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Letter from Arthur F. Burns to RN RE: Enclosed report on recommendations for early action. 1 pg. [Letter], 1/18/1969
"Recommendations for Early Action or Consideration: A Report to the President-Elect" submitted by Arthur F. Burns. Table of Contents and report pages 1-65. 72 pgs. [Report], 1/18/1969
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This file contains:
Letter from Arthur F. Burns to RN RE: Enclosed report on recommendations for early action. 1 pg. [Letter], 1/18/1969
"Recommendations for Early Action or Consideration: A Report to the President-Elect" submitted by Arthur F. Burns. Table of Contents and report pages 1-65. 72 pgs. [Report], 1/18/1969
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Richard Nixon Presidential Library
White House Special Files Collection
Folder List
Box Number Folder Number Document Date
Document Type
Document Description
20
1
01/18/1969
Letter
Letter from Arthur F. Burns to RN RE:
Enclosed report on recommendations for
early action. 1 pg.
20
1
01/18/1969
Report
"Recommendations for Early Action or
Consideration: A Report to the President-
Elect" submitted by Arthur F. Burns. Table
of Contents and report pages 1-65. 72 pgs.
Tuesday, September 15, 2009
Page 1 of 1
ECIDENT-ELECT
Richard M. Nixon
450 Park Avenue
New York, N.Y. 10022
(212) 631-8400
January 18, 1969
The Nonorable Richard M. Nixon
President-Eluct
The Pierre Notel
Fifth Avenue as 6130 Street
New York, New York
Dear Nr. President:
The enclosed report presents recommendations for
early action OF consideration on your part. It is 2
revised and chlarged version of the tentative report
that I submitted to you on January 6.
The present report, Like its predecessor, is
mainly directed to the legislative and executive tasks
in the domestic sphere that will need to be faced in
the first fet months of your Administration. The
report does deal, however, with some major problems in
the international economic area.
I need hardly say that this report is merely the
beginning of the work that will need to be done on
drawing up a plan for legislative and executive actions.
I trust that you will find it in useful beginning.
With every good wish, I am,
Sincerely yours,
Arthur F. Burns
Chadlen, Pro you
Enclosure
Coordination Crowp
FOR
EARLY ACTION on CONSIDERATION
A Report to the President-Elect
Submitted by
Arthur F. Burns
Chairman, Program Coordination Group
January 18, 1969
- i -
RECOMMENDATIONS FOR EARLY ACTION OR CONSIDERATION
Page
I - ELECTORAL REFORM
1. Electoral College
1
2. Voting Age
2
3. Clean Elections
2
4. Congressional Redistricting
3
5. District of Columbia Representation
5
II - GOVERNMENT ORGANIZATION
1. Reorganization Authority
7
2. Hoover-type Commission
8
3. Office of Executive Management
10
4. Arms Control and Disarmament Agency
11
5. Economic Policy Board
12
6. Post Office Department
14
7. Educational Activities
14
8. Health Activities
16
9. Internal Revenue Service
17
10. A Labor Court
17
III - FEDERAL EXPENDITURES
1. Revision of Budget for Fiscal 1969
19
2. Contingency Reserve for Fiscal 1969
19
3. Revision of Budget for Fiscal 1970
20
4. Revenue Sharing
20
5. Grant-in-Aid Programs
21
IV - FEDERAL TAXATION
1. Commission on Federal Tax Policy
23
2. Income Tax Surcharge
23
3. Business Income Taxation
24
4. Personal Income Taxation
25
5. Excise Taxes
27
V - FEDERAL DEBT
1. Debt Ceiling
28
2. Interest Rate Ceiling on Treasury Issues
28
- ii -
Page
VI - FEDERAL CREDIT PROGRAMS
1. Reappraisal of Existing Credit Programs
30
2. Priorities in Credit Programs
30
3. Relation of Credit Programs to Over-all
Economic Policy
31
4. Coordination of Debt Issues
32
VII - RESOURCES AND ENVIRONMENT
1. Population and Family Planning
33
2. Oceanography
34
3. Agricultural Reforms
35
4. Economic Development Assistance Act
36
5. Appalachian Development Program
37
VIII - SCIENCE AND TECHNOLOGY
1. Organizational Changes
40
2. National Science Foundation
41
3. Military Research and Development
43
4. Supersonic Transport
43
5. National Accelerator Laboratory
45
6. Post-Apollo Space Programs
46
7. Space Boosters
47
IX - TRANSPORTATION
1. Airport Development
48
2. Budget for Air-traffic Control
48
3. FAA Regulations
49
4. Highway Program
49
5. New Canal in Central America
51
6. Transportation Commission
52
X - MANPOWER POLICY
1. Modernized Employment Service
54
2. Job Vacancy Data
54
3. Encouragement of Worker Migration
55
4. Mexican-American Conference
55
5. Remedial Manpower Programs
56
6. Transition from School to Jobs
56
7. Minimum Wage Amendments
57
8. Farm Workers under Taft-Hartley
58
9. Morale of Federal Employees
59
10. Disputes Involving Public Employees
60
11. Al1-Volunteer Armed Force
60
- iii -
Page
XI - EDUCATION
1. The Federal Role
63
2. Urban Schools
66
3. Student-Teacher Corps
68
4. Institute for Educational Future
68
XII - URBAN AFFAIRS
1. Council for Urban Affairs
70
2. Office of Economic Opportunity
71
3. Voluntary Programs
72
4. Tax Incentives to Private Efforts
75
5. Human Investment Act
78
6.
Community Self-Determination Act
79
7. Supply of Skilled Construction Workers
81
8. Review of Davis-Bacon Act
82
9. Equal Employment Opportunity Commission
82
XIII - SOCIAL SECURITY AND VETERANS PROGRAMS
1. Cost-of-Living and Other Adjustments
84
2. Problems of the Aged
85
3. Veterans Programs
86
XIV - HEALTH CARE
1. Medicaid
87
2. Medicare
87
3. Hill-Burton Act
88
XV - WELFARE PROGRAMS
1. Need for Critical Review
90
2. Food for the Poor
91
3. Declaratory Applications
92
XVI - BUSINESS REGULATION
1. One-bank Holding Companies
93
2. Interest Rate Ceilings on Deposits
94
3. Occupational Safety.
95
4. Pension and Welfare Disclosure Act
96
XVII - CRIME AND LAW ENFORCEMENT
1. National Law Enforcement Council
98
2. Crime in the District of Columbia
99
3. Bail Reform
101
4. Narcotics Problem
102
5. Obscenity
103
6. Unified Correction Service
104
7. Organized Crime
105
- iv -
Page
XVIII - INTERNATIONAL ECONOMIC RELATIONS
1. U.S. Investing and Lending Abroad
107
2. Foreign Aid
109
3. Textile Imports
111
4. Tariffs and Other Trade Barriers
112
5. Tax on Foreign Deposits
115
6. Telecommunications
115
7. International Space Cooperation
116
- V -
CROSS REFERENCES
The recommendations discussed in this report are
identified by section and number. For example, the recom-
mendation concerning Excise Taxes is the 5th item in Section
IV (FEDERAL TAXATION) and will be referred to as IV-5.
The recommendations presented in one section are' some-
times also pertinent to other sections. For example, when
you study Section II, which deals with GOVERNMENT ORGANIZA-
TION, you may wish to examine also the related items in
other sections, as shown below.
Section
See Also Items
II - GOVERNMENT ORGANIZATION
VII-2, VII-5, VIII-1,
XI-4, XII-1, XII-2, XII-3,
XVII-1, XVII-6
III - FEDERAL EXPENDITURES
V-1, VII-2, VII-5, VIII-2,
VIII-3, VIII-4, VIII-5,
IX-1, IX-2, IX-5, X-1, X-2,
X-11, XI-2, XI-3, XI-4,
XIII-1, XIV-1, XIV-2, XIV-3,
XVI-3, XVII-1, XVII-2, XVII-4
IV - FEDERAL TAXATION
II-9, III-4, IX-1, XII-4,
XII-5, XII-6, XVII-7, XVIII-5
V - FEDERAL DEBT
VI-4
- v1 -
Section
See Also Items
VI - FEDERAL CREDIT PROGRAMS
V-2, XVIII-2
VII - RESOURCES AND ENVIRONMENT
VIII-4
VIII - SCIENCE AND TECHNOLOGY
VII-2, IX-5, X-1, XVI-3,
XVIII-6, XVIII-7
IX - TRANSPORTATION
VIII-4
X - MANPOWER POLICY
II-10, VII-1, VII-4, VII-5,
XI-2, XII-3, XII-4, XII-5,
XII-7, XII-8, XII-9, XIII-3,
XVI-3, XVI-4, XVIII-4
XI - EDUCATION
II-7, X-6, XII-3, XII-4, XII-5
XII - URBAN AFFAIRS
III-5, VI-2, VII-1, VII-3,
IX-6, X-1, X-2, X-5, X-6,
XI-2, XI-3, XIII-1, XIV-1,
XIV-2, XV-1, XVII-2, XVII-4
XIII - SOCIAL SECURITY AND
VETERANS PROGRAMS
XIV-1, XIV-2
XIV - HEALTH CARE
II-8
XV - WELFARE PROGRAMS
X-3, X-5, X-7, XII-9, XIII-2,
XIV-1
XVI - BUSINESS REGULATION
IX-3, X-6, X-7, x-8, XII-8,
XVII-7, XVIII-1, XVIII-3,
XVIII-6
I - ELECTORAL REFORM
1. Electoral College
Experience over the years, and more particularly the
recent election, demonstrates that the present electoral
college system is dangerously inadequate. The country
is definitely in the mood for electoral reform, and it
seems highly important that you assume early leadership
in this area.
The provisions of a constitutional amendment, so de-
signed as to encompass your public expressions on the
subject of electoral college reform, might run as follows:
(a) Abolish the office of independent elector.
(b) Retain the present number of electoral votes
for each state.
(c) Award the electoral votes in each state on a
proportional basis.
(d) The candidate who receives the largest number
of electoral votes, provided that the number is
(say) at least 40 per cent of the total elec-
toral vote, will be declared the winner.
(e) In the event that a candidate does not receive
the required percentage of the total electoral
vote, a runoff election between the two top
candidates would be held as quickly as possible
(say, within two weeks).
- 2 -
(f) The winning candidate in the regular election,
or in the event of a runoff the winner of that
election, would immediately be designated the
President-Elect, and the present laws of
succession would apply from that point on.
In considering the controversial subject of elec-
toral college reform, it would be highly desirable to
consult with Congressmen William McCulloch and Richard
Poff, also with Senators Dirksen, Hruska, and Mundt.
2. Voting Age
A constitutional amendment, which would require the
states to extend suffrage to all those of age 18 and
above, deserves serious consideration. Your leadership
in behalf of such a reform may help to dispel the sense
of frustration that now characterizes so many of our
young people.
However, before moving in this direction, you or
the Attorney General will want to discuss this question
thoroughly with Congressional leaders of the Republican
Party. There appears to be limited support for a voting
age amendment among Republican Congressmen.
3. Clean Elections
Republican-sponsored Clean Election Legislation was
- 3 -
reported by the House Administration Committee during
the 90th Congress. However, it was never brought to
the House floor.
The House Republican Leadership, the House Repub-
lican Policy Committee, and an overwhelming majority of
the Republican members are committed to this legislation.
It can be anticipated that it will be introduced early
in the session.
It seems important that the Republican bill receive
the support of your Administration. Congressman Glenard
Lipscomb (ranking Republican on the House Administration
Committee) and Senator Charles Goodell (who was a prin-
cipal sponsor of this legislation when he was in the
House) should be contacted at the earliest convenient
date.
One possible point of embarrassment is the fact that
a number of Republican Finance Committees were late in
filing their reports under the requirements of the present
law. This fact has been publicly noted by the Clerk of
the House and he has forwarded this information to the
(Johnson) Attorney General.
4. Congressional Redistricting
In the 90th Congress a Congressional Redistricting
Bill was passed by the House but was not agreed to by the
- 4 -
Senate. This bill seeks to introduce the essential ele-
ment of certainty into the presently troubled situation.
It would establish temporary criteria to be effective
during the 91st and 92nd Congresses and permanent stan-
dards for the 93rd and subsequent Congresses.
The permanent standards established by this bill are
as follows:
(a) Each state shall establish by law a number of
districts equal to the number of authorized
representatives.
(b) Representatives shall be elected only from
districts so established. Existing provisions
for representatives-at-large in multimember
states are eliminated.
(c) Each district shall be composed of contiguous
territory in as reasonably compact form as the
state finds practicable.
(d) The district with the largest population in a
state shall not exceed by more than 10 per cent
the district with the smallest population, as
determined under the most recent decennial census.
Something in the nature of guidelines for the Courts
should be enacted. A redistricting bill will undoubtedly
be introduced again.
Although the redistricting problem will hardly merit
- 5 -
a high priority in your legislative plans, it would be
well to call it to the attention of the Attorney General.
5. District of Columbia Representation
During the past several years, there has been an
increasing demand for some type of Congressional repre-
sentation for the District of Columbia. Three general
plans have been advanced:
(a) Grant the District a nonvoting delegate in the
House of Representatives.
(b) Consider the District of Columbia the same as
a Congressional District for purposes of re-
presentation. This would give the District one
and possibly two Representatives.
(c) Consider the District of Columbia the same as
a state for purposes of representation. This
would give the District two Senators and one
and possibly two Representatives.
The "nonvoting delegate" plan can be handled through
a simple statutory change, while the other two plans
would call for a constitutional amendment. Congressional
hearings on these plans will probably be held in 1969.
In view of the political excitement surrounding the
District of Columbia problem, it would be well to
instruct the Attorney General to confer with the legis-
- 6 -
lative leaders from both the Judiciary and District Com-
mittees and also with appropriate District of Columbia
officials.
- 7 -
II - GOVERNMENT ORGANIZATION
1.
Reorganization Authority
The Reorganization Act of 1949 has just expired
(December 31, 1968). This basic law gave the President
authority to propose reorganization plans for Federal
agencies, such plans to go into effect automatically
unless vetoed within 60 days by either body of Congress.
The purpose of the original act was to promote
efficiency and economy in government, and it has had bi-
partisan support through the years. In the last Congress,
the House voted a two-year extension of the law but the
Senate failed to act.
A special message should be sent promptly to the
Congress requesting renewal of the President's general
reorganization authority; that is, re-enactment of the
statute that expired in December, 1968.
In addition, the special message should request new
discretionary authority to reorganize the Executive
Office without further reference to Congress. At present,
the President does not have formal reorganization powers
for his own Executive Office which are comparable to
those of cabinet officers in their separate departments.
- 8 -
2. Hoover-type Commission
Your Administration faces numerous and difficult
problems in the area of government organization. Several
different approaches to restructuring of the government
may be taken.
(a) There is much to be said for a new "Hoover,
Commission.' 11 The various task forces have
repeatedly raised serious questions about the
organization of individual departments and
agencies. There is extensive demand in the
Congress for a new "Hoover Commission. " You
?
also promised to do this.
(b) On the other hand, the Task Force on Organi-
zation of the Executive Branch argues cogently
that an Advisory Committee on Government Orga-
nization, made up of distinguished private
citizens and staffed by the Budget Bureau's
Office of Executive Management, would be a
more flexible device, especially since it would
be able to attend to urgent problems without
the long delays inherent in a single, massive
reorganization study. For problems of unusual
complexity, the Task Force recommends special
commissions.
(c) Still another approach has been suggested by
- 9 -
Mr. Ash in a memorandum that he prepared for
you. Under his proposal, as described in
that memorandum, reorganization problems as
well as many other functions (including some
undefined supervision of the Bureau of the
Budget) would be handled in the White House by
an Assistant to the President. Although this
proposal cannot be lightly dismissed, its
potential difficulties need to be recognized.
First, it would involve the White House in some
operating responsibilities and may therefore
result in an embarrassingly large White House
staff. Second, it carries the danger of
alienating some of your most trusted colleagues
and advisers. Third, it may be publicly chal-
lenged on the ground of over-centralizing
authority in an official who has neither been
elected by the people nor confirmed by the
Senate. Frank Lindsay, Chairman of the Task
Force on Government Organization, has carefully
reviewed the Ash proposal and he completely
agrees with the opinion here expressed.
(d) Although the Task Force has argued against a
new "Hoover Commission", and Mr. Ash also ques-
tions its uscfulness, it is important to see
- 10 -
that the approaches which they prefer are not
necessarily inconsistent with the "Hoover
Commission" approach. Clearly, a comprehensive
study of governmental organization does not
rule out early action based on limited, special
studies. As for the Ash proposal, a full and
candid discussion with Mr. Ash has indicated
that it too can be modified so that it will be
free from the objections raised in this report.
It is critically important that you reach an early
decision on the general approach you wish to take to the
many and pressing problems of government reorganization.
In making a decision, you should keep in mind that many
Congressmen, both Republicans and Democrats, are in favor
of a Hoover-type Commission; SO that, if you delay a
pronouncement on this subject, the Democrats will probably
introduce such legislation and many Republicans would
feel that they must go along.
3. Office of Executive Management
The Bureau of the Budget has long had responsibility
for organization and management problems. In recent
years, however, its capability for dealing with special
problems has atrophied. An Office of Executive Manage-
ment was established during the past year within the
- 11 -
Bureau for the purpose of restoring, broadening, and
strengthening the management and program coordination
role, but no head for this office has yet been appointed.
There is much to be said for building up the capa-
bility of the Bureau of the Budget to handle organization
and management problems. This may be accomplished by
establishing a second deputy directorship in the Bureau;
by naming this Deputy Director as the head of the Office
of Executive Management; and by assigning to this Office
the responsibility of reviewing, evaluating, and coor-
dinating Federal programs and of making sure that the
executive departments make effective use of regional
agencies, especially in their relation to state and local
governments.
It would appear desirable to carry out this proposal
whether or not you accept Mr. Ash's scheme. In any
event, you will want to discuss rather promptly the
present proposal with Mr. Ash and with the Budget Director.
other
4. Arms Control and Disarmament Agency
One way in which you could emphasize your great and
any approach
enduring concern for the establishment and maintenance
of peace is to endow the Arms Control and Disarmament
Agency, which now has a very lowly status in the Federal
establishment, with real prestige.
- 12 -
This could be accomplished by announcing that the
Director of the Agency is to be given Cabinet status,
that he will become a member of the National Security
Council, and that he will be expected to report to the
President and the Cabinet on disarmament efforts in the
context of the government's over-all efforts to achieve
a durable peace.
A still more dramatic step might be to ask the
Congress to absorb the Disarmament Agency in a new Depart-
ment of Peace. Such a Department might absorb other
governmental activities -- for example, the U.S. Infor-
mation Agency, the Peace Corps, and the Food for Peace
Program. There may be grave difficulties, however, in
persuading the Department of State and the Congress of
the wisdom of the proposal.
Either of the two suggested actions would be hearten-
ing, particularly to young people, both here and abroad.
5. Economic Policy Board
Governmental planning in the realm of national
security is now coordinated through the National Security
Council. There is a serious need for a corresponding
mechanism for coordinating the many separate, and not
infrequently conflicting, policies of the governmental
departments and agencies concerned with economic matters.
- 13 -
It is recommended that you give prompt considera-
tion to the establishment of an Economic Policy Board.
The leading economic agencies -- say, the Treasury De-
partment, Commerce Department, Labor Department, the
Bureau of the Budget, the Council of Economic Advisers,
perhaps also the Department of Health, Education and
Welfare -- would have a permanent place on this Board.
Other departments or agencies (notably the Federal Re-
serve Board) would send representatives when their range
of activity was pertinent. The meetings would be
scheduled on a regular basis, say, every other Monday.
The Chairman of the Council of Economic Advisers could
best serve as the Secretary of the Economic Policy Board.
The President, of course, would preside over this Board.
A Board functioning along these lines would not
only facilitate the coordination of economic policies and
the early correction of mistaken policies; it probably
would also economize on the President's time. However,
the Economic Policy Board would not eliminate the need
for the "troika" -- that is, for occasional meetings at
which the Secretary of the Treasury, the Chairman of the
Federal Reserve Board, and the Chairman of the Council
of Economic Advisers would discuss sensitive financial
questions with the President.
In view of the special role that the Council of
- 14 -
Economic Advisers would have under the present proposal,
it is recommended that you discuss it with Mr. McCracken
in the near future.
6. Post Office Department
In the 1968 Platform, a definite commitment was made
in favor of "extension of the merit principle to post-
masters and rural carriers." Also, full consideration
of improvements in the nation's postal service, as re-
commended by the Commission on Postal Organization, was
pledged. Then too, in the last Congress, the House
Republican Policy Committee went on record as favoring
the removal of politics from the Post Office, with rural
carriers and postmasters specifically mentioned.
With the advent of a new Administration, an excellent
opportunity is presented to reorganize the Post Office
Department. A first step has been taken in the appoint-
ment of a businessman as Postmaster General.
As quickly as possible, discussions should be held
with legislative and party leaders, so that the ramifica-
tions of a businesslike approach to the operation of
the Post Office are clearly understood and appreciated.
7. Educational Activities
The Task Force on Education makes a strong plea for
- 15 -
the reorganization of the Federal government's edu-
cational activities, which it asserts are suffering
because of "a multiplicity of uncoordinated, and some-
times conflicting, initiatives from many different
departments and agencies of the Executive Branch and
from the Congress. " It notes that less than a third of
total annual Federal expenditures on education of
approximately $12 billion is administered by the Com-
missioner of Education.
The Task Force calls attention to various reorgani-
zation possibilities, including creation of an inde-
pendent Department of Education; but notes that it
"did not feel qualified to pass judgment on them" or to
decide precisely how much consolidation of Federal ac-
tivities in this area is called for. It definitely
favors, however, an upgrading of the post of Commissioner
of Education, noting that "the rank and salary of the
Commissionership are now totally incommensurate with
the level of responsibility involved. 11
The Task Force's comments on the uncoordinated
nature of Federal educational programs have obvious
merit, and early consideration of this matter by a
special commission seems indicated.
- 16 -
8. Health Activities
The Task Force on Health makes 2 variety of recom-
mendations for reorganizing Federal activities relating
to health programs. It argues for the creation of a
separate Department of Health (something you have pro-
mised to consider), and also urges creation of a Council
of Health Advisers within the Executive Office. These
two recommendations are of such nature that they probably
can be best considered either by a new "Hoover Commission"
a
or by/special Commission on the Organization of Federal
Health Activities.
The Task Force makes other narrower proposals that
could be acted on earlier if the Secretary of HEW agrees
that they have merit. One of these is a recommendation
that the administration of Medicaid and Medicare be put
under the Assistant Secretary of Health and Scientific
Affairs, who already has line authority over the Public
Health Service and over-all responsibility for coor-
dination of the health functions of the Social and
Rehabilitation Service and the Office of Education.
You should ask the Secretary of HEW to consider promptly
the merits of this proposal, particularly because of
the administrative deficiencies that now plague Medicare
and Medicaid.
- 17 -
9. Internal Revenue Service
The Task Force on Federal Tax Policy recommends that
you appoint an "advisory commission" to report to you
within six to eight months the results of a study of the
status and administration of the Internal Revenue Service.
As to status, the inquiry would consider whether the
Internal Revenue Service should report directly to the
President, as well as whether increased autonomy within
the Treasury Department would serve the public interest.
As to administration, the inquiry would consider per-
sonnel needs, salary standards, and procedures respecting
taxpayer compliance.
If you should decide on a Hoover-type Commission, it
would concern itself as a matter of course with the
Internal Revenue Service. On the other hand, if there
is to be no new "Hoover Commission", you will want to
consult with the Secretary of the Treasury and perhaps
also with Congressional leaders on the proposal for a
special study of the Internal Revenue Service. In this
connection, note that the "advisory commission" suggested
by the Task Force would not necessarily call for legis-
lation.
10. A Labor Court
There is a growing awareness that a complete reor-
- 18 -
ganization of the labor laws and the method by which
they are enforced may be necessary. All too often,
Congressional action has been nullified through agency
or departmental interpretations.
Certainly, labor-management laws should be inter-
preted and applied by persons of judicial temperament
acting in an atmosphere that is well insulated from poli-
tical and special interest pressures. The concept is
thus being advanced that a labor court should have juris-
diction over all facets of the labor-management field.
Senator Griffin and seven other Senators, including
Senator Percy, have introduced a bill that would abolish
the National Labor Relations Board and establish in its
place a 15-judge U.S. Labor Court similar in many res-
pects to the U.S. Tax Court. Similarly, Senator Smathers
has introduced a bill that would establish a U.S. Court
of Labor-Management Relations with jurisdiction over
labor disputes which result in work stoppages that ad-
versely affect the public interest of the Nation.
The general concept of a Labor Court is intriguing,
but this concept also raises questions concerning the
machinery needed for investigatory work, prosecution,
and so on. Preliminary discussions of this general con-
cept should be hold at an carly date between the Secretary
of Labor and the legislative leaders, including Senator
Griffin.
- 19 -
III - FEDERAL EXPENDITURES
1. Revision of Budget for Fiscal 1969
Within the first week or two of your Administration,
it would be desirable to issue an order to all department
and agency heads requesting them:
(a) to determine, after consultation with the
Budget Director, which programs within their
jurisdiction merit a low priority status;
(b) to reduce or restrain at once the expenditures
on low priority programs in this fiscal year
(that is, between January and June 30, 1969).
The Budget Director should be requested to prepare
a strong directive along these lines for your signature.
This action is needed in order to bring government
expenditures under stricter control. It is also desirable
to lay a foundation for a later reduction or elimination
of the income tax surcharge -- if that should be decided upon.
2. Contingency Reserve for Fiscal 1969
The Revenue and Expenditure Control Act of 1968
established a ceiling on expenditures for fiscal 1969,
subject to exemption for certain categories of expenditures.
You should request the Budget Director to determine
at once whether existing plans provide reasonable assurance
- 20 -
of coming to the end of fiscal 1969 without having to
request relief from the legislative expenditure ceiling.
If such assurance does not exist, the Bureau should sub-
mit to you, by a very early date, a plan of further
restraints in order to provide a margin for possible
slippage of actual expenditures beyond stipulated targets.
Needless to say, it would be embarrassing to ask
the Congress to lift the ceiling.
3. Revision of Budget for Fiscal 1970
There is a strong case, both political and finan-
cial, for revising thoroughly the budget that President
Johnson will submit before leaving office.
You should hold a meeting rather promptly with the
Budget Director (and perhaps others) to decide whether
to reformulate the entire Johnson budget for fiscal 1970.
If a more or less comprehensive revision of the budget
is decided upon, it would probably have to be presented
to Congress no later than April 1, 1969.
4. Revenue Sharing
A good deal of Congressional support has developed
for the proposal that the Federal, government share a
portion of the revenues raised by the income tax with the
- 21 -
states and localities. This proposal, of course, is
popular with governors and mayors.
Whatever the merits of any general revenue-sharing
program may be, a decision should be deferred at this
time because of budgetary constraints.
You should also keep in mind the fact that a
revenue-sharing plan is bound to defer or limit future
reductions of the Federal income tax.
5. Grant-in-Aid Programs
The existing categorical grant-in-aid system should
be overhauled to give the states and localities more
latitude in deciding on the specific uses of funds to
achieve the general objectives the Federal government
seeks to promote. The Task Force on Intergovernmental
Fiscal Relations has made three main proposals to this end:
(a) Congress should be requested to give the
President authority to consolidate existing
grant programs for related functions, subject
to disapproval by either House within a limited
period under the type of procedure used for
reorganization proposals.
(b) States and localities should be permitted to
make single applications for joint funding of
projects deriving funds from several Federal
- 22 -
sources.
(c) States and localities should be authorized to
transfer up to a specified proportion of funds
received under one grant program to another
program of the same Federal agency, provided
the total amount of any Federal program does
not exceed its authorized size.
You should ask the Budget Director and the Director
of the Council for Urban Affairs to give you, by an early
date, their reaction to these proposals.
- 23 -
IV - FEDERAL TAXATION
1. Commission on Federal Tax Policy
A thorough reexamination of the Federal tax system
is long overdue.
The Task Force on Federal Tax Policy recommends that
the new Administration request the Congress to establish
a Commission on Federal Tax Policy, which would address
itself to the task of formulating recommendations for a
Federal tax system that "would be simpler, fairer, and
more conducive to the economic advancement of all Americans. "
The proposal is to request the Congress to establish
a broadly based Commission, including members of the
legislative and executive branches of the government.
Since at least a year would be required for the Com-
mission's study, prompt action on this proposal is essen-
tial if basic tax legislation is to be attempted in 1970.
You should discuss the proposed Commission with the
Secretary of the Treasury and with Congressman Wilbur
Mills at the earliest opportunity.
2. Income Tax Surcharge
Under present law, the 10 per cent surcharge on
income tax expires on June 30, 1969. A decision whether
to extend the surcharge in its present form, to reduce
- 24 -
it, or to eliminate it cannot be delayed beyond mid-
April or thereabouts. Subject to this constraint, the
decision should be delayed as long as possible, so that
it can be made in the light of the latest information
on (a) the outlook for the economy, (b) the state of
the budget, (c) the war in Vietnam, and (d) interna-
tional political and financial prospects at large.
Of course, if a decision is made to extend the
surcharge, rather than to reduce or to eliminate it, the
extension could be merely for a six-month period.
3. Business Income Taxation
The Task Force on Federal Tax Policy has submitted
various technical proposals for changes in business in-
come taxation, in the hope that they may be legislated
(or revised by Treasury regulation) during 1969.
One proposal calls for the elimination of the "re-
serve-ratio test" in applying the depreciation guide-
lines promulgated in 1962. The suggested change would
simplify the depreciation guidelines, and reduce the
costs of compliance and administration. This change can
be made by the Treasury directly.
Another proposal seeks to liberalize the legislation,
enacted in 1958, which permits certain corporations
meeting specified tests to elect to be taxed, in effect,
as partnerships.
- 25 -
Other proposals, aiming to reduce obstacles under
which American companies operate in the international
sphere, call for revision of the tax treatment of business
income derived from foreign sources.
Still other proposals aim to eliminate existing
abuses by tightening the definition of capital gains, by
revising the tax treatment of income from real estate
investment, and by revising the tax rules regarding the
timing of receipts and deductions.
Some of the recommended changes, such as the elimi-
nation of the "reserve-ratio test", are clearly desirable
and raise few difficulties. Others are desirable in
principle but require much additional study, and it is
doubtful whether the Treasury can make firm recommendations
in time to secure legislation in 1969. However, the sooner
the Treasury turns to the thoughtful proposals of the
Task Force the better. You should urge the Treasury to
get on at once with the job of appraisal and drafting.
4. Personal Income Taxation
The Task Force on Federal Fiscal Policy recommends
the following changes in the personal income tax:
(a) increase the minimum standard deduction
(b) simplify and liberalize tax treatment of
- 26 -
moving expenses of employees
(c) liberalize income averaging.
Under present law the minimum standard deduction on
a joint return is $200 plus $100 for each exemption
allowable to the taxpayer. The proposal is to increase
the deduction to $300 plus $100 per exemption. The esti-
mated revenue loss resulting from this proposal is $350
million for fiscal 1970. This proposal would be advan-
tageous to poor people, many of whom have been hurt by
inflation. It has considerable merit.
The Internal Revenue Service now insists in many
cases on taxing, as income to the employee, the major
portion of the reimbursement of his moving expenses that
he receives from his employer. In the interests of an
efficiently operating economy, public policy should
facilitate mobility of the work force.
You should promptly inform the Secretary of the
Treasury of your reaction to the proposals of the Task
Force concerning the minimum standard deduction and the
liberalization of the moving expense allowance. You
should inform him also of your own proposal for full de-
duction of drug and medical expenses on the income tax
returns of the elderly. These proposals need to be
considered in connection with the revision of President
Johnson's budget for fiscal 1970.
- 27 -
The recommendation by the Task Force concerning
income averaging raises some difficult technical pro-
blems, and you should merely request the Treasury to
study it.
5.
Excise Taxes
According to present law, the 10 per cent excise
on telephone service will be automatically reduced to
5 per cent on December 31, 1969. Similarly, the 7 per
cent excise on new passenger automobiles will fall to
5 per cent.
It seems reasonably clear that the government can-
not afford the loss of revenue in fiscal 1970 that would
result from present legislation.
Your recommendations on these excises should be made
to the Congress at the same time as your decision on the
income tax surcharge is transmitted to the Congress.
- 28 -
V - FEDERAL DEBT
1. Debt Ceiling
The ceiling on the Federal public debt at present
is $365 billion. But, under existing legislation, the
ceiling will automatically drop to $358 billion on June
30, 1969, then return on July 1 to $365 billion.
If any revision of the debt ceiling is to be re-
quested of the Congress, it would be advisable to move
very quickly, so that the blame can be placed where it
belongs. The Secretary of the Treasury should be asked
to advise you promptly on this question.
There is another and more fundamental question raised
by the debt ceiling. This year the Federal government
is operating under an expenditure ceiling. The mood of
the Congress appears to be to continue this practice. If
that is done, there will no longer be any reason to have
a debt ceiling. Logic, however, does not always prevail
in governmental practice; and it is probably just as
well not to raise the question openly this year.
2. Interest Rate Ceiling on Treasury Issues
The Treasury is prohibited by law from paying more
than 44 per cent interest on securities issued with a
maturity in excess of seven years (raised from five years
- 29 -
by legislation of June 1967). This ceiling should be
raised or, better still, abolished.
The ceiling does not hold down the interest cost of
the public debt. On the contrary, it forces the Treasury
to borrow by issuing short-term securities, and under
recent conditions this has served to raise the cost of
borrowing. At present, the market interest rate on long-
term Treasury securities, while above the 41 per cent
ceiling, is below the interest rate the Treasury is forced
to pay for its short-term borrowings.
More important still, since the Treasury has been
unable to issue long-term securities in recent years, it
has frequently been forced to come to market with large
offerings to refinance the debt, and during the periods
when the Treasury is in the market the Federal Reserve
authorities cannot very well be expected to tighten credit
conditions as the state of the economy might require.
The frequency of large Treasury debt operations has been
an obstacle to the conduct of a stabilizing monetary policy.
The proper timing of a request to the Congress for
a revision of the interest ceiling is uncertain. You
should discuss this question at an early date with the
Secretary of the Treasury.
- 30 -
VI - FEDERAL CREDIT PROGRAMS
1. Reappraisal of Existing Credit Programs
A comprehensive reappraisal of the existing Federal
direct loan and loan guaranty programs is needed. The
Task Force on Federal Credit Programs recommends that a
Cabinet Committee do this.
The Committee should consist of the Director of the
Bureau of the Budget (as Chairman), the Secretary of the
Treasury, the Chairman of the Council of Economic Advisers,
and the Chairman of the Federal Reserve Board.
All of the Federal credit programs should be scru-
tinized by the Committee in the light of the principles
set forth in the report of the Task Force on Federal
Credit Programs. In particular, each agency involved
in administering a Federal direct loan or loan guaranty
program should be required to document the need for its
program in the light of said principles.
2. Priorities in Credit Programs
The highest priority need for new and existing
Federal loan and loan insurance programs is to meet the
problems of the city -- urban renewal and development,
decent housing for the poor, the financing of private
- 31 -
enterprice in the ghettos, elimination of air and
water pollution, improvement of the transportation system,
and other problems.
To the extent that loan insurance programs are used,
private capital will be mobilized to do the job. To the
extent, however, that loan insurance, which of itself can
be a powerful device, is supplemented by enlarged Federal
loan programs, it will be all the more necessary to cut
back on Federal lending programs where there is no longer
a high priority need. You should stress this basic rule
of fiscal prudence when and if you proceed to appoint a
Cabinet Committee to reappraise the government's loan
and guaranty programs.
3. Relation of Credit Programs to Over-all Economic Policy
In the past there has frequently been poor coordi-
nation between Federal Reserve policy and the policies
of other financial agencies -- for example, FNMA or the
Federal Home Loan Banks. If the Economic Policy Board
recommended in this report is adopted, you should imme-
diately charge a sub-committee of this Board with the
continuing responsibility of coordinating the activities
of the Federal direct loan and loan guaranty programs,
so that they can be fully responsive to the Administra-
tion's over-all economic policy. The Chairman of the
- 32 -
Council of Economic Advisers should serve as the chair-
man of this sub-committee, the other members being the
Secretary of the Treasury, the Chairman of the Federal
Reserve Board, and the Director of the Bureau of the
Budget.
If decision on the Economic Policy Board is deferred,
the Chairman of the Council of Economic Advisers should
be requested to assume the responsibility of seeing to
it that the activities of the Federal direct loan and
loan guaranty programs keep generally in step with over-
all economic policy.
4.
Coordination of Debt Issues
In the past, new debt issues of Federal credit
agencies have often come to market without any apparent
coordination with direct U.S. Treasury financing. One
way to deal with this problem would be to establish an
office within the Treasury whose responsibility would be
to coordinate all agency borrowing and to plan such
borrowing in the light of direct Treasury borrowing and
general money and capital market conditions.
This suggestion should be promptly communicated to
the Secretary of the Treasury.
-, 33 -
VII - RESOURCES AND ENVIRONMENT
1. Population and Family Planning
The explosive increase of population among the poorer
nations of the world and among our own poor people is a
terribly serious but also a terribly neglected problem.
You may want to use something like the following
paragraph in an early address:
"One of the great question marks overhanging
the last third of this century is whether mankind's
efforts to end privation and hunger will be defeated
by excessive population growth. This danger is most
acute in the less developed parts of the globe, and
I pledge that this Administration will continue to
expand efforts to give assistance to those governments
that seek our help in developing family-planning
programs. But the problem is not confined to foreign
countries. Among this nation's own disadvantaged
groups there are serious gaps in the availability of
family-planning knowledge and assistance. I assure
you that high priority will be given to the matter
of determining how best these gaps can be removed. If
A member of the White House staff should be assigned
the task of developing, with the aid of appropriate
officials in the Department of State and the Department
of HEW, a specific program.
- 34 -
2. Oceanography
Late in the campaign you recommended an expanded
effort in occanography. This field offers an opportunity
to develop at relatively low cost a program of exploration
that could excite the imagination of the American people
much as the space program has done.
Besides greater scientific knowledge, there are other
potential benefits: new sources of food, untapped re-
sources of oils and minerals, new kinds of recreation,
and the possibility of opening up new fields of technolo-
gical progress.
Beyond this, there is the question of national
security. The Soviet Union, for example, continues to
make swift progress in oceanography, with serious impli-
cations for underwater warfare. It is vitally important
that we not fall behind.
In 1966, the Commission on Marine Science, Engineer-
ing, and Resources was established to make recommenda-
tions on the national oceanographic effort. The Commis-
sion's report, which has just been published, concludes
that a national marine program will contribute to
strengthening both the national economy and national
security, calls for better coordination of efforts in the
field of oceanography, and recommends the formation of a
new, independent, Federal agency to be called the National
- 35 -
Oceanic and Atmospheric Agency.
The programs recommended by the Commission are
estimated to involve an expenditure by 1980 of about $1
billion per year over and above current outlays, which
would amount to a doubling of the present outlay on
oceanography.
The Commission's report will be controversial.
Various departments and agencies are expected to express
much concern over their loss of authority if the Commis-
sion's recommendations are carried out.
You should seek advice on the Commissions recommenda-
tions from the Secretary of the Interior, the Secretary
of Commerce, and Congressman Charles A. Mosher. Should
you have to comment at an early date on the Commission's
report, you might confine yourself to restating your
conviction that an expanded effort in oceanography is
needed, and that a more coordinated effort in this pro-
mising field will be pursued by your Administration.
3. Agricultural Reforms
The Republican Platform and your address in Des
Moines, Iowa during the campaign presented various pro-
posals for agricultural reform. The following in par-
ticular deserve implementation:
(a) Development of policies that enlarge the
- 36 -
farmer's opportunity to manage his own affairs
and give him a greater voice in shaping his
own future.
(b) Revitalization of rural America through greater
emphasis on vocational training and on economic
incentives for industrial development.
(c) Pursuit of an economic policy which protects
American agriculture from unfair foreign com-
petition, while increasing our overseas commo-
dity dollar sales.
(d) Development of a sound crop insurance program.
(e) Reorganization of the management of the Commo-
dity Credit Corporation's inventory operations.
You should ask the Secretary of Agriculture to
evaluate and assume leadership in developing these and
other proposals, with a view to possible presentation in
a Presidential special message on agriculture. A pro-
visional date for this should be set.
4.
Economic Development Assistance Act
The extension of this Act is certain to arouse
considerable controversy. For some time, Republicans
have been concerned about the duplication and waste that
has been associated with this program.
The Economic Development Assistance Act, the
- 37 -
Appalachian Regional Development Act, and the Model
Cities Legislation -- all deal with many of the same
areas and problems. Consideration should be given to
how the overlaps of existing legislation can be elimi-
nated. The provisions with the greatest degree of con-
fusion are those dealing with water pollution control
and sewage treatment.
As soon as possible, the Secretaries of the several
departments involved in this program should consult the
legislative leaders to determine a course of action.
5. Appalachian Development Program
A two-year appropriation that was voted in 1967 for
the Appalachian Regional Development program expires
June 30, 1969. This is an important matter which will
require early attention within the White House office,
not only as to future funding levels but also as to
whether the Appalachian program should serve as a model
for other new regional undertakings.
The White House must be the focal point of decision-
making on this issue because Congress appropriates money
for this program directly to the President, something
that is unique in Federal assistance efforts. The usual
procedure involves a funneling of Federal money to states
and localities through an agency or department, which
- 38 -
then administers its use.
According to recent reports, many Governors view
the Appalachian program (initiated in 1965) as a parti-
cularly promising innovation in inter-governmental rela-
tions. They regard the Appalachian Commission as pro-
viding true Federal-State partnership, something that
they do not feel is achieved when Federal aid is disbursed
by departments in the form of categorical grants. The
fact that the Commission can exercise broad discretion
in using Federal moneys means, according to its guberna-
torial supporters, that program priorities can be set in
a meaningful way. The contention also is made that much
greater efficiency in the use of funds can be achieved
with the Appalachian technique than when attempts at
solving regional problems involve different Cabinet
departments whose efforts often are not properly coordinated.
One significant feature of the Appalachian program
has been its attempt to treat the problems of rural areas,
towns, and cities on a coordinated basis. In particular,
the migration of surplus farm population toward metropoli-
tan centers, where unskilled jobs typically have not been
available in large numbers, has been discouraged. This
has been done by means of an educational thrust aimed at
making rural citizens aware of job opportunities in
middle-sized smaller centers that traditionally were by-
passed in the move from farm to city.
- 39 -
Given the support which the Appalachian program
enjoys, it seems probable that other parts of the
country will urge that they too be accorded the benefits
of similar arrangements. The merit of setting up similar
regional programs embracing the entire country would
seem to warrant early consideration. Specific attention
should be given to the possibility of using the Appalachian
Commission as a model for the regional undertakings that
have been created under the Economic Development Act for
which the Commerce Department has administrative respon-
sibility. These are reported to have been less success-
ful in their operations.
The Director of the Council for Urban Affairs and
the Secretary of Commerce should be involved in the dis-
cussion of these issues, and so too should Governor
Scranton, who is especially enthusiastic about the
Appalachian Commission.
- 40 -
VIII - SCIENCE AND TECHNOLOGY
1. Organizational Changes
The Task Force on Science and Technology recommends
a number of organizational changes pertaining to the
Federal go ernment's science activities. The objective
is to give science and technology a "status" in govern-
ment CO: ensurate with their vital role in national life;
to promote greater inter-agenc cooperation and cross-
fertilization in science activaties; and to attract a
larger umber of senior scier sts and technologists into
governm nt service.
One of the specific p= osals made by the Task Force
is that posts of Assistant ecretary for Science and
Technology be established 111 the Departments of Interior,
State, Justice, HUD, Agriculture, and the Post Office
and that appointees be given policy-making and line
authority.
You emphasized the deficiencies of Federal science
policy during the campaign, arguing that "the government
is not really in control of itself in this field. If In
view of your interest and commitment, you should seek at
a rather early date Dr. DuBridge's advice on the various
organizational proposals made by the Task Force.
You should also seek Dr. DuBridge's advice concern-
ing the organizational changes proposed by the Task Force
- 41 -
on Space. The Task Force recommends that the adminis-
trative organization of NASA be changed to correspond
to program objectives rather than to means of accom-
plishing them, and at there be a strengthening in the
coordination of NAS. and Department of Defense space
programs.
2. National Science Fou ation
Dr. Lee A. DuBr ge makes a compelling plea for
immediate relief to National Science Foundation. He
writes as follows:
"The expendi: re ceiling imposed on the
National Science F indation for fiscal 1969 was
extraordinarily dam ging -- primarily because it
forced NSF essentially to abrogate grants and
agreements already lade to many colleges and uni-
versities. It is one thing to cut the allocations
to new grants or to renewals of grants; it is quite
a different thing to say to an investigator and his
university that he cannot spend money already
granted. Since, when a grant is made, commitments
to staff and equipment are frequently made well in
advance, the expenditure ceiling forced universities
either to abrogate such commitments or else to dip
into their own funds to meet what they regarded as
- 42 -
either legal or moral obligations already undertaken.
"I suggest that immediately after January 20
the President request the Director of the Bureau
of the Budget to add approximately $25 to $30 million
to increase the authorized expenditure ceiling of
NSF. This would immediately get many important.
scientific projects out of serious financial diffi-
culties, would avoid serious damage to many impor-
tant research programs, and, most of all, it would
be an enormously important gesture for the new
administration to make to win the confidence of
scientists and educators throughout the country. It
will tell the world of higher education that the
new administration will not countenance abrogating
agreements already made, even though budgetary
tightness may sometimes force reductions in new
agreements involving future plans. An increase in
this expenditure ceiling is a trivial part of the
total national expenditures, but is a very large
factor in university research and graduate education
programs. "
You should promptly ask the Budget Director to check
the facts reported by Dr. DuBridge. If they are found to
be accurate, there is some urgency, in granting immediate
relief to NSF.
- 43 -
3. Military Research and Development
The Task Force on Science and Technology asserts
that a mistaken policy with respect to the building of
prototypes has contributed heavily in recent years in
the nation's failure to make adequate progress in develop-
ing new weapons systems. "Beginning in the early 1960's,"
the panel states, "we began greatly to overemphasize paper-
cost effectiveness studies, i.e., studies based on un-
proven assumptions regarding hardware performance and
costs
", while simultaneously reglecting exploratory
prototype construction. As a consequence of this penny-
wise posture, we have often traveled long distances down
unpromising roads at considerable expense before realiz-
ing mistakes. The Task Force argues for "a significant
increase in the number of exploratory prototypes built
in connection with new military systems, and a clear ex-
pectation that only a fraction will prove 'successful"
Since the Task Force considers the prototype problem
to be of "overriding importance", you should call it
promptly to the attention of the Secretary of Defense.
4. Supersonic Transport (SST)
To date the Federal government has spent close to
half a billion dollars on the development of the SST.
- 44 -
The original design has been scrapped, and Boeing will
submit & complete redesign of the airframe on January
15, 1969. Under the terms of the contract, the govern-
ment has up to 90 days to make a decision. There are
several options open which range from determining that
Boeing has defaulted on the contract to proceeding with
the current program.
There are complex economic, scientific, and mili-
tary questions involved in reaching a decision. For
example:
(a) Does the new design meet performance speci-
fications?
(b) IS the new design economically viable?
(c) Does the SST now merit the high national
priority that it had two years ago?
Because of the many serious, unresolved questions
still surrounding the SST, and in view of the fact that
almost half a billion has already been spent on this
project, it is recommended that you immediately estab-
lish a committee to investigate the SST program and ask
it to report its findings and recommendations within 60
days after the submission of the new Boeing design.
The membership of the committee might include scientists,
aeronautical engineers, medical men, business executives,
and military men with no vested interests. Among other
- 45 -
things, the committee should familiarize itself with a
recent study by a scientific panel established by the
Secretary of the Interior.
5. National Accelerator Laboratory
One of the items which the Task Force on Science and
Technology singles out for early action is the provision
of construction funds for the proton accelerator project
at Weston, Illinois. Because of budgetary constraints,
support for this project -- a fundamental research under-
taking with regard to the nature of matter -- has SO far
been limited to relatively moderate planning appropriations.
No funding provision has been made either for construction
or for annual operating expenses.
The Task Force reports as follows: an immediate
decision to fund $100 million for fiscal 1970 is "necessary
if the outstanding personnel already assembled
are to
be held together. At stake here is the vitality of U.S.
physical science
If we do not soon fund construction
of the
accelerator, we risk not only our world leader-
ship in this field Eo the Soviet Union/ but our effec-
tiveness in generating both basic knowledge and a corps
of exceptionally valuable scientists
"
You should seek an early assessment of this matter
from Dr. DuBridge.
- 46 -
6. Post-Apollo Space Programs
One of the more important national issues that will
have to be resolved very shortly is the scope and direc-
tion of U.S. space efforts now that the manned lunar-
landing project, which has been the chief focus of non-
military space activities throughout the 1960's, is
approaching its end.
While there is general agreement in scientific circles
that vigorous space efforts should continue, major dif-
ferences exist with respect to both specific projects and
the appropriate annual level of funding. The Task Force
on Space believes that present annual outlays are "neces-
sary and adequate"; and it recommends that NASA place
primary emphasis in coming years on manned lunar explora-
tion, on the so-called Apollo Applications Program, and
on unmanned planetary probes. It does not believe that
a commitment should now be made to more ambitious and
costly undertakings, such as construction of a manned
space station or a manned Mars mission. There is, however,
some feeling within the Task Force in favor of more ag-
gressive space activities.
It is recommended that you establish a high-level,
inter-agency committee that would report its recommendations
back to you within this calendar year. Your Science Adviser,
the head of NASA, the Director of the Bureau of the Budget,
- 47 -
and a senior official from the Department of Defense /
should serve on the committee.
7. Space Boosters
The Task Force on Space believes that a break-
through may be near in achieving dramatic cost reductions
in launching and boosting operations, with potential
savings that "could total many billions of dollars over
a 10-year period. If It feels that "continued priority"
should be given to studies of alternative approaches to
cost savings and that "these studies should be augmented
to provide a more complete understanding of the techni-
cal alternatives, and to make more complete economic
comparisons for several different future levels of
launching activity. "
You should discuss with Dr. DuBridge the panel's
specific recommendation that the Department of Defense
and NASA coordinate their studies in this area SO as to
provide, about November 1, 1969, information upon which
a joint DOD-NASA program decision could be made.
- 48 -
IX - TRANSPORTATION
1. Airport Development
In keeping with the campaign pledge you made to
relieve the crisis that plagues air transportation, you
should instruct the Secretary of Transportation to give
very high priority to the preparation of an administra-
tion Airport Development bill.
Unavoidably, a substantial increase in Federal ex-
penditures is going to be entailed (probably amounting
to at least several hundred million dollars annually),
but the budget impact can and should be completely off-
set by simultaneously instituting a variety of user
charges. It makes sense to insist that the same pay-as-
you-go principle apply here as in the case of the
Inter-
state Highway System, and the device of earmarking user-
tax collections and having them flow through an Airport
Development Trust Fund should be considered.
A number of proposals for considerably expanding
Federal assistance to airport development were introduced
in the 90th Congress and these should be a helpful point
of departure for the Secretary (especially S. 3641
approved by the Senate Commerce Committee on July 1, 1968).
2. Budget for Air Traffic Control
To dramatize further your concern with the problems
- 49 -
of air congestion and air safety, you should also ask
the Secretary of Transportation to focus promptly on
the outgoing Administration's fiscal 1969 and fiscal
1970 budgets for the air traffic control system and to
advise you within 30 days whether any supplemental
"emergency" funds should be sought. This, of course,
would be a "sitop-gap" move, pending completion of Con-
gressional action on basic airport development legislation.
3. FAA Regulations
You should be aware that the FAA has recently promul-
gated regulations that will become effective next April
27, setting hourly quotas for use of the overburdened
airports in New York, Washington, and Chicago. Strong
opposition to these regulations can be expected from cer-
tain groups within the aviation industry, and it is not
improbable that a campaign will develop to have them
killed or substantially modified.
Given the acute problem of airport congestion, there
is a strong presumption that the FAA regulations should
stand, but you should ask the Secretary of Transportation
to make an early appraisal of this matter.
4.
Highway Program
You should direct the Secretary of Transportation to
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make a specific early move to start rebuilding good
working relations between Federal and state highway
officials.
These relations appear to have deteriorated
seriously and rapidly in recent years -- with the feeling
now widespread among state officials that what used to
be a partnership arrangement has become more and more
Federal dictation. The grievances range over many par-
ticulars, embracing not only roadbuilding matters but
also such things as Equal Employment Opportunity regu-
lations.
As a starter, the Secretary and the new Highway
Administrator might jointly communicate with all state
highway departments, candidly acknowledging that a pro-
blem exists, inviting suggestions, and promising that
known trouble-spots will be reviewed. One of the things
the Secretary should specifically seek to determine is
the extent to which the manipulation of Highway Trust
Fund disbursements for economic stabilization purposes
in recent years has frustrated the efficient and orderly
management of construction projects on the Interstate
System. In view of the interest of the Council of
Economic Advisers in stabilization objectives, this
agency should join the Department of Transportation in
a review of actual experience and the delineation of a
policy for the future.
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5. New Canal in Central America
There are several powerful reasons for giving early
consideration to a second ocean-to-ocean canal in Central
America:
(a) the nation's military vulnerability to a
closing of the present canal,
(b) its saturated capability, and
(c) its inability to accommodate the current
generation of oil tankers.
The Task Force on Science and Technology has called
attention to the feasibility of a canal that would avoid
conventional locks by selecting a route (already surveyed)
involving a continuous one-way flow of water from the
Pacific to the Atlantic. Selection of such a route,
however, would have uncertain ecological consequences.
Because of the peculiar range of military, diplomatic,
and environmental problems that are involved, an inter-
departmental group (with representation from the Depart-
ments of Defense, State, HUD, and Commerce, and the Office
of Science and Technology) should be asked to give you
before the end of 1969 at least a preliminary assessment
of the problems and costs that would be entailed in build-
ing a second canal. Significantly, construction of a
second canal might afford an opportunity for the first
dramatic nonmilitary use of atomic power.
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6. Transportation Commission
A series of specific, well-publicized initiatives
to demonstrate your concern with the nation's trans-
portation problem seems particularly important because
it looks as if it may take considerable time to fashion
a coherent over-all approach to the full range of exist-
ing national transportation problems. The Task Force
on Transportation has presented a number of interesting
suggestions for actions in various areas, and these will
be passed along for review by the Department of Trans-
portation. On many vital issues, however, the Task Force
report is more suggestive than definitive, and it there-
fore may be wise to create a National Commission on
Transportation Needs and Policies.
Among other things the Commission should explore the
desirability of allowing railroads greater freedom in
setting rates, and of giving railroads as well as other
transportation enterprises the power to engage in supple-
mentary lines of business activity.
A Commission on Transportation would be in keeping
with the commitments you made in the course of the cam-
paign. Thus, you stated that "the proper role of the
FAA would certainly be high on the agenda of an indepen-
dent commission patterned on the Hoover Commission."
Again, you promised an "immediate reevaluation" of the
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Merchant Marine subsidies "in consultation with industry
members and labor representatives, with the goal of pro-
viding incentives for productivity. II
You should discuss the proposed Commission at an
early date with the Secretary of Transportation. We need --
but are not anywhere close to having -- a national
strategy pertaining to the balanced development of our
various transportation components, with guidelines as to
the Federal government's role.
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X - MANPOWER POLICY
1. Modernized Employment Service
In our country, the matching of available jobs and
unemployed workers often proceeds slowly and inefficiently.
Fortunately, modern high-speed computers and telecommuni-
cation systems now make it possible to organize the labor
market much more efficiently, thereby reducing unemploy-
ment and at the same time curbing inflationary pressures.
During the campaign you called attention to the need for
just such a job bank.
The Secretary of Labor should be directed to under-
take a thorough study of how such a program could best
be implemented in the near future. A date should be set
for a draft of the legislation.
2. Job Vacancy Data
We now have reasonably good current information on
unemployment -- that is, for the supply side of the labor
market. However, there are no current or comprehensive
records on job vacancies -- that is, for the demand side
of the labor market.
Because of this serious gap in our economic intelli-
gence system, it is often difficult to tell whether there
is a surplus or deficiency in the aggregate demand for
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labor, so that much of our monetary and fiscal policy-
making proceeds in the derit. If a comprehensive system
of job vacancy statistics were established, this diffi-
culty would be remedied. Also, once the data are broken
down by community and occupation, programs of vocational
education, of job placement, and of guidance could be put
on a much more rational basis.
It is recommended that legislation authorizing a
national system of job vacancy statistics be requested
at once.
3. Encouragement of Worker Migration
In order to stimulate unemployed people to move
where they could find jobs, the government has conducted
a pilot program under which moving allowances and sub-
sidies have been granted to encourage migration. It
would be desirable to request the Secretary of Labor to
make an assessment of this activity with a view to judg-
ing its potential promise.
4. Mexican-American Conference
During the campaign you promised to convene a White
House Conference "prompuly after taking office in January"
to discuss with Mexican-American leaders the numerous
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problems surrounding the life and activities of
Mexican-Americans.
The Secretaries of Labor and Commerce should be
promptly requested to advise you, jointly, by an early
specified date, on the participants, format, and issues
of such a conference.
5. Remedial Manpower Programs
The Task Force on Labor, Incomes, and Manpower
Policies finds that the priority need for remedial man-
power programs is a comprehensive manpower bill which
would consolidate the lessons of experience into a
single manageable program offering remedial services
adapted to community and individual needs.
The Secretary of Labor should be requested to pre-
pare at once a suggested draft of such legislation,
accompanied by an analysis of its prospective costs and
benefits.
6. Transition from School to Jobs
Study of the composition of unemployment by age
levels brings out the sharply higher rates for young
workers, especially black teenagers living in central
city areas. While a somewhat higher unemployment rate
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for young workers is to be expected as they find their
way in life, the present levels are excessive and con-
stitute one of the most worrisome aspects of current
unemployment.
A strong effort needs to be directed at the problem
of the transition from school to work, or in many cases,
the transition from idleness to work. An added dimension
of the problem of transition results from the flow of
young people from the Armed Services into civilian life
and work activity. Special efforts must be made in such
areas as training, counseling, and work-school programs.
Obviously these are areas for cooperative work involving
the various levels of government and private employers.
In addition, a differential in the minimum wage should be
considered, SO that lower learner-rates, rising to the
regular minimum by age 21, would open initial job oppor-
tunities on a wider scale for young workers.
The Secretary of Labor should be requested at once.
to prepare a report, together with a draft of proposed
legislation, on ways of facilitating the transition of
youth from school to useful jobs.
7. Minimum Wage Amendments
Congressman John Dent, Chairman of the Labor Sub-
committee of the House Education and Labor Committee,
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has indicated that hearings will be held early in the
91st Congress on proposals to raise the minimum wage per
hour from $1.60 to $2.00, to increase overtime pay from
time and one-half to double time, and to provide that
overtime pay start after 35 hours (rather than the
present 40).
In view of the continuing increase in the cost of
living, there will be a great deal of pressure to get
your Administration to sponsor these changes. From an
economic standpoint, the wisdom of these changes is very
questionable in the present environment. The Task Force
on Inflation rightly urges you "to resist measures that
impair incentives to hire, train, and upgrade labor, such
as further increases in minimum wage rates or the broaden-
ing of its coverage. If
You should advise the Secretary of Labor to discuss
at the first opportunity this legislation with Congres-
sional leaders, including Congressman Ayres and Senator
Javits. The Secretary will undoubtedly want to use such
an opportunity to take up the special problem of the
teenager, where some relief from the present minimum wage
is advisable.
8. Farm Workers Under Taft-Hartley
At the present time, farm workers are not subject
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to the provisions of the Taft-Hartley Act. However,
there has been a sustained effort on the part of trade
unions and the Johnson Administration to remove this
exemption. A bill that would place certain farm workers
under the Taft-Hartley Act was reported by the House
Education and Labor Committee but failed to get a rule from
the Rules Committee.
There was a great deal of opposition to this bill
from both Republican and Democratic Congressmen. The major
argument against it was that farming does not lend itself
to collective bargaining. The farmer is particularly
vulnerable to strikes, for a whole crop could be lost if
work was stopped at a crucial time.
As soon as possible, the Secretary of Labor and the
Secretary of Agriculture should review this troublesome
question.
9. Morale of Federal Employees
It is highly important that you make a special
effort to win the full cooperation of Federal career
employees who, in the end, execute decisions and deter-
mine the quality of government services.
Besides advising department and agency heads of
your desires in this regard, it is recommended that you
set a conspicuous example by arranging for an early
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meeting with the Executive Officers Group. An associa-
tion made up of top departmental administrators, this
Group meets regularly and has a secretary in the Execu-
tive Office.
10. Disputes Involving Public Employees
A national policy with regard to unions of public
employees and disputes involving public employees is
urgently needed.
It would be desirable to establish, under the guidance
of the Secretary of Labor, a special task force to make
a searching examination of this problem. The availability
and enforcement of state and local laws should be explored
as well as the ramifications of a Federal intrusion. Al-
though Federal employee strikes be not a problem today,
they could become a problem in the proximate future.
Hence, this potential problem area, and particularly the
bearing of recent changes in Federal employer-employee
relations on it, should also be studied in depth.
You should discuss the vexing problem of public
employee disputes with the Secretary of Labor at an early
opportunity.
11. All-Volunteer Armed Force
One of your strongest pledges during the campaign
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was the eventual abolition of the draft. It is the
major issue that you can use to establish a rapport
with the youth of the country.
There is, of course, substantial opposition to such
a move, partly on the ground that it may endanger nation-
al security and partly for budgetary reasons.
Thus, it is important that you work toward the ob-
jective of abolishing the draft, but that you do so in a
manner that protects both the national security and the
budget. This can be done by moving toward an all-volunteer
armed force in a series of steps, evaluating the results
of each before moving to the next, as follows:
(a) Reaffirm your pledge to end the draft as soon
as possible.
(b) Increase the planned July 1, 1969 military pay
raise of some $2 billion to $3 billion, con-
centrating the additional billion in the lowest
enlisted ranks where the military-civilian pay
discrepancy is greatest. This should induce
a rise in enlistments and allow draft calls to
be reduced.
(c) Appoint a special Commission charged with the
task of developing a detailed plan of action
for ending the draft.
(d) Request the Budget Bureau to evaluate the cost
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required to replace the draft with an all-
volunteer armed force. The Bureau should
also be prepared to report the impact on
enlistments of the higher military pay scale
of fiscal 1970, and to recommend in the light
of its findings any change in the pay scale
for fiscal 1971. If the evidence indicates
that enlistments are highly sensitive to
increased pay scales, the move toward elimina-
ting the drait can be accelerated at limited
cost. On the other hand, if the evaluation
indicates that very large costs are needed to
assure a substantial increase of enlistments,
a slower pace of implementation would be
logical.
You should, of course, take into account the very
real possibility that the military chieftains, perhaps
with good reason, would raise a storm of protest about
the narrowing of pay differentials between officers and
privates. In any event, you will need advice on this
whole problem from the Secretary of Defense, and you
should communicate your interest to him promptly.
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XI - EDUCATION
1. The Federal Role
The Task Force on Education expresses strong concern
about your campaign pledge to press for 11 a Federal
program to turn back to state and local control, through
block grants, such funds as are urgently needed to upgrade
their educational performance. 11
This emphasis on general aid -- as contrasted with
categorical grants for specific, narrowly defined purposes --
is worrisome to the Task Force for several reasons, but
especially SO because they believe that "it would probably
reopen the Church-State issue in aggravated form. "
The Task Force notes that the constitutions of thirty
states (including New York, California, and Illinois) have
provisions which tightly restrict aid by state bodies to
parochial schools. Thus, it is considered probable that
any attempt to turn Federal educational dollars (which at
present do benefit sectarian-school children to some extent)
into generalized state educational dollars would provoke
bitter opposition from Catholic officials. This, the panol
fears, might possibly unsettle the whole Federal educa-
tional effort. A companion danger, according to the Task
Force, is that any distribution of general aid moneys to
sectarian schools in those states where constitutional
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restrictions do not exist would invite a spate of "estab-
lishment-clause" suits challenging the constitutionality
of Federal educational aid.
Because of these considerations, the Task Force
emphatically recommends that neither you nor any high
official of your Administration "make any further allusions
to block grants until the full implications of new methods
of Federal financing of education in regard to the Church-
State issue have been fully explored. If
Indeed, the Task Force believes that even without
any disturbance of present aid-distribution procedures
there may well occur new legal challenges to Federal edu-
cational programs. Because of this, it recommends that
you promptly set up a small study group "to review the
consequences of a possible adverse decision by the courts
on all existing Federal education legislation and to
prepare proposals as to how such legislation might be
revised should the need arise. 11
While the Task Force opposes any move toward "general
aid", it does believe that the number of specific cate-
gorical educational grant programs is now unnecessarily
large and that this fact creates burdensome operating and
administrative problems for state and local officials and
for educational institutions. It therefore recommends, as
a matter of early "high priority", a thorough study of the
possibilities for regrouping a number of present categorical
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grant programs into "designated block grant programs"
to afford recipients considerably more latitude and
discretion than they now have in using funds. Discretion
would not be so broad, however, as to make aid "general."
In 2 closely related recommendation, the Task Force
calls for "study as quickly as possible" of all existing
education legislation with a view to determining how it
might best be reorganized and recodified to provide
greater efficiency in administration. The Task Force
points out that there are now operative 69 pieces of
educational legislation and that in fiscal 1970 the Office
of Education will be administering at least 113 programs.
According to the Task Force, "there is a widespread
belief, both at the state and local level, that the seek-
ing of funds under this multiplicity of legislation is
an unnecessarily burdensome and time-consuming business. 11
The Task Force on Science and Technology likewise
recommends that procedures governing the distribution of
Federal aid to institutions of higher learning be revised.
It clearly would like to see a deemphasis on specific
project grants and contracts, with less earmarking of
moneys and with accountability for funds "limited to
demonstration that they have been expended in a responsible
manner. " The departure from specific grants desired by
this Task Force is so sweeping in fact that it may be