Bureau of
the Budget.
MORE
GERALD FOR? LIBRARY
- 3 -
2
Mr. Ford, how long will the request for
the extension of the surtax be -- for a. year or more?
CONGRESSMAN FORD: The request will be for fiscal
1970.
Q
For the full amount, sir?
CONGRESSMAN FORD: Yes.
d Senator, you said that there will be substantially
larger surplus by the time we get through. Who do you mean
by "we"?
SENATOR DIRKSEN: I mean those who are charged
with the responsibility of the budget and the fiscal
affairs of this Administration.
Q You didn't mean the Congress as opposed to
the Administration?
SENATOR DIRKSEN: The Congress is a part of this
operation; for after all, they will have to be passing on
authorizations, and on appropriations. Insofar as they
relate to this whole picture, they have a responsible role
just as well.
Q
Congressman Ford, you pointed out last year
there was a 5 percent inflation rate, and that this year
the high-water mark had been reached. Do you have an
estimate for how much inflation there may be this year?
CONGRESSMAN FORD: That was not discussed at the
meeting this morning, but I have seen other comments and
I have talked to some of the people in the Administration,
and it is hoped it would be 3 percent or less in 1970.
Q
Along that line, are there any signs at
present which point to a reduced rate of inflation --
specific signs?
CONGRESSMAN FORD: I think the general attitude,
and I can't give you any specifics, but 4.8 to 5 percent
was the figure in calendar 1968. But the economists as
a whole, indicated from a variety of the economic indicators,
there will be this drop off from the figure of 1968 to
a lower figure.
Q
Would the Congress --
SENATOR DIRKSEN: Let me respond a little further.
I don't believe those figures are very significant,
because what you. have to do is to siphon off some
spending, and at the same time use whatever tax devices
are at hand for the purpose of adding to it, so that you
take that out of the economic blood stream. Where will it
finally land? You can't tell. You can only tell after
it happens.
GERALD FORD
MORE
(OVER)
- 4 -
0
Would the Congress sit still for a major
cut in public works spending?
CONGRESSMAN FORD: I don't believe that the
Congress will reduce the budget requests of the previous
Administration or the programs of this one significantly.
There will be some selective changes. Those programs
or those projects which have an emergency nature, those
projects which are in the mill, half way through, obviously
ought to be continued. But there will be a selective
pruning both by the Congress and, I think, by the Adminis-
tration.
Q Will the message tomorrow reflect this?
SENATOR DIRKSEN: Let me illustrate just a little,
whoever asked that question.
I saw the Weather Bureau forecast the other
day for what they anticipate by way of floods in the
Northwest, and in the Middlewest. Evidently it is going
to be a rough season. There you are going to have an
emergency, and you will have to do something about it.
That you can call selective.
On the other hand, you may have something
in the mill that is not nearly so urgent, and there
again you can be selective in holding down one and
raising the other. But in every case, you try to keep
the whole public works picture in balance.
0
Was there any indication about any
steps the Administration might take to discourage business
expansion, as an example, the 7 percent interest rate?
SENATOR DIRKSEN: It was discussed in the Senate
Finance Committee yesterday morning.
Q
In light of that, and in light of the
housing and the interest rate, and the whole current
inflation picture, do you accept the validity of these
predictions that we have peaked on inflation, and it will
drop to 3 percent?
SENATOR DIRKSEN: I don't know. I don't attach
too much significance to a figure, as such. You do what
you can and you just want to be sure that you are going
in the right direction to diminish and restrain inflation,
then let the chips fall where they will. Then, if that
isn't enough, you have to resort to something else.
Q
Senator, may I clear up something that
just appears as a technicality? This message will be
from the President to the Congress and not from the
Secretary?
SENATOR DIRESHN. It will be from the President.
MORE
LIBRARY GERALD P. FORD
- 5 -
2
Gentlemen, we were told last week, I think,
by some of the people who were at the meeting, that the
Administration's figures on the budget, as you suggest,
show some areas where there were underestimates of what
it is going to cost, and overestimates, perhaps of income,
such as user charges and other things that will hike
the thing up may be $1 billion, from which you have to
find corresponding money.
Now, the Johnson budget called for a very
substantial surplus, reasonably substantial, in fiscal
1969.
SENATOR DIRKSEN: 2.4
Q In view of these underestimates and so on,
how are we to get to a situation where we actually have
a larger surplus, as you suggest, in fiscal 1969,
with three quarters of the year already over?
SENATOR DIRKSEN: I didn't mean to imply for
a moment that what we will save will be as big as
we expect to save in 1970. We will certainly save
what we can over and above that figure, if that is possible.
Q Do you think it will be possible?
SENATOR DIRKSEN: I think SO. They have been
going all through the budget, and it is only after they
come up with hard figures for every expenditure item
that you will know.
C
If the Administration feels, and you say
they do feel that the high-water mark in inflation has
been reached, they must have given you some supporting
data or evidence of this. Can you give us some idea of
that?
SENATOR DIRKSEN: I don't know that we subscribe
particularly to where you did reach the high-water mark
in inflation. It depends on when these remedial forces
come into play, that you can say, "All right, you can
now see statistically that .it is tapering off.
Q Did you discuss the situation in the light
of the war, the possibility of the war ending or continuing?
SENATOR DIRKSEN: Only in a very modest residual
way. It was alluded to, expressing a hope that if we
can get out from under that expenditure, then, of course,
it becomes a new ball game, as the Budget Director said.
CONGRESSMAN FORD: I think the feeling was in
the light of the current siutation in Vietnam, and the
economic problems we have of trying to fight inflation,
that this message was needed and necessary. But if there
were any changes in either the economic situation or in
the war in Vietnam, it would certainly give a great
deal of additional running room as far as the tax picture
and the expenditure picture was concerned on some of our other
problems.
MODE
(OVER)
FORD i GERALD LIBRARY
- 6 -
SENATOR DIRKSEN: Let me make one observation
there. The previous Budget Director under the previous
Administration went up here to some college to make
a commencement speech, and strangely enough it was a
speculative speech on what was going to happen if and
when we concluded this disagreeable business in Vietnam.
He started out with this premise: He said there
are those who feel that once we bring an end to it, there
will be $20 billion to spend on all manner of domestic
social programs. He said, "I am sorry that I have to
disabuse the public mind of that impression."
Then he went on to tell what a hole was plowed
into our inventory of weapons of all kinds, knocking heli-
copters out of the sky, planes, ammunition, and everything.
Contrary to what our experience was in Korea, it will be
quite the reverse now, and there will be gaps in our whole
security pattern.
Those will have to be filled up. Well, how much
will be left out of the $20 billion, if you take that as
an estimate? Well, he dropped it way down.
Q
Mr. Ford, did you mean to suggest that the
message tomorrow will be qualified on the basis of
possible changes? In other words, ask for an extension
provided that certain things don't change in the next year?
CONGRESSMAN FORD: Yes. In other words, it
is predicated on the present circumstances, looking down
the road as far as the economy is concerned, and as far
as the war in Vietnam is concerned. Really, it reaffirms
that part of the budget message that came up from President
Johnson, where he said it was needed and necessary to have
an extension of the surtax because as far as he could foresee
at that time, these circumstances would prevail in fiscal 1970.
Q And the full 10 percent is needed for the
full fiscal year?
CONGRESSMAN FORD: Based on these assumptions,
of which any one of the several could change.
THE PRESS: Thank you.
END
(10:45 A.M. EST.)
THE WHITE HOUSE
Ford
Budyt anthmity -1970 =
agencies -
NOR
ups 3.4
Down 3.0
BOB -
Downs $2.1
GERALD LIBRERY ? FORD
Totals - Mps $3.4
Drum 0 5.4
WH Pdrshp meeting 3/25/69
PERIOD - March 18 to March 24, 1969 (inclusive)
HOUSE ACTION
Tues. March 18 - Five Suspensions -- ONE DEFEATED
The House by voice vote suspended the rules and passed the four following bills:
1.
S. 1058, to extend the period within which the President may transmit to
Congress plans for reorganization of agencies of the executive branch
of the Government (by a record vote of 334 yeas to 44 nays), clearing
the measure for the White House.
2. H.R. 7206, to adjust the salaries of the Vice President of the United States
and certain officers of the Congress (by a division vote of 181 yeas to
64 nays). A demand for yeas and nays was refused.
3. H.R. 2669, to amend section 213 (a) of the War Claims Act of 1948 with
respect to claims of certain nonprofit organizations, amended, and the
title amended.
4. H.R. 8438, to extend the time for filing final reports under the
Correctional Rehabilitation Study Act of 1965 until July 31, 1969.
5. The House defeated H.R. 2171 relating to national observances and holidays
by roll call vote of 164 yeas to 212 nays. (Two-thirds required to
suspend rules.)
Wed March 19 - Debt Ceiling
By a vote of 313 yeas to 92 nays the House passed H.R. 8508 to increase the
permanent to $365 billion and the temporary debt limit to $377 billion
through June 30, 1970.
Thurs. March 20 - School Lunch -- Child Nutrition Act
The House passed by voice vote H.R. 515, the National School Lunch Act and
the Child Nutrition Act of 1966 after adopting the following two amendments:
1. Requires State revenue to be used proportionately between regular
school lunch programs and special school lunch programs.
2. Requires for cooperation and coordination between the Secretary of
Agriculture and the Secretary of HEW in the development of nutrition
aspects of the bill and provides for evaluation of school lunch programs.
F3RD & LIBRARY GERALD
-2-
PROGRAM AHEAD
Monday -- No legislative business.
Tuesday and balance of week
Supplemental appropriation for 1969, Commodity Credit Corporation, $1 billion
H. R. 5554 - To provide a special milk program for children (Subject to a
rule being granted)
H. R. 337 - To increase the maximum rate of per diem allowance for employees
for the Government traveling on official business (Subject to
a rule being granted)
H. R. 7757 - To authorize appropriations during fiscal year 1969 for
procurement of aircraft for the Armed Forces (Subject to a rule
being granted)
SERALD LISEARY ? YORD
CONGRESSMAN
NEWS
GERALD R. FORD
HOUSE REPUBLICAN LEADER
RELEASE
--FOR RELEASE AT 12 NOON--
March 26, 1969
Statement by Rep. Gerald R. Ford, R-Mich., Republican Leader, U.S. House of Reps.
I feel certain the Congress will approve President Nixon's proposals to
meet the very serious problem of inflation head-on by extending the 10 per cent
surtax for a year and by achieving a substantial budget surplus in fiscal 1970.
I urge that the American people likewise enlist in the fight against
inflation by making those spending and saving decisions which will help bring
inflation under control.
This is not a problem that the President alone can solve. He needs the
help of the Congress and he needs the help of the people. Business, labor and
consumers -- all must make a commitment to the goal that President Nixon has set,
that of erasing the current inflationary psychology and halting the steady
erosion of the dollar's purchasing power. If America whips inflation now our
people can have a strong, growing economy with low unemployment in the future.
President Nixon has accepted the challenge. He has made the politically
unpopular decision to recommend extension of the surtax for a full year at the
existing level.
This took courage. Let's all of us now have the courage to back the
President in this painful course, for the longterm good of the Nation and
especially the poor and the pensioners.
# # #
LIBRARY GERALD P. JONO
FOR RELEASE 5:30 P.M. (EST)
APRIL 12, 1969
Office of the White House Press Secretary
THE WHITE HOUSE
STATEMENT BY THE PRESIDENT
The Administration's first full review of the Federal budget for the fiscal year
1970 is now complete. As a result, beginning next week I shall send a series
of budget amendments to the Congress.
Amendments for most agencies will go forward within a few days. The overall
totals are now being made available.
The budget that we inherited from the previous Administration in January stated
the estimated expenditures for the fiscal year 1970 at $195.3 billion. Our
examination of that budget reveals that some of these estimates -- notably
those for interest on the Federal debt and farm price support payments -- are
turning out to be too low. After making the necessary adjustments to cover
these underestimated items, we find that the actual expenditures budget sub-
mitted by the previous Administration is $196.9 billion.
I am proposing new reductions in Federal spending of $4.0 billion, reducing the
overall spending figures for the coming fiscal year to $192.9 billion. I am also
recommending to the Congress cuts totalling $5.5 billion in appropriations
requests and other budget authority -- thereby reducing significantly the future
spending obligations of the Federal government.
Our proposals mean not only a substantial cutback in the spending of tax
dollars in the coming year, but a substantial reduction in claims against future
tax dollars and future budgets. With this approach, we believe we have made a
necessary and significant beginning toward bringing the Federal budget under
closer Presidential control; we have taken the reins firmly in hand.
We recognize, however, the responsibility for budget control is a continuing
one. For the past eight years -- the sole exception being the current year --
our government has run an uninterrupted string of budget deficits. Our actions
now, we believe, have brought an end to the era of the chronic budget deficit.
As a result of this review and these cutbacks, we are proposing the largest
budget surplus in eighteen years -- and the fourth largest in our history -- a
surplus of $5.8 billion dollars for fiscal year 1970.
We believe that a surplus of this magnitude will speak louder than any words
to the business and labor communities in this country and to the world that
the United States is determined to bring a halt to the inflationary spiral which
has seriously affected our economy these last four years.
In the last thirty-six months, inflation has seriously eroded the value of every
pay raise won by the average wage earner; it has done unquestionable harm to
the economic welfare of the very poor in our society and those millions of
Americans living on pensions and Social Security; it has weakened our inter-
GERALD FORD VIBRART
national payments position; it has sapped foreign and domestic confidence in
the American dollar.
Inflation is the most disguised and least just of all the taxes that can be imposed;
and we intend to lift that hidden tax off the backs of an over-taxed people.
These reductions in spending cannot be achieved effortlessly, or without making
some very difficult decisions as to our priorities. But they can be achieved by
an Administration and a Congress dedicated to eliminating the crushing burden
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of inflation and committed to the responsible control of the Federal budget.
They can be achieved if this government is willing to impose upon itself the
same new discipline that inflation and rising taxes have imposed upon the
American wage earner and his family.
Some of the decreases in the budget will require legislation; others will result
from smaller appropriation requests; still others will come from executive
actions that I have directed be taken. In sum, these reductions constitute
my best judgment as to where to reduce this budget to bring the acceleration
of Federal spending under control.
But even in the wake of these cuts -- which we believe to be in the best interest
of all Americans -- great resources remain at our disposal to do the work that
needs to be done in our society.
For example, I am proposing for fiscal year 1970 a level of spending for our
domestic problems $6 1/2 billion higher than the figure for the fiscal year 1969.
This Administration will never turn its back upon the growing needs of the
American people. That is why domestic spending in the coming year -- even
after these cuts -- will far exceed that for any other year in American history.
We have come into office convinced that there are better ways than the old ways
to solve new problems; and we intend to explore these more hopeful approaches.
With regard to specific cuts, the Secretary of Defense has already identified
reductions in defense budget outlays of $1.1 billion. We believe these cuts
will enhance our economic security without risk to our national security.
Information with regard to other specific cuts will be released by the Bureau
of the Budget on Tuesday.
As part of the budget review, I have directed that a substantial reduction be
made in the level of Federal employment recommended by the preceding
Administration. As a result, full-time employment in the executive branch,
by the close of the coming fiscal year, will be more than 45, 000 below that
recommended in the January budget.
These reductions will not be made "across the board, 11 but selectively, since
manpower for vital needs such as crime control will have to be increased.
Consistent with these objectives, I will ask Congress for repeal of Section 201
of the Revenue and Expenditure Control Act, which imposes restrictions on
hiring in the executive branch. I am in full accord with the objective of that
legislation. However, that objective is best achieved, not through some
arbitrary limitation, but through leadership determined to reduce personnel
and willing to make the difficult decisions as to where the cuts should come.
Just as we have made the judgments as to where the Federal budget should be
cut, so we ask for the authority to determine those areas where the reduction
of personnel can most beneficially be made.
Although the officials of this Administration have worked long and hard con-
ducting this review of Federal expenditures and employment, the 1970 budget is
not yet a finished effort. Conditions affecting the budget change constantly.
What will remain constant, however, is our determination to rein in this rising
cost of living and to spend the tax dollars of the American people with a full
awareness of the personal effort and labor they represent.
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GERALD
FOR RELEASE ON DELIVERY TO THE SENATE OR THE
APRIL 21, 1969
HOUSE OF REPRESENTATIVES AT 12 NOON EST
Office of the White House Press Secretary
THE WHITE HOUSE
TO THE CONGRESS OF THE UNITED STATES:
Reform of our Federal income tax system is long overdue. Special
preferences in the law permit far too many Americans to pay less than their
fair share of taxes. Too many other Americans bear too much of the tax
burden.
This Administration, working with the Congress, is determined to
bring equity to the Federal tax system. Our goal is to take important first
steps in tax reform legislation during this session of the Congress.
The economic overheating which has brought inflation into its fourth year
keeps us from moving immediately to reduce Federal tax revenues at this time.
Inflation is itself a tax -- a cruel and unjust tax that hits hardest those who
can least afford it. In order to "repeal" the tax of inflation, we are cutting
budget spending and have requested an extension of the income tax surcharge.
Although we must maintain total Federal revenues, there is no reason
why we cannot lighten the burden on those who pay too much, and increase the
taxes of those who pay too little. Treasury officials will present the Adminis-
tration's initial group of tax reform proposals to the Congress this week.
Additional recommendations will be made later in this session. The overall
program will be equitable and essentially neutral in its revenue impact. There
will be no substantial gain or loss in Federal revenue, but the American taxpayer
who carries more than his shareof the burden will gain some relief.
Much concern has been expressed because some citizens with incomes
of more than $200,000 pay no Federal income taxes. These people are
neither tax dodgers nor tax cheats. Many of them pay no taxes because they
make large donations to worthy causes, donations which every taxpayer is
authorized by existing law to deduct from his income in figuring his tax bill.
But where we can prevent it by law, we must not permit our wealthiest
citizens to be 100% successful at tax avoidance. Nor should the Government
limit its tax reform only to apply to these relatively few extreme cases.
Preferences built into the law in the past -- some of which have either outlived
their usefulness or were never appropriate -- permit many thousands of
individuals and corporate taxpayers to avoid their fair share of Federal taxation.
A number of present tax preferences will be scaled down in the Admin-
istration's proposals to be submitted this week. Utilizing the revenue gained
from our present proposals, we suggest tax reductions for lower-income
taxpayers. Further study will be necessary before we can propose changes in
other preferences and as these are developed we will recommend them to the
Congress.
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Specifically, the Administration will recommend:
-- Enactment of what is in effect a "minimum income tax"
for citizens with substantial incomes by setting a 50%
limitation on the use of the principal tax preferences
which are subject to change by law.
This limit on tax preferences would be a major step
toward assuring that all Americans bear their fair
share of the Federal tax burden.
-- Enactment of a "low income allowance, " which will
remove more than 2, 000, 000 of our low income
families from the Federal tax rolls and assure that
persons or families in poverty pay no Federal income
taxes.
This provision will also benefit students and other young
people. For example, the person who works in the
summer or throughout the year and earns $1, 700 in
taxable income and now pays $117 in Federal income
taxes -- would pay nothing.
The married couple -- college students or otherwise --
with an income of $2, 300 and current taxes of $100 would
pay nothing.
A family of four would pay no tax on income below $3, 500 --
the cut-off now is $3,000.
The "low income allowance, II if enacted by the Congress, will offer
genuine tax relief to the young, the elderly, the disadvantaged and the
handicapped.
Other tax reform proposals would also help workers who change
jobs by liberalizing deductions for moving expenses and would reduce
specific preferences in a number of areas:
-- taxpayers who have certain nontaxable income or other
preferences would have their non-business deductions
reduced proportionately.
-- certain mineral transactions (so-called "carved out"
mineral production payments and "ABC" transactions)
would be treated in a way that would stop artificial
creation of net operating losses in these industries.
-- exempt organizations, including private foundations,
would come under much stricter surveillance.
-- the rules affecting charitable deductions would be
tightened -- but only to screen out the unreasonable
and not stop those which help legitimate charities
and therefore the nation.
-- the practice of using multiple subsidiaries and
affiliated corporations to take undue advantage of
the lower tax rate on the first $25,000 of corporate
income would be curbed.
GERALD R. FORD LIBRARA
-- farm losses, to be included in the "limitation on tax
preferences, 11 would be subject to certain other
restrictions in-order to curb abuses in this area.
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I also recommend that the Congress repeal the 7% investment tax
credit effective today.
This subsidy to business investment no longer has priority over other
pressing national needs.
In the early 60's, America's productive capacity needed prompt
modernization to enable it to compete with industry abroad. Accordingly,
Government gave high priority to providing tax incentives for this moderni-
zation.
Since that time, American business has invested close to $400 billion
in new plant and equipment, bringing the American economy to new levels of
productivity and efficiency. While a vigorous pace of capital formation will
certainly continue to be needed, national priorities now require that we give
attention to the need for general tax relief.
Repeal of the investment tax credit will permit relief to every taxpayer
through relaxation of the surcharge earlier than I had contemplated.
The revenue effect of the repeal of the investment tax credit will begin
to be significant during calendar year 1970. Therefore, I recommend that
investment tax credit repeal be accompanied by extension of the full surcharge
only to January 1, 1970, with a reduction to 5% on January 1. This is a
reappraisal of my earlier recommendation for continuance of the surcharge until June
30, 1970 at a. 10% rate. If economic and fiscal conditions permit, we can look
forward to elimination of the remaining surtax on June 30, 1970.
I am convinced, however, that reduction of the surtax without repeal of
the investment tax credit would be imprudent.
The gradual increase in Federal revenues resulting from repeal of the
investment tax credit and the growth of the economy will also facilitate a start
during fiscal 1971 in fuding two high-priority programs to which this Admin-
istration is committed:
Revenue sharing with State and local governments.
-- Tax credits to encourage investment in poverty areas
and hiring and training of the hard-core unemployed.
These proposals, now in preparation, will be transmitted to the Congress
in the near future.
The tax reform measures outlined earlier in this message will be
recommended to the House Ways and Means Committee by Treasury officials
this week. This is a broad and necessary program for tax reform. I urge
GERALD R. FORD TREATY
its prompt enactment.
But these measures, sweeping as they are, will not by themselves
transform the U.S. tax system into one adequate to the long-range future. Much
of the current tax system was devised in depression and shaped further in war.
Fairness calls for tax reform now; beyond that, the American people need
and deserve a simplified Federal tax system, and one that is attuned to the
1970's.
We must reform our tax structure to make it more equitable and efficient;
we must redirect our tax policy to make it more conducive to stable economic
growth and responsive to urgent social needs.
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That is a large order. Therefore, I am directing the Secretary
of the Treasury to thoroughly review the entire Federal tax system and
present to me recommendations for basic changes, along with a full
analysis of the impact of those changes, no later than November 30, 1969.
Since taxation affects so many wallets and pocketbooks, reform
proposals are bound to be controversial. In the debate to come on reform,
and in the even greater debate on redirection, the nation would best be
served by an avoidance of stereotyped reactions. One man's "loophole"
is another man's "incentive." Tax policy should not seek to "soak" any
group or give a "break" to any other -- it should aim to serve the nation
as a whole.
Tax dollars the Government deliberately waives should be viewed
as a form of expenditure, and weighed against the priority of other
expenditures. When the preference device provides more social benefit
than Government collection and spending, that "incentive" should be
expanded; when the preference is inefficient or subject to abuse, it
should be ended.
Taxes, often bewailed as inevitable as death, actually give life to
the people's purpose in having a Government: to provide protection,
service and stimulus to progress.
We shall never make taxation popular, but we can make taxation fair.
RICHARD NIXON
THE WHITE HOUSE,
April 21, 1969.
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