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Digitized from Box 4 of the White House Press Releases at the Gerald R. Ford Presidential Library
FOR IMMEDIATE RELEASE
NOVEMBER 8, 1974
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
ROY ASH
DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
THE BRIEFING ROOM
10:04 A.M. EST
MR. NESSEN: Roy Ash of the Office of Management
and Budget is here to talk to you this morning, and
as I explained to you, the purpose of this is for Mr.
Ash to give you some broad outlines of the concepts
and general ideas that President Ford is going to need
to consider before he sits down to make specific budget
decisions.
Some of you expressed an interest in this kind
of educational process for your own background knowledge
as you get into writing stories about the 1976
budget.
As I told you, the President expressed the
feeling that Mr. Ash's presentation was a great educational
opportunity for all of us, and you said you wanted to
share that, and that is why we are doing it this morning.
I think in line with that, we ought to point
out that it is a broad kind of educational and
philosophical discussion that Mr. Ash willhave with you
and it is obviously much too soon to get into specific
numbers with him.
Roy, if you will, just let me say one thing.
At 10:30 the President and Mrs. Ford will receive
donations from the American Cancer Society from a group of
school children in the Rose Garden. There will be photo
coverage of that, and some of you who want to go to that
can go around to the side door of the press room now
and you will be taken out to that.
Roy Ash.
MORE
(OVER)
- 2 -
MR. ASH: Thanks, Ron.
Ladies and gentlemen, I am here by the popular
demand of at least one of you, maybe only one. Attendance,
as I understand, is optional. I wish mine were also
optional. (Laughter)
There have been, as you know, a series of
meetings and discussions with the President over the
last few days covering the 1975 budget and the 1976
budget. I would like to share some of that discussion
with you -- not all of it -- but some of the key parts
of it that I think could be of use to you.
First, I should tell you exactly where we stand
in the budget process, and there are two processes going
on in parallel. One relates to the 1975 budget, and the
other to the 1976 budget.
As to the 1975 budget where, as you know, the
President has stated it is his intention to reduce the
expenditures to less than $300 billion, we have now gone
to each department and agency asking them to prepare the
particulars for a considerable number of programs by
which they can each do their part in reducing expenditures
below that level. They are working on those. We will be
working on them this week and next week. And shortly after
the Congress returns from recess, the President will be
submitting his proposals, very specific proposals, for
reductions of the 1975 budget.
As to the 1976 budget, we are now going through
the process called Director's review. Director's review is
an occasion where I, along with others in my organization,
others of the White House staff, go over in considerable
detail the proposals of each of the departments and agencies
that have been worked on for the last two or three months
for the 1976 budget.
This takes place daily. In fact, one of the
reasons that I apologize for asking to meet with you
earlier this morning is that as soon as I finish this
meeting I go into one of those, and we deal with the
new budget and scrub it over. That is called the
bloodletting room over there in 248 where we do this work.
But we have been doing it for the last few days. We will
continue through the end of this month with an every day
activity of dealing with the 1976 budget.
MORE
- 3 -
I don't intend at this time to put in front of
you the specific 1975 cuts or the specific 1976 budget
actions, but I do think it might be useful to provide
some context to use when that information does become
available because as you see the 1975 and 1976 budget
action specifically, I think it is essential that you
see it in the context that makes sense.
I want to make four points particularly to
provide perspective, particularly to provide the kind
of perspective that the President is applying when he
looks at the 1975 and 1976 budget actions. These
four points are quite interlinked, but it is essential
that you rise above the specifics and look at these
if truly you want to appreciate what is going on in
both of these years' budgets.
The first point is the exponential growth,
the Federal expenditures, to over $300 billion this
year and increasing at say $30 billion a year is not at
all what it seems to be. First, on a constant dollar
basis -- that is what money will buy -- we are
spending no more today than we were in 1968. In fact,
if the Congress joins with us and we have expenditures
below $300 billion in this fiscal year we will be
spending, on a constant dollar basis, less than we spent
in 1968, and any years since.
But, even while we make that point that on
a constant dollar basis that the Federal expenditures
have been level now for six years, they did go up about
50 percent on a constant dollar basis from 1961 to 1968.
This is hard to get used to, hard to get used to the
fact on a constant dollar basis what money will buy.
We have not been increasing the budgets for the last
few years because we certainly see and hear all kinds
of evidence that suggests to the contrary.
The second point, though, before we rest
totally on this first one, not only have total
expenditures on a constant dollar basis not been
increasing since 1968, but the cost of what we picture
as Government have been substantially decreasing.
I think that is key.
What do we picture as Government? Running
all of the departments and agencies, including Defense,
that is Government. In effect, carrying out the
Governmental functions in the land. Both defense and
other than defense have been down, or are down one-third
from what they were in 1968. Defense is down a third.
All other, running all the other Government operations
are down a third from what they had been in 1968.
MORE
- 4 -
Q
That is in dollars, sir?
MR. ASH: On a constant dollar basis. Government
as such has been going steadily down, so that is another
point to keep in mind, that we need to dispel the shiboleth
that Government spending implies that Government as such
has been increasing.
Now the third point, what does this mean? If
it doesn't mean that Government as such has been increasing
but instead declining, what does it mean? It means that
the main role of Government is no longer of governing,
including defense as a part of the carrying out of the
sovereign functions of the Nation. It means that the
main role of Government these days is that of a redistributor
of income and well, collecting cash from some groups of
people and paying it out to other people. That is what
has been going on. This is the function that has been
substantially increasing.
I have said that defense and all other aspects
of Government have gone down a third on a constant dollar
basis since 1968. This other function of Government,
that of income redistribution, has doubled since 1968.
In effect, more than one-half of all of the cash money
that passes through Government these days is merely on
its way to somebody else. It isn't to carry out a
governmental function, whether it be defense or anything.
It is merely money passing through the till, counted up
in Government expenditures and Government revenues, but
passed out to somebody else to spend.
Now the fourth, and the real watershed issue --
and this is the key one that relates to policy-making --
is that over this last six years then, defense and all
other governmental functions have been declining just
about the rate that the transfer payments have been
increasing. In effect, we have been able to hold
total outlays at a level constant dollar basis because
year after year for the last six years we have been
reducing defense, reducing all others, and increasing
transfer payments at the same rate, but -- and this is
the real crux of it all -- now these decreases in
defense and other operations of Government, at least at
the rate they have been taking place, are no longer
possible or even desirable.
Defense, as you know, is at the lowest percentage
of Gross National Product since 1950. Yet, even as we
can now no longer reduce those programs that have for the
last six years been allowing us to increase others, those
others, those income transfer programs have been increasing
and have built into them through legislation such a fixed
schedule of commitments that they have their own increase,
their own momentum built squarely in the programs.
MORE
- 5 -
So these are the difficult decisions now.
The ability to continue to cash in from the reductions
of defense and governmental operations at a rate
allowing us to pay for the income transfer programs
is ending. It is ended, and because that is ended,
we now have a whole set of new problems in front of us.
So, in summary, I guess, before taking your
questions, I would make these points. First, Government
expenditures on a constant dollar basis are not growing,
and have not been for six years. They are not growing
as a percentage of Gross National Product, or any other
such measure.
Second, Government itself, the functions and
roles of Government governing have in fact, been declining.
Third, the Federal Government has become a
massive redistributor of income. A totally different
kind of function than it has been engaged in at least
on this scale in earlier years.
And fourth, we are at the crossroads. The
decline in governmental operations, including defense,
can no longer provide the increases that are built into
these other programs.
So when we now consider the changes in budgets,
1975 and 1976, we mostly have to consider the changes in
pattern of income redistribution. Of course, we will
continue to reduce Government operations wherever
possible, as we have been doing since 1968, but the game
has changed, and this is what we are talking about with
the President.
Thank you. I will take any questions you have.
MORE
- 6 -
Q Mr. Ash, in view of this, why was the
President campaigning for the last several months on the
grounds that big spenders were doing us in?
MR. ASH: This is not inconsistent at all with
that proposition because the big spenders have most of
all been spending for these income redistribution
programs and have built into authorizing legislation --
not just annual appropriations -- built into fundamental
legislation programs and rates of growth of those programs
that can lead us to runaway expenditures if we really let
them go as they are. We must re-examine them, and this is
the key the President is making.
Q
Then, sir, why have you been impounding
all this money on projects that were certainly not income
distribution? You have been impounding a lot of things --
water, sewer -- and a lot of other things, and why have
you been doing this if less money has been spent for
Government and less Government cost?
MR. ASH: We have been impounding it even for
defense. We have been cutting back every place that we
believe that expenditure represents a lower priority
claim against the taxpayers than do the others. It has
been across the board and will continue to be across the
board.
I am suggesting that in terms of massive dollars
there is a major shift in the composition of the Federal
budget. And we will be impounding $1 million here and
$100 million there, but when we want to talk about billions
and billions and looking at Federal expenditures in their
overview, at the billions and billions levels, then what
we must be talking about these days is the whole set of
programs that are income redistribution. But we will
still be working across the board on big programs, little
programs, Government operations and income redistribution.
Q
Mr. Ash, do you describe your budget then
for 1976 as kind of a bread and butter budget that will
not have any exotic programs in it, any fat in it, so to
speak?
MR. ASH: It won't have any fat in it if we can
help it, if we can find it all and take it out. We are
certainly working hard, and that is what these sessions
are. In terms of exotic programs or not, the President
hasn't made any decisions yet as to the 1976 budget
and, therefore, we are not able to say what it will or
will not compromise, finally.
Certainly we are working on a lot of options
and possibilities for him of all kinds of programs, but this
is too early to decide what will or won't be in the 1976
budget.
MORE
- 7 -
Q
Mr. Ash, if the Pentagon or some other
agency of Government lets a contract for a specific
piece of hardware, I take it that is not income
redistribution?
MR. ASH: That is not.
Q
Could you give, then, a simple example of
what income redistribution is?
MR. ASH: Let's take the simplest example of
all -- social security. Let's take another one -- food
stamps. Let's take others -- retirement programs of
various kinds. AFDC is income redistribution; revenue
sharing is income redistribution. In fact, we collect
the cash from Federal taxpayers and pay it out to some-
body else to spend.
Q
Can you give us an example of where the
Defense Department has cut back spending that was not
income redistribution?
MR. ASH: None of the Defense Department is
income redistribution. The Defense Department is
carrying out a sovereign function of the sovereign Nation
to provide for security --
Q
You just said a while ago that most of the
Defense Department was income distribution on laws that
were established that they couldn't do anything else
about.
MR. ASH: I didn't say that.
Q
Give us an example of where the Defense
Department has cut back on programs that you say we are
spending less and the Defense Department has been spending
less for years. Give us an example where it is not income
distribution.
MR. ASH: None of the Defense Department
activities are income redistribution. They are operations
of a Federal Government.
Q
Give us an example of this cutback, this
beautiful cutback.
MR. ASH: I can tell you that the main example
is to look at the total of defense expenditures and
particularly see what they haven't done.
MORE
- 8 -
Q
What they haven't done?
MR. ASH: What they haven't done where they save
money.
Q
Things that they didn't spend money on,
are you saying that is a saving.
MR. ASH: That is right.
Q
Give us an example where they did cutback.
MR. ASH: The cutting back is by what they don't
do, that is how they cut back. That is the only way
to cut back.
Q
Give us an example of where they went back-
wards in saving money for the Government.
MR. ASH: They go forward in saving money.
Q
You just said that we have been cutting
back since 1968. I want you to tell me where the Defense
Department has spent less, in what areas.
MR. ASH: In 1968 the Defense Department on a
constant dollar basis, what money will buy today, spent
about 50 percent more than it spends today. It has since
1968 stopped or reduced the level of operations,
certainly by retreating -- retreating is not the word
(Laughter) -- certainly by withdrawing from Vietnam has
substantially reduced the level of operations.
It has reduced the level of research and
development. It has reduced the level of procurement
of products. It has reduced the level of employment.
Let's take military employment. Uniform military
employment went from three and a half million people down
to two million two. One million three hundred thousand
former uniformed members of the military have gone into
the private work force, having come out of the military.
There are examples -- in fact, the whole
history of the Defense Department for the last six years
is substantially --
Q
How do you square that with the giant
recruiting programs? We are paying millions of dollars
each year --
Q
Can I interrupt?
MR. ASH: Let's go to some other question.
MORE
- 9 -
Q
You didn't answer that question, Mr. Ash.
I said how do you justify that with giant recruiting?
MR. ASH: Let's go on and I will get back to
it.
Q
Are you saying that in the future transfer
payment programs are going to have to increase in order
to pay for the expense of Government?
MR. ASH: I am saying that as we look from here
out in Government expenditures and any changes in their
levels, whether it be upward or downward, we have to be
especially mindful of those that are called income
transfer programs because that today is the major
function, expressed in dollars at least, of the Federal
Government.
Therefore, if we are to reduce rates of growth
of expenditures, we can't do it without looking at the
programs we call income transfer; that is, where the money
is spent. You can only reduce expenditures from where
it is being spent.
Q
Mr. Ash, you spoke about income redistribution
factors versus the sovereign functions of Government.
Isn't it a fact that most of your income redistribution
takes place in the social services, or Health, Education
and Welfare? In fact, there is nothing from redistribution
in State, Defense or Justice?
MR. ASH: That is right.
Q
What are you doing to cut some of those
departments other than Defense?
MR. ASH: Well, I have already said let's take
State. The State Department is down in personnel from
what it was in 1968, more than any other department
proportionately. There is a substantial reduction, and the
State Department is largely a personnel cost department.
So, that one is substantially down.
Q
Do we tell the White House then that they
are buying their striped trousers at Robert Hall rather
than Brooks Brothers and that they are driving Plymouths
rather than Cadillacs? How are we cutting specifically
in these departments?
MORE
- 10 -
MR. ASH: I have already described in defense
we have one million three hundred thousand people off
of the armed services. We have substantially
reduced the procurement of weapons for the military.
In the State Department we have reduced the number of
personnel because the State Department is basically a
high personnel cost operation. That is the only kind you
can reduce there.
Now, what other ones do you have in mind? We
have reduced so many of them. The total employment of the
Federal Government, civilian employment, is less today
than it was in 1968.
Q
At which point do you, as a budget writer,
say there is no more fat, we are down to muscle and bone?
MR. ASH: We just keep working it over and over
every single day, week, month and year. That is the
essence of what we do.
Q
Mr. Ash, to avoid this continual build-up
of transfer of payments to go through the Government, are
you reaching a conclusion that what is now necessary
is a major tax reform initiated by the Administration to
bring about, in fact, this transfer of redistribution of
income?
MR. ASH: We are not reaching any conclusions
in particular. Let me tell you -- because it is only a
truism -- the alternatives that are available to the
President as he makes his decision about the 1976 budget,
if we are to bring closer together outlays in revenues
toward a point of balance, we have got only three ways to
do it. One is to reduce outlays, the other is to increase
revenues and the third way is to not close the gap completely
and have a deficit, or any combination of those three.
I am merely saying that has a truism that is the
only thing to work on. I am not indicating any particular
outcome of the 1976 budget because none has been decided.
In fact, we are meeting this afternoon with the President
to discuss this very thing about which you have asked.
Q
But you are going to base those decisions on
those three areas, is that right? I mean, the 1976 budget
will come out from one of those three areas, right?
MR. ASH: In dealing with the 1976 budget and the
objective to have that budget be noninflationary, it is
necessary to reduce expenditures from what they otherwise
would be, to raise revenues, or thirdly, to not fully
close the gap or some combination. It is the only choices
available, it is not suggesting policy. It is merely
suggesting that is the universe and we have to look at
the whole universe.
MORE
- 11 -
Q
Do you expect to balance the budget in 1976?
MR. ASH: It certainly is the direction that we
should be going because what we want to make sure is
that the 1976 budget policy is one that best serves the
economy as we would foresee it for 1976.
Inflation will not have fully disappeared by
1976, and the 1976 budget, therefore, should not be
a contributor to inflation.
MORE
- 12 -
Q
How can you have a combination of these
three? Can you explain that? How can you have a
combination of three possibilities?
MR. ASH: Sure, you can have some reductions.
You can have some increased revenues. You can have some
shortfall from balance. That is theoretically possible.
And again I am not stating what the outcome will be.
It has not been decided. I am merely saying we have to
look at all of this.
Q
Mr. Ash, the President has said that I
intend to submit a balanced budget for fiscal 1976.
You have just told us it is the direction we should be
going. You can go in that direction without getting there.
My question is, in view of the decline in the
economy and the loss of tax revenues that you are going
to sustain, do you believe it is possible to balance the
budget for 1976?
MR. ASH: Of course it is possible.
Q
Do you think it will be done?
MR. ASH: That decision is going to be made on
the specifics as we get closer to the realities, or closer
to the actual publication of the budget. But certainly
it is the goal, the objective, the desirable end result,
given the economy as we see it now. But as we all know,
the President and every other President wants to consider
all the facts before he makes his final decisions which
will be, say, by the end of next month.
Q
How much will the decline in the economy
cost you in terms of lost tax revenues? In other words,
I think a few months ago you were talking about a $333 billion
figure for a possible balance. Presumably that is no
longer possible.
MR. ASH: At this moment, and with the present
tax structure, revenues will probably be somewhat less
than that as we forecast them for fiscal 1976. We will
be making our final forecast by mid-month next month, and
those will be used as the basis for determining basic
budget policy for 1976.
Q
Mr. Ash, do you identify Federal education
programs as income redistribution programs?
MR. ASH: A number of them are not, but some
are, some of them that are basically income transfer where
we are handing out money to others to spend.
MORE
- 13 -
I don't have in mind how each program classifies,
but the principle is simple. When the Federal Government
collects cash, pays out cash for individual, or state, or
city use, that is income transfer, and others in turn make
use of that cash. That is an income transfer program.
Q
It is transferred to other individuals. It
may be transferred to other --
MR. ASH: As an example, let's say the money
that we transfer to states and cities, under either general
revenue sharing or special revenue sharing, that is a form
of income transfer. We collect the cash. We pay out the
cash. They then make the spending decisions with that cash.
Q
Wouldn't it be logical to raise taxes to
keep them in line with constant dollars?
MR. ASH: This is a good point here. Would it
be logical to raise taxes? Without answering it directly,
let me answer it indirectly, because I don't know how to
answer it directly.
We had a Tax Reform Act of 1969, and we had
subsequent revisions in our tax structure. The net
effect from 1970 through 1975 of tax reductions was to
reduce the cumulative amount of revenues to the Government
by $65 billion in the years 1970 through 1975. That is
almost equal to the deficits accumulated in those same
years.
Or to put it another way, had we continued to
have through the 1970s the tax structure that we had up
to that Tax Reform Act of 1969, we would have had
virtually no deficits for the last five years. The deficits
did not come then from decreasing expenditures. The
deficits came from a change in the tax laws that reduced
revenues. That is what has been going on for these last
five years.
When I described to you that we have had on
a constant dollar basis about a level rate -- about a
level of Government expenditures through now, we have
incurred considerable deficits. Why so? Because revenues
have in fact been declining on a constant dollar basis,
declining because of the Tax Reform Act of 1969, and other
tax legislation since that time. We have during these last
few years created our deficits to a great extent by
reducing our revenue intake rather than increasing your
outlays. Certainly on a constant dollar basis that is
absolutely a fact.
MORE
- 14 -
And to elaborate on that, one more point that has
a very important principle in it, I have said that we have
foregone $65 billion of revenue over these last few years
by virtue of tax reductions. Where have those revenues been
foregone? Individuals have received not $65 billion but
$80 billion of that revenue foregone, in effect more than
all of it, and corporations have paid $15 billion more than
they would have under the earlier tax laws.
Now in making that calculation, I want to make
clear you understand how I have dealt with Social Security
revenues. Social Security revenues have also gone up, have
gone up rather than gone down, have gone up during that
time, half of which are borne by corporations, and half of
which are borne by individuals. I have redistributed those
halves to each, but the main principle that should be seen
in what is going on in taxes is that we have put millions
more dollars into the hands of individuals with their
propensity to consume, and taken billions out of corporations,
with their propensity to invest, and the net effect is that
we have substantially affected the economy through taxation,
redistributed their Country's income.
Q
Mr. Ash, the way you present that leaves only
one logical alternative, doesn't it? Increased taxes?
MR. ASH: It doesn't leave that as the only
logical alternative, but it does say, just hypothetically,
if we were to revert to the tax structure that we had before
1969, that would be the direction that we would go, but
this in no way suggests that we are going that way. There
is no decision. There is no implication. There is no plan.
There is no intention to do that at all. And I should make
that absolutely clear. I am just discussing the hypothetical
situation, the hypothetical conclusion of reassessing what
has been happening since 1969.
Q May I follow up, please, by just asking if
you explained this situation to the President in the same
mood, in the same tone, and with the same emphasis that you
have just explained it to us?
MR. ASH: I have explained all of this to the
President. I hope as completely -- I know I have -- as
completely as I have explained it to you. And I hope,
vice-versa, I have explained it to you as I explained it
to the President. You have heard what the President heard.
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- 15 -
Q
In your philosophical review, Mr. Ash,
is this income redistribution process a good thing or
a bad thing?
MR. ASH: We have taken to our Country's basic
policies one of redistributing income and wealth. We
have come to the point in our national life when we can
afford to do SO. And we have decided as a matter of
policy that we will do SO. It is a good thing because
that is partly one of the advantages of living in this
Country is that we do have policies that take care of
those that need the extra help that can be given them
by those who are realizing the greatest income. So in
that sense this is fundamental to national policy, and
it is good national policy.
Q
Has it gone far enough yet, the income
redistribution, in your view?
MR. ASH: We can all disagree on that, and
I am sure that three-quarters of the political action
in this city discusses the subject of has it gone far
enough, or too far, or the right directions. Today almost
all the legislation that we deal with deals with that question.
I don't know the answer in general.
Q
What you are saying is, if reductions come,
they have to come in that area, and if tax relief comes,
it should not come to individuals but to corporations?
MR. ASH: No, I am not saying that at all. I am
saying as a matter of a truism, you can only reduce money
where you are spending it, and I am saying that is where
we are spending it.
Q
Can you give us the figures to support the
four points, please? The fact that the Government's
spending has decreased while spending for income distribution
has increased? And tell us what you include in Government
spending besides defense?
MR. ASH: I think I have them in my head here to
give them to you. Let's take two categories. First let's
take defense, and I will express these in 1975 dollars,
constant dollar base is 1975 dollars.
We today are spending in defense in fiscal 1975
about, let's say, 84, 83 or 84 billion dollars before
the year is over, for national defense in 1975 dollars.
We spend in 1968 for national defense, measured by the
same value of dollars, about 134 -- is that the number --
let me see if I am right here. I am not sure if I have
those numbers exactly right.
Joe, I wonder if we could get them exactly. I
don't happen to have them exactly right, but that is very
close.
Let's take all other than defense --
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- 16 -
Q
First, could you tell us what the figure
was in 1968 dollars?
Q
Yes, 1968, not 1975 dollars.
MR. ASH: I didn't bring all my tables with me
on it. There is all the data right there. I can't think
of a better place to get information than from the press.
My numbers were right. Defense in 1975, $88
versus $134, and that is a reduction that is on the
constant dollar from $134 to $88. Interest and other non-
defense; that is, everything else in Government except
income transfer, running every department and agency of
Government, running all the judicial system, running all
the legislative system, and paying all the interest on
the Federal debt, all of those things today account for
$52 billion, and in 1968 it counted for $78 billion on a
constant dollar basis. Again, you can see down a third.
Q
How about 1968 dollars?
MR. ASH: For 1968 the numbers would be -- I
can get the precise numbers for you -- but it would be
approximately two-thirds of that. If you wish them
precisely, I just don't happen to have them with me.
Q
Mr. Ash, on this defense discussion,
isn't it a little bit misleading? In 1968 we had a war,
so it would be easy to believe that you would be
spending less in peace than in war.
MR. ASH: It is not misleading. In fact, it is
part of the basic phenomena I am describing. From 1968
on, we were withdrawing from Vietnam. In the process of
withdrawing from Vietnam -- I should emphasize that word
more than any other words -- in the process of withdrawing
from Vietnam, we realized a peace dividend.
We reduced substantially the cost we were using
for defense. What did we do with the monies that we
reduced? We spent them for these income transfer
programs. It is not unrealistic, it is a fact. We have
cashed in a $40 billion peace dividen , $40 billion a
year.
Put it another way. If we were running at the same
rate as we were, in 1968, we would be spending $40 billion
more a year for defense than we are now. The fact is that
our defense reductions have been going down; others
are going up. Defense can't come down any further; others
are still going up.
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Q
My point is, I guess, defense would have
come down anyway if you weren't transfering the money
somewhere else. In peacetime you would be spending less
than you would in wartime anyway, presumably.
MR. ASH: Sure we would. I am merely saying
that we took that reduction, and instead of reducing taxes
or in other ways reducing the level of Government
expenditures, we spent, year by year since 1968, each
year's reduction of defense was spent on other programs.
We have now come to the point where those other
programs have their built-in momentum for growth. The
possibilities of reducing defense are no longer there,
and that is why we are at this major crossroad, and that
is why the key issue today and the one the President has
to make decisions about now, is what is the best budget
posture that we should have.
Q
Mr. Ash, isn't the alternative then
that the President either has to increase taxes or cut the
income transfer programs, like social security? I mean,
isn't it that simple?
MR. ASH: I have indicated the three choices.
Q
I heard the three choices, but he has already
eliminated one because he doesn't want deficit spending;
therefore, doesn't he have the two choices -- increased
taxes to pay for the income transfer programs or --
you know, it is that simple.
MR. ASH: The President will be making his final
determinations in this whole matter by about mid-month
next month, and putting together the budget. I am sure
as he looks at it, he is going to consider all possibilities
and look at the economy as best it can be seem from that
time. I wouldn't want to pre-make any decisions for him.
Q
Would you give us the dollar figures on
those income transfer growths?
MR. ASH: Income transfer growth since that time,
expressed in 1975 dollars, in 1968 were $89 billion
and have gone up to $166 billion.
Q
What was the second figure?
MR. ASH: From 89 to 166, a growth almost
double.
Q That is 1968 to 1975?
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MR. ASH: 1968 to 1975. What has happened
is that payments to individuals and to State and local
governments and through them to individuals have almost
doubled while the rest of Government has come down
about one-third.
So, I think the key points to get in your minds
as background is do not equate Government spending with
Government in the sense that it means running Government.
Government spending is more and more to be equated with the
income transfer function of Governments and, therefore,
when you see dollars, expenditures or anything else, don't
automatically transfer dollars to Government. Consider
the fact that Government has been going down; transfer
payments have been going up.
Q
Mr. Ash, can we have those figures in
1968 dollars on income transfer, please?
MR. ASH: I don't have them in front of me in
1968 dollars. They are about two-thirds of each of
these. We can get for you and pass out all of these
data, if you wish.
Joe Laitin has it all right on the top of his
desk waiting, 1968 dollars or any other dollars.
Q
Mr. Ash, if we take the President at his
word -- I want to return to this question -- if we take the
President at his word, and a lot of us heard him throughout
the campaign trail about the balanced budget and reduced
Government spending, then I want to get back and ask you
about the two choices -- cut the income transfer programs
like the social security and so on, or increase taxes?
Isn't it as simple as that if we take the President at his
word?
MR. ASH: I didn't come out here today to run
ahead of Presidential decisions, and I would let him
speak for himself, as he has, and I am sure he will, on
basic budget policy that will go to the 1976 budget, and
we will let him make those determinations. I am merely
pointing out the difficulties that he will have as he
makes those decisions.
Q
In this room not too long ago, Mr. Ash,
you said that there would be $1 billion in recissions and
deferrals for defense. Since that time you have
announced $500 million. What happened to the other $500
million? Have they been scrapped? Have you then decided
we could not afford to cut that much more?
MR. ASH: No, I think you will see some more.
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Q That is before the first of the year,
do you think, or by Christmas?
MR. ASH: In not too long a time.
Q
Can I follow that up, sir? You also
indicated that beyond that $1 billion there would
be others. Will there be others or will the ones that
we will see in not too long a time simply be the ones
that were promised initially?
MR. ASH: You will have to look at them when
they come out, but I think when you add them up you
will probably find that they will exceed the ones that
we have already done and those that will yet be coming
will probably exceed that number. They will be out for
you to add up soon.
Q
Two questions about transfer payments.
First, what has been the fastest growing transfer payment
categories? Do you know by what percentages?
MR. ASH: Yes. Actually, the interesting thing
about this -- the question is what is the fastest
growing income transfer program. Some say, oh, well,
the issue here is merely social security, social security
has accounted for all of this.
The fact is that the "all other than social
security" have increased at about the same rate as has
social security; that is, all income transfer programs
in the aggregate, social security included, social
security excluded have been going up at about the same rate.
So, that is a built-in rate that we have
pretty well got into the system or had in the system now
for these years.
Q
Aren't transfer payments generally
considered in the nondiscretionary category? Haven't
they in the past because the Federal legislation establishes
them and they grow at a certain rate?
MR. ASH: Yes.
Q Are you redefining what is discretionary
and what is not discretionary in the budget?
MR. ASH: I haven't discussed any of this in
terms of what is discretionary and what is not, but I think
your point is absolutely correct that as to most of the
income transfer payments it is not a matter of annual
appropriations, it is merely a matter of paying the bill
that the Government has undertaken to pay when it wrote
the substantive legislation itself.
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The legislation establishes the beneficiaries,
the definition of beneficiaries, and it establishes
the payment schedule to those beneficiaries.
The Executive Branch administers that
legislation. As a result, almost all of those payments
are in a sense mandated by law to the extent that the
law stays as it is. We merely write out the checks when
somebody steps up and presents his credentials. We
calculate the size of checks owing him and write it out.
It becomes quite mandatory in that sense.
Q
Aren't you talking then about legislative
reforms before you can go ahead with cutting back on
transfer recommendations?
MR. ASH: Yes, and I should make clear that when
the President has said that he will, relating to the
1975 budget, propose to the Congress means to get that
budget below $300 million, that it will be by a combination
of deferrals, recissions and substantive legislative
proposals. All three will be a part of it.
Q
Can you tell me, Mr. Ash, if in the normal
course, how much the income transfer programs will be going
up if you do nothing to cut them or keep them where
they are in the 1976 budget?
MR. ASH: I don't have the specific numbers in
my head, but they will continue at the same rate that they
have been going for the last six years, thus creating the
watershed occasion where we have to now determine what to do.
Q
Mr. Ash, do you include any Government
subsidies in income transfers, such as shipbuilding
subsidies, and would those be cut?
MR. ASH: Those are not in the classification
of income transfer programs, but that doesn't mean that
they are not candidates. It doesn't mean that
everything isn't a candidate for reductions where those
reductions are due. There is no program -- and the
President has said this I don't know how many times --
no program immune from consideration for reduction.
Q
Which category do you put those in,
category "D"?
MR. ASH: These are part of Governmental
operations. They are not, in the purpose of our
classification, income transfers.
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You know, it is hard to define a line in some
cases and any of these numbers I have quoted should be
subject to plus or minus on 1 or 2 percent because of
definitions at the margin. But they give you the thrust--
without the issues right at the margin--they give you the
thrust of what has been happening anyway.
Q
May I ask you a question about GNP?
Do you have a calculation on what the rate of GNP, negative
or positive, will be in the coming fiscal year?
MR. ASH: I have it, but I don't happen to
either have it in my head or on a piece of paper in
front of me. But clearly, it is a part of the decision
making as to the 1976 budget when the President decides
how to trade over all of these factors in the economy
and his 1976 budget.
Q
Mr. Ash, do you know what the growth of
real GNP has been over the last five yars, and is there
any kind of a projection of what it may be over the next
five years?
MR. ASH: Again, I guess I don't have the
statistics in front of me of what the growth of GNP has
been or projected.
Q
Can we get that later?
MR. ASH: Yes, I am sure you can get it. Any
good economic reporting service will give you the
growth of GNP over the last five years.
Q
How about yourself?
MR. ASH: Projections become something else,
as you know, in the 1976 budget for the first time we are
going to be presenting five-year projections of a number
of different economic indicia and we will in that
budget provide those kinds of data.
I think they will undoubtedly be qualified to
some degree because none of us and none of you, or nobody
I know, can feel that he can within a 1 percent plus
or minus project any economic indicia.
We will do the best we can and put those in the
budgets.
Q
Mr. Ash, if you do cut the 1975 expenditure
level to $300 billion, how big will the deficit be; in
other words, how much of revenues will flow from your
projection?
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MR. ASH: Revenues at the moment for 1975
are expected to be something around the 294 or 295 level.
That is about what was forecast when we put together
the budget almost a year ago now. There are factors
that have caused it to go both ways, but the net of all
of those factors is to come out about at the same level
it was originally estimated. One thing you should know,
estimating revenues is much more difficult than
estimating outlays because they are a function of the
economy and estimating the economy is harder than
estimating how much we have spent.
But at this moment we are looking right around
that level of revenues, 294, 295, the same numbers we
had before.
Q
You said earlier that spending was growing
at a rate of about $30 billion a year. Are you
looking for a $30 billion increase for 1976 over 1975?
MR. ASH: Let's take the numbers that we have
quoted before. Let's assume that we are successful,
successful meaning let's assume Congress joins with us on
these deferrals and recissions and substantive
legislation and causes outlays to be $300 billion. $30
above that is $330, as you know, because for the first
time this was published in detail.
We have provided guidance to departments and
agencies for the 1976 budget, which guidance added up
to just slightly under $330.
Q
Is that the projected spending total
right now?
MR. ASH: Right now is the word that got
me off the hook slightly because that is the budget
guidance out to the departments and agencies. We are
now in the process of directors reviews, which is to
take all of their proposals as against that guidance
number and consider them in detail, some pluses, some
minuses, some variations for all kinds of reasons and
facts and at this stage we are going through the process
to determine whether that is the right number or not, but
that certainly is the guidance that went out and to which
they responded.
Q
And that is subject to a reduction, I take it?
MR. ASH: I have just been told that I have to get
over and let some blood on HEW because that directors review
starts here in just a few minutes. I wouldn't invite any
of you to join me, but sometimes I wish you were there
rather than me.
THE PRESS: Thank you, Mr. Ash.
END
(AT 10:50 A.M. EST)