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BUDGET in BRIEF
FISCAL

YEAR

1966

This budget recognizes that a growing economy
is needed to promote national strength and progress.
It is also needed to move us toward a balanced budget.

THE GOVERNMENT DOLLAR
Where it comes from . • .

Borrowing

34

Where it goes . . .
Veterans^.

4 Fixed Interest Charges

Agriculture

Internationai

34

Fiscal Year 1966 Estimate
Includes Trust Funds

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C., 20402 - Price 30cents




CONTENTS
G L O S S A R Y on page 2.
I N T R O D U C T I O N on page 3Page

PART
A
A
A

1. T H E B U D G E T : A M U L T I P U R P O S E T O O L
Program To Meet National Needs
Program To Eliminate Waste
Program for Growth and Prosperity
Taxes and the economy
Expenditures and the economy
The budget, prices, and the balance of payments
The Budget in Perspective
Growing public responsibilities
Public use of the Nation's output and labor force
Aid to State and local governments
Changing Federal programs
Public debt
Investment
PART 2. T H E B U D G E T P R O G R A M B Y F U N C T I O N
National defense
International affairs and
finance
Space research and technology
Agriculture and agricultural resources
Natural resources
Commerce and transportation
Housing and community development
Health, labor, and welfare
Education
Veterans benefits and services
General government
Interest
PART 3. B U D G E T F A C T S A N D F I G U R E S
Measures of Federal
finances
The budget process
PART 4. P O R T I O N S O F T H E P R E S I D E N T ' S B U D G E T

5
5
9
10
10
12
13
14
14
16
18
18
20
22
23
24
28
30
32
33
35
38
41
45
47
49
50
51
52
56

MESSAGE
TABLES ON THE BUDGET

59
70

Note.—All years referred to are fiscal years, unless otherwise noted. Detail In the
tables, text, and charts of this booklet may not add to the totals because of rounding.




I

GLOSSARY
Fiscal year.—Year running from July i to June 30 and designated by
the calendar year in which it ends.
New obligational authority.—Congressional authorization to obligate
the Federal Government to pay out money. While usually voted each
year, it may be made permanent authority, as with interest on the public
debt. Obligational authority may be enacted in several forms:
• Appropriations are the most common form and authorize agencies to
obligate money for a stated purpose.
• Contract authorizations allow an agency to contract for the purchase
of goods and services. A subsequent appropriation is necessary to pay
the bills incurred.
• Authorizations to spend debt receipts permit agencies to borrow
money (usually from the Treasury) for a stated purpose.
Obligations.—Commitments made to pay out money. They must be
made within the amounts authorized by Congress and are incurred, for
example, when personnel are hired, purchasing contracts made, or loan
agreements signed.
Expenditures.—Consist generally of checks issued and cash paid. The
transactions of business-type activities which generate their own receipts
(such as the Post Office) are normally recorded as net expenditures—that
is, disbursements less receipts. If receipts exceed disbursements, the result
is shown as a negative expenditure.
Administrative budget.—Provides the framework for requesting and
approving authority to obligate funds owned by the Federal Government.
Trust funds.—Money held by the Federal Government in trust for
specified purposes. These funds are not included in the administrative
budget.
Consolidated cash statement.—Often called the Statement of Receipts
from and Payments to the Public. The statement combines the administrative budget with the trust funds, showing the flow of cash between the
Government and the public.
Gross national product.—Total market value of all goods and services
that the Nation produces in a single year.

2




INTRODUCTION
The budget is both a financial report and a plan for the future.
It is also a request for legislation, since congressional approval is necessary if the proposals in the budget are to be carried out. Further,
it is an important aid in the management and administration of the
Government's activities. Finally, it is an economic document, for
it must take into account the many ways in which Government taxation and spending affect the operation of our economic system.
The budget is presented to the Congress each January, about 6
months before the start of the fiscal year. Congress considers the
budget and votes new obligational authority and revenue measures.
Once granted authority, Federal agencies may obligate the Government to make the payments necessary to carry out the authorized programs. However, there may be a considerable interval between the
time Congress votes the spending authority and the time the payments
are actually made.
The totals discussed in the budget include the amounts contained
in both the administrative budget and the Government trust funds.
They are usually referred to as the consolidated cash totals and should
not be confused with the administrative budget totals which are often
used alone.
This booklet provides information on the budget program for the
fiscal year 1966; the process of formulating, voting, and executing the
budget; and the relation of the budget to the national economy.




3

FROM THE PRESIDENT'S BUDGET MESSAGE
This budget provides reasonably for our needs. It is not extravagant. Neither is it miserly.
It stands on five basic principles:
• Government fiscal policies must promote national strength, economic progress, and individual opportunity.
• Our tax system must continue to be made less burdensome, more
equitable, and more conducive to continued economic expansion.
• The Great Society must be a bold society. It must not fear to
meet new challenges. It must not fail to seize new opportunities.
• The Great Society must be a compassionate society. It must
always be responsive to human needs.
• The Great Society must be an efficient society. Less urgent programs must give way to make room for higher priority needs. And
each program, old and new, must be conducted with maximum
efficiency, economy, and productivity.
The major features of the 1966 budget translate these principles into
action.

JANUARY 2 5 ,

1965.

Additional portions of the President's
budget message are reprinted beginning
on page 59.

4




PART 1

THE BUDGET: A MULTIPURPOSE TOOL

The Federal budget serves many purposes. Consequently, it may
be examined from several points of view. The budget is primarily
a program to meet the pressing national needs of our dynamic society.
The budget is also, however, an aid in promoting an expanding and
healthy economy and an essential instrument for insuring efficient
operation of all the Federal Government's programs.
A P R O G R A M TO MEET N A T I O N A L NEEDS
Recognizing that vulnerability to aggression could bring to naught
our efforts to build a better society within our borders, we give first
priority in the Federal Government's program to strengthening our
national defense. Recognizing too that our own destiny is bound up
with the fate of other nations, we give economic and military aid to
those less developed countries which show the will and the capacity
to safeguard their independence and pursue self-sustaining economic
growth.
At home, the quickening tempo of social and economic change
requires continuing reassessment of the domestic programs of the
Federal Government. The rapid growth in the productive power of
our economy creates new problems—problems of urban congestion
and blight, of water and air pollution, of people and regions left
behind in the general economic advance, of rising aspirations for a
fuller existence—but it also gives us the resources to cope with these
problems. The programs of the Federal Government must be
responsive to these changing needs.




5

Details of the Government's programs are discussed in Part 2 of
this booklet. Among the central objectives of these programs are
the following:
• Our Nation will continue to maintain the strongest defense
establishment in the world. We will steadily improve the effectiveness of our Armed Forces. Intensive research and development
will pave the way for continued improvements in weapons and
equipment.
• We will work toward world peace and prosperity through financial and technical assistance to less developed nations. These nations,
in turn, must demonstrate the will and determination to achieve
political stability and economic progress. Our support for the
United Nations and for improved international understanding will
reemphasize our own determination to seek a world of mutual
trust.
• Poverty will be attacked at its sources—by programs to improve
the education of our youth, to train those whose skills are no longer
in demand, and to assist areas to lift themselves from chronic
depression.
• The Nation's health will be advanced through expanded research and measures to hasten the practical application of research
findings. At the same time, our older citizens will be able to obtain
needed hospital care through an expanded social security program,
while new programs will provide medical attention for our needy
children.
• Living conditions in both urban and rural areas will be improved
through programs to assist these areas in solving their pressing problems of housing, transportation, community facilities, and economic
development.

Our basic tas\ is threefold:
• To \eep our economy growing.
• To open for all Americans the opportunities now enjoyed
by most Americans.
• To improve the quality of life for all.—From the President's State of the Union Message, January 4, 1965.

6



We see\ to establish a harmony between man and society
which will allow each of us to enlarge the meaning of his life
and all of us to elevate the quality of our civilization.—From
the President's State of the Union Message, January 4, 1965.

• The natural beauty of our land will be preserved and sound use
of natural resources encouraged by measures to create new parks and
recreational areas and to reduce harmful pollution of our air and
water.
The effort required to meet these and other urgent needs is measured by the total of Federal cash payments to the public. In 1966,
these payments will amount to an estimated $127.4 billion, an increase of $6.0 billion over 1965. To finance these expenditures, total
cash receipts will rise to an estimated $123.5 billion in 1966, up $6.1
billion from 1965. As a result, the Federal deficit on a consolidated
cash basis is expected to be $3.9 billion, a $100 million reduction from
1965.
FEDERAL RECEIPTS FROM A N D P A Y M E N T S T O T H E PUBLIC
[Fiscal years.

I n billions]

Description

1064

actual

1065

estimate

1066

estimate

FEDERAL RECEIPTS
Administrative budget receipts
Trust fund receipts
Deduct: Intragovernmental transactions
Total rcccipts from the public

$89.5
30.3
4.3

$91.2
30.5
4.3

$94.4
33.6
4.5

115.5

117.4

123.5

97.7
28.9

97.5
29.0

99.7
32.9

6.2

5.1

5.2

120.3

121.4

127.4

-4.8

-4.0

-3.9

FEDERAL P A Y M E N T S
Administrative budget expenditures
Trust fund expenditures
Deduct: Intragovernmental transactions and other adjustments
Total payments to the public
Excess of receipts ( + ) or payments ( — )




7

Within total payments to the public, there will be significant changes
from 1965 in individual programs. Of the 12 functional areas
described in Part 2, spending will increase in 6 while remaining
approximately the same or declining in the other 6. Briefly, the
major components of total expenditures in 1966 will be: 1
• $51.6 billion in the administrative budget for national defense, a
reduction of $0.6 billion from 1965, and $16.7 billion for space and
interest payments. Together, these amounts account for slightly
more than half of total Federal payments.
• $32.9 billion for the self-financed social security, highway, and
other trust funds, up $3.9 billion from 1965. The bulk of these
expenditures will financc programs to benefit the aged, the unemployed, the disabled and survivors of deceased workers.
• $31.4 billion for all the rest of the activities of the Federal Government, up $2.3 billion from 1965. This rise results from the $3.3
billion increase in administrative budget expenditures for health,
labor, welfare, and education, partially offset by small declines in
other areas.
Composition of Federal Payments

Social StMy a«
»» t nt
Qht Tut Tyfid*
te r s

1942
1945
Fbcol Ytucj •
-

.

•

' T h e sum of the f o l l o w i n g figures exceeds the net total of Federal p a y m e n t s to the public,
largely because some transactions, w h i c h take place w h o l l y between G o v e r n m e n t agencies, have
not been deducted.

8



A P R O G R A M TO ELIMINATE WASTE
The Federal budget, like the budget of a corporation, involves hard
choices—selecting the goals of greatest importance and the best means
to achieve them. Through the budget process, the President performs the difficult task of assigning priorities—deferring, restricting,
or rejecting some programs to provide funds for more urgent requirements. But the budget process also provides the President an opportunity to review the economy and efficiency with which existing
programs are managed, to identify and direct specific management
improvements and cost reductions, and to assure that the best methods
are used in carrying out new programs considered worthy of support.
This budget reflects substantial accomplishments in this area in 1965
and the President's determination to achieve even greater advances in
1966.
Wherever waste is found, I will eliminate it.
Last year we saved almost $3.5 billion by eliminating waste.
I intend to do better this year.—From the President's State
of the Union Message, January 4, 1965.
Many striking examples of cost reduction have resulted from the
enthusiastic response of Federal managers and employees to the President's challenge to find less expensive ways of accomplishing the vital
tasks of government. For example:
• The Defense Department cost-reduction program saved $2.8 billion in fiscal year 1964 alone while increasing our military strength.
• The Atomic Energy Commission saved $66.1 million in calendar
year 1964, a result of 2,658 separate cost-reduction actions.
• Consolidation and improvement of the Federal Telecommunications System will save an estimated $25 million annually.
• By selective purchasing of automatic data processing equipment,
the Government will realize net annual savings in leasing fees of
about $175 million by 1967.
These are only a few of the many efforts underway to give greater
effect to every tax dollar. Efficient and economical government use
of resources is essential to effective national policy, to continued prosperity, and to maintenance of the public trust.
9
759-738 O—65




2

A P R O G R A M FOR GROWTH A N D PROSPERITY
The revenue and expenditure policies of the Federal Government
have a major influence on the health and growth of the Nation's economy. This fact was recognized by Congress in passing the Employment Act of 1946—charging the Federal Government with specific
responsibility for promoting "maximum employment, production,
and purchasing power." The budget is the principal vehicle through
which the President proposes policies and programs designed to meet
this responsibility.

We are in the midst of the greatest upward surge of economic well-being in the history of any nation.—From the President's State of the Union Message, January 4,1965.

Taxes and the Economy

The largest single source of revenue is the individual income tax, followed in importance by the corporation income tax. Other important
sources include employment taxes (largely for social security), excise
taxes, unemployment insurance payroll taxes, customs duties, and
estate and gift taxes. The accompanying table shows the amount of
revenue expected this year from the principal sources.
Since the major taxes are levied as a proportion of income, Federal
Government revenues depend largely on the level of the Nation's
income and economic activity. This economic activity, however, will
be strongly influenced by changes in the tax structure. For example,
the reduction in corporate and individual income tax rates enacted
last year was a major element in spurring the economy to record levels
of production, profits, and income. During the past 4 years, the
Nation has averaged a 5% rate of economic growth, compared with a
3.7% rate during the entire period since 1947. The current economic
expansion—now extending 4 years—is the longest in our postwar
history.
In the administrative budget, the most important change in tax
policy proposed by the President in 1966 is a $1.75 billion reduction in
excise tax rates. This will help to assure continued economic expan10



FEDERAL RECEIPTS FROM THE PUBLIC
[Fiscal years.

In billions]

Source

1964
actual

1965
estimate

1966
estimate

A D M I N I S T R A T I V E BUDGET RECEIPTS
Individual income taxes
Corporation income taxes
Excise taxes
Other
Total, administrative budget receipts

$48.7
23.5
10.2
7.1

$47.0
25.6
10.7
7.9

$48.2
27.6
9.8
8.8

89.5

91.2

94.4

16.8
3.0
3.5
6.9

16.7
3.0
3-6
7.2

18.7
2.9
4.0
8.0

30.3

30.5

33.6

4.3

4.3

4.5

115.5

117.4

123.5

T R U S T F U N D RECEIPTS
Social security receiots
Deposits by States, unemployment insurance
Gasoline and other highway excise taxes
Other
Total, trust fund receipts
Deduct: Intragovernmental transactions
Total, receipts from the public

sion, and it will reduce or eliminate taxes that are costly to administer
and burdensome to business. Furthermore, the excise tax reform will
improve the equity of the tax structure by making an individual's tax
liability depend more on his ability to pay and less on the products
he buys.
It is estimated that the revenue lost through excise tax reforms will
be more than offset in 1966 by the growth of revenue from other taxes.
Thus, total revenue in the administrative budget in 1966 will exceed the
1965 level by $3.2 billion. This gain is even larger when compared
with the immense loss in both tax revenue and national output which
would result from a pause in the upward surge of our economy.
The President is also requesting that Congress enact or extend certain user charges. User charges are designed to insure that those who
obtain special direct benefits from a Government program pay an
equitable share of the costs of that program. For example, increases in
existing fees and establishment of new fees will be proposed in such
areas as transportation, patents, and meat inspection.




it

In the trust funds, an increase in employer and employee payroll tax
rates is proposed for January i, 1966. This increase is related to a
proposed improvement in social security benefits and the recommended
program of hospital insurance for the elderly under social security.
Federal Receipts

S Billion.
125-

- Trust Fund
Receipts

Expenditures and the Economy

lust as reductions in the Federal tax rates stimulate the Nation's
economy, so also do increases in Federal expenditures.
A better understanding of the economic significance of Federal
transactions can be obtained by examining a special set of figures,
summarized in the budget, called the Federal sector of the national
income accounts. These figures measure Federal Government finances
as they affect the current flow of income and output in the economy.
(A description of these accounts is contained in Part 3 of this booklet.)
On a national income basis, outlays of the Federal Government will
total $127.0 billion in fiscal year 1966. Of this total, however, only
$66.7 billion will be spent directly to purchase goods and services

12



to carry out Federal programs. Most of the remainder represents
Federal financing of the use of the Nation's goods and services by
others. Examples are veterans pensions, social security benefits, research grants to universities, and grants to State and local governments for highway construction, public assistance, and other important
programs.
The Budget, Prices, and the Balance of Payments

In 1966, Federal payments are expected to exceed receipts by $3.9
billion. If the economy were operating at maximum capacity, the
fiscal policy associated with such a deficit might create excess demand
for the output of our farms and factories—thus leading to rising prices.
At present, however, we have capable workers who are idle and factories which are not in full use. An expansionary fiscal policy at this
time helps to reduce the gap between current spending and the spending necessary for full, productive employment of workers and machinery. The fruits of this policy can be seen in the relative stability of the
price level in this country since 1961 accompanied by a reduction in
unemployment from nearly 7% in early 1961 to about 5% now.
Economic growth with price stability has had favorable effects on
our foreign trade position, as reflected in the balance of payments.
The basic strength of our position is shown by the consistent and substantial excess of our exports cf goods and services over our imports.
On the other hand, an increasing flow of U.S. private investment overseas, coupled with essential Government commitments abroad, have
strained the Nation's balance of payments. Positive actions, such as
the interest equalization tax on the purchase of foreign securities, have
been necessary to insure progress in reducing this strain. In calendar
year 1964, these actions—along with strict controls over Government
spending abroad—resulted in a further improvement in our balance of
payments position.
In the long run, a healthy balance of payments depends on a healthy
economy. Steady and balanced growth in an inflation-free economy
will bring increased domestic investment and greater productivity.
These, in turn, will further improve our competitive position abroad
and strengthen our balance of payments.




13

THE BUDGET IN PERSPECTIVE
The Federal Government provides public services, ranging from national defense to control of water pollution. The pattern and quantity of public services provided at any given time are strongly influenced
by changing social and economic forces. Some of these relationships are discussed below.
Growing

Public

Responsibilities

The accelerating pace of growth and change in recent years has
led to expanding demands for services from the Federal Government.
Over the last decade alone, population increased more than 18%.
The problems associated with even this large growth are understated
if no attention is given to the composition of the total.
First, it is important to note the change in age distribution. Population has increased markedly in age groups which have greater need
for public services—those under 18 or over 65 years of age. These
groups have increased by nearly 30% over the past 10 years, and now
constitute over 45% of our people.
Second, it is equally significant to note sociological changes in the
populace. In this same decade, the number of people living in urban areas has increased more than 30%, and now makes up about 70%
of the population.
These changes in age distribution and location of our people
increase public service demands over and above what total growth,
alone, would require.
The quantitative changes outlined above paint only part of the picture of growing Federal responsibilities. Our society has changed
qualitatively, as well. Our standard of living has risen dramatically
in the last decade. One measure of this increase is real disposable income per capita, which is simply the amount of money available for
private spending after adjustment for taxes, price increases, and population growth. Using this measure, the Nation's standard of living
rose 24% over the past decade. As our level of living increases we not
only desire better private goods and services, but we demand better
public services as well. Just as old automobiles or washing machines
have little appeal, outdated public health or'education practices are also
unacceptable.

14




The soaring workloads of Federal agencies are a reflection of these
steadily increasing pressures for more and better public services. For
example, between 1956 and 1966:
• The volume of mail will have risen over 30%.
• Enrollees in vocational education will have increased by 70%.
• The number of children participating in the school lunch program
will have increased almost 85%.
• The number of veterans pension cases will have increased almost 100%.
• Visits to our national parks will have increased 1 1 5 % .
• Beneficiaries under the social security programs will have increased
160%.
• Active urban renewal projects will have increased about 350%.
• The number of coins minted will have increased almost 560%.
Selected Program Trends
F A A Operations

S o c i a l Security

Million!

OASDI Beneficiaries
Total Landings and
Takeoffs Controlled

Urban Renewal

Bureau of the M i n t

Thousands

— 10

'Projects Underway
Coins Minted

1955
57
Fiscal Years




63

65 66 1955
Estimate

57

63

65 6 6
Estimate

15

Public Use of the Nation's Output

and Labor Force

The reasons for growth in Federal spending are clear. The relative
magnitude of the increase, however, requires some comparisons to
place it in proper perspective. The total national economy and State
and local governments serve as useful measuring rods since they are
subject to demands similar to those affecting the Federal Government.
In the decade ending with fiscal year 1966, Federal cash payments
to the public will have increased by an estimated 76%. Over the same
period, the gross national product ( G N P ) will have risen over 60%.
While Federal payments rose as a proportion of G N P during the first
part of the decade, they are now falling for the third consecutive year,
and in 1966 will drop to less than 19%. Considering only the administrative budget, which excludes the rapidly growing trust funds, the
ratio of Federal spending to G N P will drop to under 1 5 % in 1966, the
lowest ratio in 15 years.
However, both administrative budget and cash figures fail to indicate
the real economic impact of Federal spending largely because they
include transactions which do not affect current output (as explained
on page 55 of this booklet). The national income accounts make
these and other necessary adjustments. Under the national income
definition, Federal purchases of goods and services represent the

Percent

50-

Federal Payments
as a Percent of Gross National Product

fiscal Ycara

16



amount of national production actually used by the Federal Government. In 1956, Federal purchases of goods and services were 1 1 . 1 % of
G N F ; in 1966 they are estimated to decline to about 10%. Like administrative budget expenditures, 1966 Federal purchases will represent
the smallest proportion of GNP in the past /5 years. Aside from
essential spending for defense, Federal use of the national output for
civilian purposes in 1966 will account for less than 2% of GNF.
Over the same decade, State and local governments will have
increased their purchases of current output by about 125%—much
more rapidly than the Federal Government—in trying to meet their
rapidly growing responsibilities.
The same trends are evident for Government employment. While
Federal civilian employment is expected to increase only 5% since 1956,
the total labor force will have increased 12%, and the population more
than 18%. As a result, Federal civilian employment in 1966 will
constitute a smaller proportion of total civilian employment (less than
3.5%) and of total population (1.3%) than a decade earlier. In the
same period, State and local governments have found it necessary to
increase employment by about 50% to meet the demands facing them.
Federal employment, therefore, is also a declining portion of total
government employment—24% in 1966 compared to 32% in 1956.
Civilian Employment

Total, Federal Government, State and Local Government

17
750-738 0 — 8 5




3

Aid to State and Local

Governments

The strains on State and local government resources, implied by
the expenditure and employment growth cited above, create an additional responsibility for the Federal Government—that of assisting
these governments to meet the burgeoning needs of their people.
Federal expenditures to aid State and local governments (including
loans and shared revenue as well as grants) have grown from about
$3.8 billion in 1956 to an estimated $13.6 billion in 1966—an increase
of nearly 260%.
These aids cover a wide variety of activities ranging from airport
construction to urban renewal. In 1966, about half of the funds will
be spent for highways and public assistance.
Federal aids to State and local governments have taken on added
significance in the last decade. As a proportion of total Federal cash
payments to the public, these aid expenditures rose from 5% in 1956
to about 1 1 % currently. Federal funds have also become an important
source of revenue for State and local governments, constituting about
14% of total State-local general revenue in recent years.
Federal expenditures for these purposes insure that essential public
needs are met as local responsibilities, thus maintaining a workable,
cooperative federalism.
Changing Federal Programs

Dynamic changes require dynamic, rather than static, budget programs. A sound program for a decade past .will not meet today's
needs. Federal budgets have responded to the changing nature of
the challenges which confront the Nation.
PERCENTAGE C O M P O S I T I O N OF FEDERAL P A Y M E N T S
[Fiscal years.

Percent of total]

Functions

Health, labor, and welfare; education; and housing and
community development
National defense, space, and interest
Other
Total

l8



1956
actual

1961
actual

1966
estimate

15.2
63.5
21.4

23.4
55.9
20.7

29.3
52.2
18.5

100.0

100.0

100.0

By combining the many functions of the Government into major
categories, significant trends can be seen more readily. The categories
in the table indicate the increasing emphasis which is being placed
on human resource development in 1966—in response to the expanding needs already mentioned, and the quest for national excellence.
Expenditures for all health, labor, welfare, housing, community
development, and education programs have more than trebled in
absolute amount in a decade, now constituting 29% of total Federal
cash outlays.
Payments for defense, space, and interest have risen much less
rapidly. This is particularly true in 1966, when expenditures for
national defense, the largest item, are expected to decline by about $300
million. Space and interest payments, together, will rise by about
$550 million. In the 1966 budget, therefore, these functions continue
to decline as a proportion of total payments.
Other Federal programs include such functions as international
affairs, agriculture, natural resources, commerce and transportation,
veterans, and general government. These programs have grown in
absolute amount, but less rapidly than total payments. Consequently,
they have accounted for a relatively declining proportion of payments.
The Changing Composition of Federal Payments
Percent of Totol

-30

Health, Labor and Welfare,- Education?
Housing and Community Development
5-

1955

1956

Fiscal Years




1957

1958

1959

I960

1961

1962

1963

1964

1965

1966

Estimate

19

P re t
ec n
125

Debt
of Gross National Product

'65 '66
Etfimat*

Public Debt
The public debt of the Federal Government was incurred primarily
to defend the cause of freedom in World War II. About two-thirds
of the present debt level was incurred in the 8-year period from 1939
to 1947. In 1939, the debt was $45.9 billion. By 1947, it had risen
almost sixfold to $258.4 billion. At the end of 1965, it is expected to be
$316.9 billion.
While the debt will increase $5.6 billion in 1966, to $322.5 billion,
it will continue to decline in relation to the size of our economy. As a
percentage of the gross national product, the public debt has declined
sharply since 1947—from 1 1 6 % to less than 50% today. As the economy continues to expand, the public debt should become a continually
smaller proportion of gross national product.
Moreover, Federal debt has grown much more slowly than other
kinds of debt. The national debt has grown only 25% since 1947,
while private debt has risen about 420%, and the debt of State and local
governments almost 600%.

20



Finally, the public debt is mot a drain on national resources because
the vast bulk of it is owed to American taxpayers. On June 30, 1964,
individual Americans directly owned 22% in the form of savings bonds
and other Government securities and shared indirectly in an additional 29% as depositors in banks and savings institutions, and owners
of insurance policies. Another 19% of the debt was owned by agencies
of the Federal Government itself, mostly in the trust funds which
finance such programs as social security and unemployment compensation, and 7 % was held by State and local governments. Only
5 % of the debt was owed to foreign citizens.
Net Public and Private Debt




21

Additions to Federal Assets -

O t h e r Than Defense a n d

Space

$ Billions

Loans and
Financial
Other

Other State-Local

Investments

Assets

Works

D i r e c t Federal
Public W o r k s
H i g h w a y Grants
t o States

RECEIPTS

FEDERAL P A Y M E N T S

mmmmmmm•

Investment

In assessing financial position, it is important to consider assets as
well as liabilities. While the Federal Government does not budget
separately for capital investments and current operating expenses, data
are made available in the budget to identify those expenditures which
are of an investment nature. These expenditures add to our supply
of assets and produce benefits which extend over many years. Examples are the construction of highways and other public works,
loans to finance housing, and grants to build hospitals. In 1966,
net Federal investment expenditures, other than defense and space, will
total $9.1 billion.
Outlays for other developmental purposes are also grouped and
shown separately, since they also yield benefits over many years.
These will total $5.8 billion in 1966 for such programs as education,
training, health, and research.
Net expenditures for investment and other developmental purposes
in 1966 will constitute 11.7% of total Federal payments and over 20%
of outlays excluding defense and space.

22



PART 2

THE BUDGET PROGRAM BY FUNCTION
For budget purposes, the many activities conducted by
the Federal Government are arranged in 12 functional
categories, as summarized in this section and shown on
the chart below.' All programs serving the same general
purpose are grouped together, even when they are carried
on by different agencies.
The only activities not classified by purpose are those
covered under special allowances, which are estimated at
$507 million in 1966. These allowances provide for the
promotion of economic development of the Appalachian
region, and for contingencies. The allowance for contingencies does not encompass specific appropriation
requests proposed by the budget, but rather assures that
there is flexibility within the budget totals for "supplemental" requests if the need should arise.
1966 Expenditures by Function
$ Billions
20

30

40

50

60

N a t i o n a l Defense
H e a l t h , Labor, a n d
Welfare

Administrative Budget
Trust Funds

Interest
Commerce a n d
Transportation
Veterans
S p a c e Research a n d
Technology
A g r i c u l t u r e — Not Including
Food for Peace
I n t e r n a t i o n a l — Including
Food for Peace
N a t u r a l Resources
Education
General Government
Housing and Community
Development

1

The

fibres

d o r o t a d d t o t h e net t o t a l of F e d e r a l p a y m e n t s t o t h e p u b l i c , l a r g e l y b e c a u s e s o m e t r a n s a c t i o n s

which take place wholly between one G o v e r n m e n t agency and another, have not been eliminated.




23

N A T I O N A L DEFENSE
/ Administrative Budget . .
c
1 9 6 6 Expenditures j T n j f | F u n d $
*

$51.6
$

1 Q

Billion
„ion

Bj

America maintains the most powerful military forces in the world.
These forces are capable of an effective response to any form of
aggression—ranging from local insurgency to general nuclear war—
anywhere in the world. Although great advances in our military
strength and readiness have been made in the past few years, further
improvements are needed to insure our continued superiority over all
potential aggressors.
However, it is now possible to maintain and improve our forces
without increasing defense outlays each year. In fact, estimated expenditures are declining, from $54.7 billion in 1964 to $53.0 billion in
1965 and to $52.6 billion in 1966. These reductions are possible because
of gains already made in our defense and atomic energy programs,
vigorous cost reduction efforts, and prompt retirement of older weapons
systems no longer needed. The estimated expenditures for 1966 include
$47.9 billion for military activities of the Department of Defense, $2.1
billion for military assistance, $2.5 billion for atomic energy programs,
and $48 million for other defense-related activities.
Department of

Defense—Military

The Department of Defense carries out eight major programs which
provide the balanced military strength required for the security of the
Nation:
( 1 ) Strategic retaliatory forces, including intercontinental ballistic
missiles, Polaris missile-launching submarines, and manned bombers,
along with the facilities—such as communications—required to control
these forces.
(2) Continental defense forces, combining systems to warn against
attack, weapons (such as interceptor aircraft and ground-to-air missiles) needed to resist an attack, and civil defense shelters to increase
chances of survival from attack.
(3) General-purpose forces, including ground, sea, and air forces
equipped and trained to cope with conventional or brush-fire wars.
(4) Airlift and sealift forces, including the ships and planes designed
to move our combat forces rapidly wherever needed.

24



(5) Reserve forces, comprising units intended to augment the regular forces swiftly when needed.
(6) Research and development activities, providing the new weapons and techniques on which the effectiveness of all forces depends.
(7) General support activities, including training, intelligence,
security, Defense-wide supply, housing, and medical care for military
personnel.
(8) Retirement pay for military personnel.
To carry out these programs, the Department of Defense will make
expenditures to pay military personnel, purchase equipment, operate
and maintain equipment and facilities, conduct research and development, and build necessary facilities.
National Defense

Administrative

Budget

$

^im

Trust Funds

MILLIONS

DEPARTMENT OF DEFENSE-MILITARY

Military Personnel
Purchase of Weapons and Equipment
Operation and Maintenance

5,400
Research and Development
m

,326

Military Construction, Civil Defense, and Other

ATOMIC ENERGY
•

N

H

2.530

MILITARY ASSISTANCE

•|KQ76
DEFENSE-RELATED ACTIVITIES
| 48

Military personnel.—Active
duty personnel of the Army, Navy,
Marine Corps, and Air Force will total 2.6 million at the end of 1966.
The reserve components of those services will decline to 869,300 in paid
drill status, primarily because of the planned realignment of the Army
Reserve and Army National Guard. This realignment is designed
to increase the combat power and readiness of the Army reserve
components.

25
759-738 O— 65




4

Purchase of weapons and equipment.—We
now have more than
850 intercontinental strategic missiles, over 900 long-range bombers,
and 22 Polaris submarines (each able to carry 16 missiles). These
forces represent a strong deterrent to nuclear attack. The 1966 budget
provides for further improvements through procurement of newer versions of Minuteman and Polaris missiles. Our flexible general-purpose
forces will be strengthened through the acquisition of advanced tactical fighters and airlift aircraft, antisubmarine and amphibious warfare ships, and other modern weapons, munitions, and equipment.
Operation and maintenance.—The
costs of operating and maintaining equipment and facilities will decline slightly in 1966, primarily
because of cost reduction efforts (including base closings), and the
gradual elimination of older, less economical weapons.
We cannot afford second-best defense forces. Neither can we
afford to be wasteful.—From the President's Budget Message,
January 25, 1965.
Research
and development.—Expenditures
for research and
development will decline by $300 million in 1966, primarily because
the development of a number of large weapons systems has been virtually completed. Increasing emphasis is being placed on developing
improvements for these systems and on laying the basic groundwork
for new strategic weapons. A number of tactical and limited war
weapons will also be given more support. Current projects include work on a large booster rocket for the space program, various
antisubmarine warfare systems, and a new battle tank. Development
will continue on the C-5A, an airplane able to carry large loads very
economically and land on relatively short airfields. It will have the
largest cargo capacity of any plane ever built.
Military construction, civil defense, and other.—The 1966 budget
contains a number of military construction projects, including troop
housing, administrative facilities, and research and development facilities. The budget also proposes construction of 12,500 new family
housing units for military personnel.

26



The 1966 civil defense program concentrates on increasing the capacity of existing shelters, encouraging the inclusion of shelter space
in new buildings, continuing the nationwide shelter survey, and providing necessary training, provisions, and equipment.
Atomic Energy
The Atomic Energy Commission is responsible for developing and
manufacturing nuclear weapons, pursuing other military uses for nuclear energy, adapting atomic energy to peaceful uses, and conducting
basic research. Expenditures in 1966 will fall by $170 million to $2.5
billion, as the procurement of uranium and production of special
nuclear materials decline. Continued emphasis will be given to the
civilian nuclear power program and physical and biomedical research.
The Commission will assist non-Federal groups to build two advanced
power reactors in 1966 to improve the use of nuclear fuels. Development efforts will also continue on the long-range objective of the
civilian power program—"high-gain breeder" power reactors which
produce significantly more fuel than they consume. Work on the
peaceful application of nuclear explosives (Project Plowshare) and of
isotopes will continue in 1966.
Military

Assistance

Military assistance to more than 60 allied and friendly nations is a
recognition of the benefits derived from united resistance to aggression.
The 1966 program concentrates almost three-quarters of our military
assistance in 11 nations forming an arc around the southern and eastern
flanks of the Sino-Soviet bloc—Greece, Turkey, Iran, Pakistan, India,
Thailand, Laos, Vietnam, the Philippines, and the Republics of China
and Korea. In the developing nations of Africa and Latin America,
the program strives to strengthen internal security and to promote
productive use of local military personnel through civic action projects
(such as road and school construction).
Defense-Related Services
These programs include the Selective Service System, the strategic
and critical materials stockpile, the expansion of defense production,
and emergency preparedness programs outside the Department of
Defense.




27

INTERNATIONAL AFFAIRS A N D FINANCE
j-*
J Administrative Budget . .
c
3
1 9 6 6 Expenditures ( T r u s t F u n < J s

$ 4 . 0 Billion 1
3 Bi||jon

$Q

The Nation's international programs promote peace, stability, and
progress in an increasingly interdependent world. Efforts to strengthen the economies of developing nations—through economic and technical aid administered by the Agency for International Development—
account for the bulk of expenditures. The Department of State promotes the foreign policy interests of the United States and the free
world through direction of our foreign relations. The United States
Information Agency promotes international understanding of our people, our guiding philosophy, and our positions on world issues through
overseas information and exchange programs.
Conduct of Foreign Affairs
High caliber representation abroad and in international organizations is a continuing need for a world power—a need which grows
with the complexity of international relations. Five years ago the
State Department maintained diplomatic and consular posts in 82 countries; today it maintains representatives in 1 1 3 countries.
Economic and Financial Programs
Throughout the world, millions of people live in extreme poverty,
amid the social and political unrest which such poverty breeds. Our
economic and financial programs assist developing nations to build
healthy economies and to strengthen their political independence.
These assistance programs both require and encourage increasing local
initiative and self-help, attributes which are crucial to any nation's
development.

Development

loans and technical

cooperation.—Long-term

loans are made at low rates of interest to supplement local resources
for such key activities as the construction of schools and transportation facilities. Equally vital support is provided in the form of technical assistance in such important areas as agriculture, education, and
1
Includes Food for Pcace expenditures formerly classified as Agriculture and Agricultural
Resources.

28



health. In addition, the Federal Government enlists the support of
the American business community for development by guaranteeing
private overseas investment against certain types of losses.
Alliance for Progress,—The Alliance for Progress encourages the
economic and social reforms needed to accelerate economic growth in
Latin America. Sustained efforts by many of these nations warrant an
expansion of our assistance in 1966, to take advantage of opportunities
for significant economic and social advancement.
International Affairs and Finance

Nt Ree^ptl
e

I

H i AdminMntin M s *
Net i*penditures

I^WfWi
f

MILLIONS

Food for Ptacc

870

Economic a n d
Financial

Proframi

c

Supporting assistance.—The United States provides commodities,
equipment, and technical advice to counter threats to political and
economic stability in countries vital to the security of the free w o r l d such as Vietnam.
Other programs,—Several other programs give additional support
to U.S. development efforts:
• At the end of 1966, the Peace Corps will have 17,000 people working or training for service in 46 developing countries.
• The Export-Import Bank will continue to finance and insure
U.S. exports, while selling a participating interest in loans to private
U.S. investors. Receipts from these sales and loan repayments will
exceed expenditures in 1966,




29

• International organizations to which the United States contributes, such as the International Development Association and the
Inter-American Development Bank, will continue their important
development financing activities through increased contributions
from the United States and other nations.
Food for Peace
The Food for Peace program makes available our surplus agricultural commodities to help feed hungry people around the world. Estimated expenditures will be $1.7 billion in 1966—the same level as in
1965.
Foreign Information and Exchange Activities
The Department of State and the U.S. Information Agency conduct
a wide variety of activities to promote better understanding of our
Nation and our foreign policy. These include the use of motion
pictures, radio and television broadcasts, cultural and educational
exchange activities, and book translation programs. Continuing
emphasis is being given to developing areas, especially Africa.

SPACE RESEARCH A N D TECHNOLOGY
1 9 6 6 Administrative Budget Expenditures: $ 5 . 1 Billion

The goal of our space program is to secure the benefits of world leadership in space exploration and in scientific knowledge and technology.
The Nation's balanced, comprehensive program to attain this goal in
eludes scientific expeditions into space by manned and unmanned vehicles, further development of satellites for weather forecasting and
other purposes, and extensive supporting research and development.
These activities will not only contribute to the advancement of scientific knowledge and our immediate objectives in space exploration, but
will also provide many useful civilian and military applications. The
largest single effort is focused on achieving a manned round trip to
the moon by the end of this decade.
Because of the momentum already achieved in these programs, expenditures are estimated to increase by $200 million in 1966—compared
to average annual increases of about $ 1 billion over the past 4 years.

30



Manned space flight.—The manned lunar landing program will
continue to spend two-thirds of the funds devoted to space purposes.
Manned flights of two-man Gemini spacecraft will he conducted to
gain training and experience for the lunar program. Testing will
also continue on the Saturn I rocket, which has flown successfully
seven times in seven attempts. Added support will be given the threeman Apollo spacecraft and the Saturn V rocket—the two principal
components of the actual lunar vehicle.
Space Research and Technology
J

MILLIONS

3,386

Meteorology, Communications, and Other Space Applications

^^^ppHMIIBHHHHHHI904
Other Research, Technology a n d Supporting Operations

Scientific investigations
in space.—In 1966, an important new
program of space exploration will be undertaken. Voyager spacecraft—following up the current Mariner photographic mission—will
be developed to carry scientific and life detection instruments to Mars.
In addition, Surveyor and Lunar Orbiter spacecraft will photograph
and relay other information about the moon's surface preparatory to
a manned landing.

Meteorology,

communications,

and other space

applications.—

Additional development of weather forecasting by satellite will be
undertaken, using the highly successful Tiros satellite and the larger
Nimbus version. Versatile Advanced Technology Satellites will be
developed for experiments on a variety of space applications—such as
communications, meteorology, and space science.

Other research, technology, and supporting

operations.—These

activities provide for the maintenance and long-term improvement
of our ability to master space. They include the worldwide tracking
system and a broad program of supporting research in space technology and aeronautics.




31

AGRICULTURE A N D AGRICULTURAL RESOURCES
1966

Expenditures {

;;

f j *

High agricultural productivity is one of the Nation's greatest achievements. However, one result of the great strides made in increasing
American agricultural efficiency has been a progressive reduction in
the number of people needed in farming. Because fewer families can
now expect to earn a living from agriculture alone, a large number of
lower income farm families need to find new employment or supplement their present farming incomes, if they are to share more fully
in our national prosperity.
During 1966, about two-thirds of Federal expenditures for agricultural programs will be for the stabilization of farm income and related
purposes. Other programs designed to benefit rural families will encourage further improvement of rural electric power and telephone
services, provide insurance for rural housing loans, and increase the
emphasis on providing better economic opportunities in rural areas.
Farm income stabilization.—Expenditures in 1966 for farm income stabilization—estimated at $2.7 billion—are $387 million less
than in 1965. (This figure excludes the Food for Peace program,
which is discussed on page 30.) Part of the decrease results from
changes in the price support programs for feed grains, cotton, and
rice. The Secretary of Agriculture will conduct a comprehensive
review of farm policies, in an effort to design programs that will continue the national benefits from our highly efficient commercial agriculture and bolster farm income, while reducing the burden on the
Federal budget and directing more of our effort to the problems of
low-income farmers.
Farming and rural housing loans.—The Farmers Home Administration makes direct Federal loans and insures private loans to meet
the special credit needs associated with farming and rural life. Legislation is proposed to supplement direct rural housing loans with larger
amounts of insured private credit. Increased emphasis will also be
placed on better housing for domestic farm labor.
Agricultural land and water resources.—Under the agricultural
conservation program, the Government shares with farmers the cost
of a number of conservation practices that are in the long-run public
32



interest. In 1966, expenditures under the watershed protection program will finance the Federal share of 280 on-going watershed projects
and 70 new ones.
Rural electrification
and telephone
loans,—The Rural Electrification Administration makes low-interest loans to furnish and
improve electric and telephone services in rural areas. While only
38% of our farms had telephone service in 1950, approximately 79%
now have such service. Reduced expenditures for both programs in
1965 and 1966 reflect proposed legislation which would authorize the
use of collections on outstanding loans to help finance new loans.
Agriculture and Agricultural Resources

H Adminiftrativt

1

Budget

$

Trust

Funds

MILLIONS

1 Farm income Stabilization

Iftlmning and Rural Housing Loans

I Agricultural Land and Water Resources

I Rural Electrification and Rural Telephone Loans

I Research and Other Agricultural Services

Research and other agricultural
services,—Special
emphasis will
be given to research and regulatory programs of the Department of
Agriculture in 1966. Particular stress will be placed on research on
environmental problems, such as pesticides and toxic molds.
T o finance the costs of Federal meat and poultry inspections—which
enhance the value of these products—a system of user fees is being
proposed.
NATURAL

RESOURCES

1 9 6 6 Expenditures {

The prudent use and development of our vast resource endowment
are essential to future national strength.
Land, water, and power resources.—These
programs account for
about two-thirds of natural resources expenditures and cover a wide
759-738 0 — 6 5 — 5




33

range of activities. They represent national investments in flood control, irrigation, water supply, navigation, power development, and
recreation which yield dividends long after their costs have been repaid.
The Corps of Engineers will spend an estimated $1.2 billion in
1966 to carry forward present projects and to start 37 new ones. The
Bureau of Reclamation will begin nine additional projects. The Tennessee Valley Authority will start four new water resource projects
and a $150 million steam electric generating plant.
High priority will be placed on research to advance the technology
for desalting water. Work also will progress on the Pacific Northwest-Southwest Intertie, which will benefit n Western States by tying
together certain private and public power systems.
Natural Resources
I

Administrative

Budget

Trust

f

Funds

MILLIONS

1 Land, Water and Power Resource*

BMHHHMflH 3 8 7
• Forests

HflBl197

1 Recreational Resources

W

|U

p i s T o n d Wildlife
• g i n
I Minerals

Hi

193

1 General Resource Surveys and Other

The Bureau ©f Land Management is responsible for the administration of grazing, forestry, and mineral leasing conducted on 464 million acres of public lands in the Western States and in Alaska.
Through the Bureau of Indian Affairs, the Federal Government
finances programs to improve the economic and social conditions of
380,000 American Indians. Two-thirds of this assistance is in the
form of educational programs. In 1966, industrial development programs for Indians will be expanded and vocational training programs
extended to include 5,400 participants.
Forest resources.—Our national forests—comprising a total area
larger than the State of Texas—will be further improved in 1966 by
augmenting timber quality, building access roads, and advancing
34




research on the uses and marketing of forest products. Additional
recreation facilities will also be provided to help meet the needs of
the 154 million visitors expected in 1966.
Recreational resources.—As the Nation increases in population
and becomes more urbanized, there is a correspondingly growing need
to provide for suitable outdoor recreation. For example, approximately 118 million visits will be made to the national parks in 1966—
twice as many as in 1957. Accordingly, the budget provides for continued development of the national park system. In addition, financed
through the recently established Land and Water Conservation Fund,
new Federal recreation areas will be acquired and a new grant program
started to help States acquire and develop recreation areas.
Minerals, fish, wildlife, and other.—More than 30 million Americans who participate in sport fishing and hunting will benefit from the
88 fish hatcheries and 315 wildlife refuges operated by the Federal
Government in 1966. In addition, the budget includes an expanded
program to assist in the construction of commercial fishing vessels.
To conserve another scarce resource, the budget proposes that the
Federal Government enter into additional long-term contracts to
purchase helium.
COMMERCE A N D TRANSPORTATION
1966 Expenditure, {

»

Billion

The Federal Government assists private businesses in many ways that
further the Nation's economic growth and stability. These measures
include direct aid to businesses and to areas with special problems, and
indirect aid to all businesses through improvement of transportation
and communication facilities. The Federal Government also promotes both the public and private interest by encouraging effective
competition and by regulating key industries where competition is not
fully effective.
Transportation

Fast, safe, and economical transportation is essential to the Nation's
economic growth and to the needs of our increasingly mobile population. If the Nation is to have such a system, Federal transportation




35

programs must be revised to place greater emphasis on the forces of
free competition. New and increased user charges to insure that beneficiaries of special Government services pay their fair share are consistent with this objective.
Highways.—The
highway program, which accounts for about
60% of commerce and transportation outlays, is financed primarily
by user charges. Revised highway taxes are recommended this year
to permit adequate progress on Federal-aid highway construction while
preserving the "pay-as-you-build" status of the highway trust fund.
This fund is financed through receipts from taxes on gasoline and
other items related to highway use. In 1966, payments from the fund
are estimated at about $3.9 billion. The accompanying chart shows the
significant rise in expenditures from this trust fund since 1957. Most
of the outlays are for the 41,000-mile Interstate Highway System, of
which over 17,000 miles have already been completed and an additional 18,000 miles are in various stages of development. Federal
aid for primary and secondary highways accounts for nearly $1 billion
in 1966—about one-quarter of total Federal outlays for highways.
Special efforts will be made to enhance the scenic and recreational
aspects of our highway system.
Commerce and Transportation

S Billion*
-8

Total

Expenditures

Trust Fund Expenditures,
M a i n l v Hiqhwavs

0
1964
Fiscal Years

36



1965
1966
Estimate

Commerce and Transportation
Net Receipts

Administrative

Net Expenditures

Budgtt

t

^ ^

Trust Funds

MILLIONS
3,918

Postal Service
261

Area Redevelopment

I128
Advancement of Business

212

Regulation of Business
Federal D e p o s i t Insurance

Corporation

Aviation.—The
Federal Aviation Agency will continue to modernize and automate its traffic control services, while at the same time
reducing its expenditures by $31 million from the 1965 level—primarily
by eliminating marginal facilities and increasing productivity.
Water transportation.—Both operating and construction subsidies
are paid to maintain the competitiveness of our ocean shipping industry.
This objective will be further served in 1966 through installation of
automated equipment in 42 ships—the 16 new ships to be added to the
fleet in 1966 and 26 ships already in operation. In addition, the Coast
Guard will accelerate its replacement of obsolete ships so as to perform
better its search-and-rescue and other missions.
Postal Services
Expenditures of the Post Office are estimated to exceed revenue by
$>714 million in 1966. The largest part of the revenue deficiency represents the cost of providing public services not chargeable to users of
the postal service. The remaining $234 million, the postal deficit, is
the loss sustained by the Post Office in its regular operations. Further
improvements in postal efficiency and better service are expected in
1966 from increased sorting and distribution by ZIP code.




37

Advancement of Business
The Department of Commerce assists American business mainly
by providing civilian research and technology aids, weather information, census and economic data, and export encouragement. In 1966,
the Weather Bureau expects to initiate regular reports of worldwide
weather conditions through observations made by meteorological
satellites. Programs to encourage exports will be further augmented.
These measures will help continue the current rapid expansion of
American exports—thus further improving the Nation's balance of
payments position.
The Small Business Administration ( S B A ) will continue to provide
loans and other aids to credit-worthy small businesses which are unable
to obtain funds elsewhere on reasonable terms. An estimated $85
million in loans are now being disbursed to assist earthquake-stricken
Alaska. In 1966, increased loans will be made to very small businesses
under the antipoverty program as well as to those displaced by federally aided construction. However, the projected sale to the public
of shares in a pool of SBA loans—proposed in order to achieve greater
private financing—is expected to cause receipts for all S B A programs
to exceed expenditures in 1966 by an estimated $195 million.
Area

Redevelopment

The Area Redevelopment Administration finances a variety of programs designed to attract new firms to communities in depressed areas
and to help these communities and regions increase job opportunities
for their people. Legislation is proposed to extend and improve the
program in 1966.

HOUSING A N D COMMUNITY DEVELOPMENT
...
\ Administrative Budget..
c
1 9 6 6 Expenditures ( T r u s f F u n d $

$0.01
$Q 8

Billion
Bj||ion

A decent home and a suitable living environment for every American family is a national goal. T o help achieve this aim, the Federal
Government extends financial assistance in forms which encourage
maximum participation by private investors and by other levels of
government. Federal assistance consists of grants, loans, purchases
of mortgages, and insurance of private loans and savings and loan

38



accounts. To assure effective leadership for a strengthened attack on
urban problems, the President has proposed a new Department of
Housing and Urban Development.
Urb an Renewal

and

Community

Facilities

Federal programs help stimulate local efforts to improve our communities and to halt urban blight. Completed urban renewal projects
are expected to rise by the end of 1966 to 162. Another 1,600 projects
will be in process or being planned. Grants for urban planning, which
help local communities shape their future growth, will almost triple
in 1966. Other grants, under newly enacted legislation, will help to
revitalize urban mass transportation. In addition, grants will continue
to be made to encourage acquisition of undeveloped urban land to help
shape city growth. Legislation is proposed to provide grants for basic
community facilities in rapidly growing metropolitan areas.
Housing and Community Development

Administrative

Budget

jffifo

$

Trust Funds

MILLIONS

Net Expenditures

509
Urban Renewal a n d Community Facilities
236
Public Housing
150
Federal Home L o a n Banks
A i d s to
Corporation

Private
Housing

Public

178

Housing

Programs

The Public Housing Administration assists local housing authorities
to provide decent, safe, and sanitary housing for low-income families.
Additional authority will be proposed for almost 200,000 more housing
units over the next 4 years.




39

Aids to Private Housing

The Federal Government fosters better housing for the Nation primarily by assuring the availability of private credit on reasonable terms.
The methods used are largely or wholly self-supporting. They may
generate more receipts than expenditures, as in both 1965 and the
current fiscal year.
Federal Savings and Loan Insurance Corporation.—Federal insurance of savings and loan accounts encourages individual savers to
pool their funds for home mortgage lending. This provides the largest
single source of funds for private housing. Premiums charged for
Federal insurance and other income will exceed estimated expenditures in 1966 by $336 million, permitting the Corporation to strengthen
its reserve position.
Federal home loan banks.—The 12 home loan banks supplement
private funds available for financing home mortgages. They accomplish this by lending money to member savings and loan associations
which experience loan demands temporarily greater than they can
meet.
Federal Housing Administration.—To
improve housing conditions and to broaden home ownership, the Federal Housing Administration insures certain housing loans against loss—thus encouraging
private financing. In 1966, federally insured loan funds will be used
to construct or purchase an estimated 570,000 houses and apartments,
and to modernize or improve another 665,000 houses. Receipts (mainly from insurance premiums and sales of acquired properties and
mortgages) will exceed expenditures by $127 million.
Federal National Mortgage Association.—The Federal National
Mortgage Association influences the supply of funds for private housing by buying and selling federally insured or guaranteed mortgages.
The new program of selling shares in pools of mortgages in order to
encourage increased participation by private investors has been
popular and successful. In 1966, the Association will have enough
receipts to pay for all current operations as well as repay some previous
borrowings.
40



Other aids to private housing.—In
1966, loans will help rehabilitate private housing in urban renewal areas. Legislation is being
proposed to help more people with moderate incomes obtain suitable
housing.
National Capital

Region

The government of the District of Columbia provides both State
and local services for the businesses and residents of the National
Capital. As the major industry of the District, the Federal Government recognizes a special responsibility to bear its proper share of the
costs of these services, as well as to provide long-term loans for needed
capital improvements. New legislation and additional funds will be
sought this year to provide for these expanding needs.

HEALTH, LABOR, A N D WELFARE
ifl// c
j-i
[ Administrative Budget • •
3
1966 Expenditures ( J r u $ t F u n d $

$8.3 Billion
$26 5

Bi||jon

Federal health, labor, and welfare programs play a major role in
promoting the well-being and independence of the American people.
More than 75% of the expenditures in this category will support social
insurance programs which help to protect families against loss of income due to the retirement, unemployment, disability, or death of the
family breadwinner. These programs are self-financed through trust
funds, the rising benefit payments of which are shown on the chart on
page 42.
A record increase of over $5 billion in 1966 for all health, labor, and
welfare programs will provide the resources to carry the war on
poverty into its second year of operation, to increase social security
benefits, and to augment health and other measures for developing
human resources.
Economic opportunity
programs.—Last
year, an unprecedented
national effort was launched to attack the sources of poverty in the
United States. In 1966, estimated expenditures of $1.3 billion will
be made to help break the vicious cycle whereby one generation's
poverty, ignorance, and disease breed the same appalling conditions
for the next. Economic opportunity programs are thus aimed particularly at the younger generation—raising their educational, skill,
and health levels, and increasing their job opportunities.




4i

The organizations and methods used in this attack on poverty are
flexible and varied. Community action programs will coordinate and
focus local leadership and resources on the problem in about 300
communities in 1966. Job Corps and wor\ and training programs
attack directly the problems associated with unemployment—providing useful work, remedial education, and vocational training for about
330,000 young men and women and about 110,000 employable adults.
Other programs include jobs for needy college students, aid to migrant
workers, loans to farmers and other rural families, assistance to the
States for literacy training, and services to the poor provided by 5,000
Volunteers in Service to America ( V I S T A ) .
Social insurance.—In 1966, an estimated $23.2 billion in benefits
will be provided to the retired, the disabled, or their survivors under
self-financed insurance and retirement programs which cover more
than 90% of the Nation's workers and their families. The old-age,
survivors, and disability insurance trust fund is the largest, and will
Health, Labor, and W e l f a r e
S Billions

42



Health, Labor, and Welfare

t

$

f | | Trust Funds

MILLIONS

Social Security, Unemployment, and Retirement Benefits

3,499
Public Assistance
2,191

Health Services and Research

|1,346
Economic Opportunity Act Programs

jl|||'-091
Labor a n d Manpower Services

| '02
School Lunch, Special Milk, and Food Stamp Programs

132*

spend approximately $20.4 billion. Benefits to railroad and Federal
employees from special trust funds will be about $2.8 billion.
Legislation is recommended this year to increase social security benefits by about 7% and to establish an insurance program to assist the aged
in paying the heavy costs of hospital and nursing home care. Hospital
care for the 15% of the aged who are not eligible for social security
or other Federal insurance benefits will be financed from the administrative budget. Hospital benefits will begin in fiscal year 1967.
To provide income during periods of unemployment, a cooperative
Federal-State system of unemployment compensation was set up 30
years ago. Expenditures from the unemployment insurance trust
fund will total nearly $3.3 billion in 1966. Legislation will be proposed to strengthen the unemployment insurance system by broadening the coverage, establishing minimum standards for level and duration of payments, and establishing a new separate Federal program
of extended benefits for the long-term unemployed.
Public assistance.—Grants to States for public assistance in 1966
will help meet the most basic needs—food, clothing, shelter, and medical care—of almost 8 million of our poorest citizens. Legislation is
proposed to increase the existing low levels of public assistance payments and to expand medical assistance for children in poor families.
Continuing emphasis will be placed on encouraging public assistance
recipients to become self-sufficient.




4J

Health services and research.—An estimated $2.2 billion will be
spent this year to safeguard and further improve the mental and
physical health of our people. This increase of about 20% over 1965
will provide funds for expanded research, training, construction of
facilities, and consumer protection activities.
The Federal Government will spend about $1.3 billion for health
research and facilities in 1966—approximately two-thirds of the Nation's total expenditures for this purpose. One-half of the Federal
funds will support research in universities.
A new program of multipurpose regional medical centers is proposed for 1966. These regional centers will provide the modern specialized resources needed to combat such major diseases as heart disease,
stroke, and cancer.
In 1963, the Federal Government undertook a program to encourage
training of the larger numbers of health personnel which our growing
population needs. Financial assistance to medical and dental schools
and students is designed to increase the number of medical school
graduates by 50% and to double the number of dental school graduates over the next 10 years. Further measures are proposed this year
to help defray the mounting costs of operating medical and dental
schools, and to provide scholarships for needy students.
Under recent amendments to the Hill-Burton hospital construction
program, measures are being taken to modernize older general hospitals
and to help provide nursing home facilities for the chronically ill and
aged.
An increased attack on mental illness and mental retardation has
been launched under legislation enacted in 1963. An estimated $455
million will be spent by the Department of Health, Education, and
Welfare in these two areas in 1966, a 39% increase over the level in
1964.
Expenditures of $248 million are estimated for 1966 to combat health
hazards caused by air and water pollution, contaminated soils and
foods, and unsafe drugs.
Labor and manpower.—The manpower activities of the Department of Labor play an important role in our economy by helping
workers acquire needed skills and find jobs.

44




In its 3-year life, the Manpower Development and Training Act has
become an important tool in helping the unemployed equip themselves to meet today's job requirements. In 1966, approximately
260,000 workers will receive training for productive employment—
bringing the total number of persons receiving training under the program to an estimated 700,000.
The 1,900 local offices of the Federal-State employment service match
the abilities of workers with skills needed by employers. Resulting
nonagricultural job placements are estimated to increase by about 38%
between 1961 and 1966. Counseling services are being expanded, particularly for disadvantaged youth.
Other welfare services.—In 1966, the Federal-State vocational
rehabilitation program will restore an estimated 145,000 persons to
employability. The Department of Agriculture will spend an estimated $302 million in 1966 for school lunch and special milk programs
to improve the well-being of many American children. The food
stamp program will provide food for more than 1 million needy
people in 1966.
EDUCATION
1966 Administrative Budget Expenditures: $2.7 Billion

Education enriches the life of the individual and is essential to the
freedom, economic growth, and welfare of our society. While education is properly the primary responsibility of State, local, and private institutions, the Federal Government must provide increased
help to assure that educational objectives critical to the national interest
are being met. Recognizing this responsibility, the Federal Government is greatly expanding its financial assistance to education. Expenditures for new and existing education programs in 1966 are estimated at $2.7 billion—an increase of more than 75% over 1965.
About one-third of the increased expenditures will carry forward the
programs enacted by the last Congress—mainly for vocational and
higher education. Another $600 million will be spent for essential
new programs under $1.5 billion of proposed new spending authority.
These programs will stress innovation in and support for elementary
and secondary education, especially for children in economically disadvantaged areas. Opportunities in higher education will also be ex-




45

paneled—particularly for students from low-income families—and institutions of higher learning will be strengthened.

Assistance for elementary and secondary education.—In addition
to expenditures of $500 million under new programs, the Government
will spend $368 million in 1966 for continued assistance to schools in
areas where enrollments are increased by children of Federal employees. Under the National Defense Education Act, $103 million will
be spent for counseling and testing programs and for new equipment.
Last year that act was broadened to cover five new subject areas: history, civics, geography, English, and remedial reading.
Education

|H|

Administratise

Budge*

Trust

Funds

Assistance
for higher education.—In
an effort to meet the
demands of rising college enrollments, expenditures of $165 million
will be made in 1966 for loans and grants to colleges for construction
of classrooms, libraries, and laboratories under the Higher Education
Facilities Act of 1963. Estimated expenditures of $265 million will
be made for loans under the college housing program. In addition,
340,000 students will receive loans totaling $180 million under the
National Defense Education Act. Expenditures under the new legislation are estimated to be $100 million.

Assistance to science education and basic research.—The National Science Foundation continues to perform a vital role in expanding science education and basic research. Expenditures of the
Foundation are expected to increase nearly 25% in 1966—to a level of
$405 million. This increase will permit the continued orderly expansion of Federal support for research in universities to offset the de-

46



dining growth rate of the more specialized research programs conducted by other Federal agencies. The Foundation will also help
overcome the shortage of trained scientific personnel by aiding 8,800
graduate students in the sciences, by sponsoring institutes for training
45,000 science teachers, and by pursuing related programs designed to
strengthen college and university science faculties.
Other aids to education.—Vocational education is essential for the
65% of the Nation's young people who will not attend college and for
workers whose skills are made obsolete by rapid economic change. To
meet this challenge, the Office of Education will more than double its
outlays for vocational education in 1966 to $186 million. Other educational aids include educational research, construction of educational
television facilities, training for teachers of the handicapped, and grants
for the construction and operation of libraries.
VETERANS BENEFITS A N D SERVICES
c _
/ Administrative Budget • .
1966 Expend,tures ( T r u $ f F o n d $
*

$4.6 Billion
$Q 5

Bi||ion

The Federal Government provides special benefits and services for
the veterans of the Nation's wars or their survivors. The major continuing programs for veterans—compensation, pensions, and medical
and hospital care—will be continued in 1966 at about their present
record levels. However, total payments for veterans programs will
decline by an estimated $0.9 billion from 1965, primarily as a result
of increased sales of housing loans and mortgages—including shares
in pools of loans—held by the Veterans Administration.
Compensation.—Compensation payments are made to approximately 2.4 million veterans or to their survivors for disability or death
arising from military service.
Pensions.—Payments are made to lower-income veterans or their
survivors for disability or death from causes not related to military
service. In 1966, these payments—totaling an estimated $1.8 billion—
will be made to about 2.1 million recipients. World War I pensioners
and their survivors will receive nearly 70% of the total. However,
an increasing number of World War II and Korean veterans or their
survivors are now becoming eligible for pensions.




47

V e t e rans Benefits and Services

Administrative

Budget

$

%%%Trust

Funds

MILLIONS

2,100

1,827

1.315

-863

Hospitals and medical care.—These expenditures provide hospital
and medical care for an average of 138,802 beneficiaries per day. They
also provide for continued improvement in the quality of medical
care and for the sixth step of a 15-year program for modernizing the
125,000-bed veterans hospital system.
'Loan
guarantee and
Veterans Administration will guarantee an estimated 170,000 housing
loans for eligible veterans. The Administration will also make 10,000
direct loans to veterans in rural areas and small towns where adequate
credit is not generally available. New loan guarantees and direct
loans are declining as fewer veterans remain eligible for these services.
Increased 1966 sales of properties and loans held by the Veterans
Administration will result in an excess of receipts over expenditures
in the housing program.
Education and training benefits.—Expenditures
for veterans
education and training will decline further in 1966 as the program for
veterans of the Korean conflict terminates on January 31, 1965. The
number of war orphans and children of totally disabled veterans receiving education and training is estimated to increase slightly to 17,100
in 1966.
Other benefits and services.—The National Service and U.S.
Government life insurance trust funds finance about 5 million life insurance policies, primarily for veterans of World Wars I and II. Last
year, life insurance programs were reopened for certain disabled
veterans.

48



GENERAL

GOVERNMENT

1 9 6 6 Administrative Budget Expenditures: $2.5 Billion

Expenditures for general government provide for Government-wide
activities, for executive direction and financial management, and for
the costs of the Congress and the Federal court system.
These general administrative, legislative, and law enforcement
expenses of the Federal Government will require estimated expenditures of $2.5 billion in 1966.
Tax collection and central fiscal operations.—The
Treasury collects the revenues and pays the bills of the Government. An increase
in expenditures in 1966 is necessary for the Internal Revenue Service
to handle the additional 1.9 million tax returns expected this year and
to make progress on the automatic data processing system for handling returns. Automation measures will improve the efficiency and
equity of tax collection.

General property and records management.—As

part of the con-

tinuing program to provide more efficient facilities for Government
operations, the 1966 budget will provide funds to design several new
buildings and to construct 24 buildings already under design—as well
as to purchase or remodel 10 other buildings. The General Services
Administration will also manage a larger volume of supplies for
defense installations and civilian agencies.
General Government

•

Administrative

Budget

}

Trust

Funds

MILLIONS

872

T e r r i t o r i e s a n d Possessions, a n d O t h e r




49

Protective services and alien control.—The Federal Bureau of
Investigation is increasing its expenditures to help assure internal
security and to make necessary investigations of civil rights violations
and criminal activity.
Central personnel management.—These expenditures include the
administrative costs of the Civil Service Commission. They also
include the costs of accident compensation and part of the expense
of health benefits for Federal employees.
Territories and possessions.—The Federal Government provides
certain services and financial assistance to the Virgin Islands, Ryukyu
Islands, American Samoa, the Trust Territory of the Pacific, and
Guam. Revenues collected in the Canal Zone cover the cost of the
Government's activities in that area.

Interest on the public debt is expected to rise by $308 million in 1966
as a result of a larger public debt and the higher short-term interest
rates necessary to limit the flow of funds abroad. Over $2 billion of
the total interest expenditures will be paid to the Federal trust funds
and agencies which have their reserves invested in U.S. securities.
The table below shows the estimated ownership of the public debt,
as of June 30,1964.
O W N E R S H I P OF T H E P U B L I C D E B T
Amount,

in billions

Individuals
Federal trust funds and agencies
Commercial banks
Federal reserve banks
State and local governments. . .
Corporations
Foreign and international
Other investors
Total

50




$68.6
60.7
59.7
34.8

22.6
20.2
15.6
30.3

312.5

PART 3

BUDGET FACTS AND FIGURES
The budget necessarily involves a great many numbers,
'usually with dollar signs attached. To have meaning,
they must be related to programs, policies, the process of
Government, the size of the economy, and other relevant
considerations. In the first two sections of this booklet,
an effort was made to present the budget in understandable and nontechnical terms and to limit the use of
statistics.
In order to introduce the reader to some of the more
technical aspects of the budget, this section briefly presents
information on measures of Federal finances and a
discussion of the budget process. Historical statistics
may be found starting on page 70.
The following additional budget documents are available from the
Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402:
r. "The Budget of the United States Government, 1966. Contains most of
the facts, figures, and analyses that users of the budget would normally
desire or need.
2. The Budget of the United States Government,
1966—Appendix.
Contains the text of appropriation language, schedules, and narrative
statements for individual appropriations and funds.




51

MEASURES OF FEDERAL FINANCES
Federal financial activities are studied from several points of view
for many different purposes. No single measure serves all purposes equally well. In the budget (as well as in this booklet), Government income and spending are discussed in terms of the administrative budget, the trust funds, the statement of cash receipts
from and payments to the public, and the Federal sector of the national
income accounts.
For an understanding of the different measuring concepts, it is helpful to begin with the two basic sets of accounts used by the Government. The first covers administrative budget funds; the second
covers trust funds. Together they comprise the financial books of the
Government, recording in detail the expenditures of each agency
and the revenues of the Government. They are indispensable tools
for the proper management of Federal finances.
Administrative budget funds include most of the receipts and expenditures of the Government. The receipts go into a general fund
except for small amounts channeled to special funds. Administrative
budget funds are the property of the Federal Government—owned just
as land and equipment are owned. They include the transactions of
Government-owned enterprises of a business nature, such as the Post
Office, the Export-Import Bank, and the Federal Housing Administration.
The administrative budget—which covers only administrative budget
funds—is the oldest and most widely known measure of our Federal
finances. It is mainly within the framework of this budget that Congress evaluates requests for funds and grants the authority for Government agencies to carry out the President's program. Expenditures
from this budget emerge as the result of Presidential requests, congressional action, and administration of authorized programs by Government agencies. Thus, the administrative budget is generally used for
control, administration, and execution of programs financed with
funds owned by the Government.
Trust funds are created when Congress designates certain receipts to
be set aside—in trust—for specified payments or programs. They are
also created, occasionally, when an activity is owned partly by the Federal Government and partly by someone else. Trust funds may be
52




used only to finance the activities for which they are designated. For
example, premiums paid by veterans on their Government life insurance policies are held in trust and used only to pay insurance claims
or dividends to policyholders.
Most of the major trust funds finance insurance-type activities such
as social security (old-age, survivors, and disability insurance), unemployment insurance, Federal employees' retirement, and veterans' life
insurance. Trust funds also finance the Federal-aid highway program and the secondary market operations of the Federal National
Mortgage Association ( F N M A ) .
Receipts of the trust funds come from sources related to their activities. For example, employers and employees covered by social security pay the taxes to finance the social security trust funds; taxes related
to highway use—such as those on gasoline—provide the receipts for
the highway trust fund. The chart below lists the major trust
funds along with their estimated receipts and expenditures for 1966.
In many cases, trust fund receipts exceed expenditures. The excess
is accumulated in reserves to meet future payments and is usually invested in U.S. securities to earn interest for the fund.
Trust Fund Estimates for ( 9 6 6
$

MILLIONS

117,553
118,629
O l d A g e and Survivors Insurance
|3,982
_3,345
Unemployment Insurance

Social Security
Programs

^^1,455

M M R ',748
Disability Insurance

1600
H o s p i t a l Insurance
Federal-aid
Highways
Federal Employees
Retirement
Railroad

jl,387
11,248

Retirement
Veterans
Life Insurance

712
1502

F N M A and
A l l Other




Receipts
Expenditures

1,226
i,972

53

S U M M A R Y OF FEDERAL RECEIPTS A N D P A Y M E N T S
[Fiscal years.

I n billions]
1984
actual

Description

1965

estimate

1966

estimate

FEDERAL RECEIPTS
$89.5
30.3
4.3

Administrative budget receipts
Trust fund rcccipts
Dcduct: Intragovernmental transactions
Total, cash receipts from the public
Add: Adjustment from cash to accrual basis
Dcduct: Rcccipts from loans, property sales, and other adjustments
National income account receipts—Federal
sector

$91.2
30.5
4.3

$94.4
33.6
4.5

115.5

117.4

123.5

-0.7

-0.9

— 1.8

0.2

0.5

0.7

114.7

116.0

121.0

97.7
28.9

97.5
29.0

99.7
32.9

6.2

5.1

5.2

120.3

121.4

127.4

1.8

1.7

1.1

3.6

2.1

1.5

118.5

121.0

127.0

-8.2
-4.8
-3.9

-6.3
-4.0
-5.0

-5-3
-3.9
— 6.0

FEDERAL P A Y M E N T S
Administrative budget expenditures
Trust fund expenditures
Deduct: Intragovernmental transactions and other adjustments (net)
Total, cash payments to the public
Add: Adjustment from cash to accrual basis
Deduct: Disbursements for loans, land purchases, and other
adjustments
National income
Federal sector

account

expenditures—

EXCESS OF RECEIPTS ( + ) OR
PAYMENTS ( - )
Administrative budget
Receipts from and payments to the public
National income accounts—Federal sector

Federal receipts from and payments to the public.—Basically,
this statement of cash flow between the Federal Government and the
public (often called the consolidated cash statement) represents a
linking of the administrative budget with the trust funds. Payments
between the administrative budget and the trust funds—such as interest payments on trust fund investments in U.S. securities—are elimi-

54



nated from the statement, since they do not involve a flow of money
between the Government and the public.
The statement of Federal receipts from and payments to the public
is much more inclusive than the administrative budget alone, and is
the best measure of the cash needs and borrowing requirements of the
Federal Government. It also gives a truer picture of the total impact
of the Federal Government on the economy than the administrative
budget.
The Federal sector of the national income accounts.—Like the
consolidated cash statement, this gauge of Federal activities includes
both the administrative budget and the trust funds. However, it
excludes transactions of a purely financial nature (such as loans) and
purchases and sales of existing assets (such as land and secondhand
items) which do not involve current production or income.
The national income accounts also differ from the consolidated
cash statement regarding the time when receipts and payments are
recorded. Receipts are recorded in the income accounts as liabilities build up, rather than on the date when the Treasury receives the
money. For example, corporations accrue Federal tax liabilities as
they earn profits—but only pay the taxes after some months have
elapsed. Similarly, expenditures for purchase of most goods and services are recorded in the income accounts when the goods are delivered
or the services performed, rather than when the actual payment is
made. This timing is a better reflection of the economic impact of
Federal transactions on spending decisions in the private sector of the
economy.
Expenditures in the Federal sector of the national income accounts
are divided into five basic components that indicate the economic
nature of the expenditures. As the table on the following page shows,
the largest item is purchases of goods and services, representing the
amount of our gross national product which is used directly by the
Government for public purposes. This category includes such items
as military equipment, new Government buildings, and the services
of Federal employees.
The second category, transfer payments, covers Federal payments
(for the most part to individuals) for which no current services are
rendered—unemployment and social security benefits, veterans pensions, and similar programs. Transfer payments do not represent




55

NATIONAL

INCOME

ACCOUNT

EXPENDITURES—FEDERAL

[Fiscal years.

SECTOR

In billions]

Description

1964
actual

1965

estimate

1966

estimate

Purchases of goods and scrviccs
Transfer payments
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises. . . .

$66.1
30.4
9.8
8.1
4.1

$65.9
31.8
10.7
8.5
4.1

$66.7
35.2
13.0
8.6
3.5

Total national income account expenditures—
Federal sector

118. 5

121.0

127.0

Government use of resources, but rather the channeling of purchasing
power to others.
Grants-in-aid to State and local governments also represent a transfer of funds. In this case, however, the transfer is to another level of
government which may either purchase goods and services (by constructing highways, for example) or make further transfer payments
to individuals (such as public assistance payments).
Net interest consists of interest paid by the Federal Government,
less interest received on loans to others.
Subsidies less current surplus of Government enterprises includes
Federal aid to business and agriculture and the surplus or deficit of
Government business-type activities such as the Post Office and T V A .
The Federal sector account is part of the Nation's economic accounts
which measure total national income and output and, therefore, is
particularly valuable in analyzing the impact of Federal activities on
the Nation's economy.
THE BUDGET PROCESS
Each January the President recommends to Congress a budget
representing his judgment on the Federal programs required to meet
the Nation's needs during the coming fiscal year.
The budget is the culmination of many months of planning. For
example, the formulation of the 1966 budget began in March of 1964.
Ten months later, in January 1965, administrative action was completed and the budget was sent to Congress—about 6 months before
the new fiscal year began. When the fiscal year ends, June 30, 1966,
over 2 years will have elapsed since the start of the budget cycle.
56



These intervals of approximately 10 months, 6 months, and 12
months correspond roughly to three basic steps of budgeting: executive
formulation, congressional deliberation and enactment, and administrative execution.
Inevitably over such a long period, many changes take place in the
original proposals: international and domestic situations may vary
from the assumptions made earlier, the President may amend some of
his own proposals, and the Congress may modify the President's
requests or add new proposals of its own.
Executive budget formulation.—During
the period of executive
formulation of the budget, there is a continuous exchange of information between the President, his staff, and the Government agencies.
Policies and issues are constantly evaluated, modified, and reevaluated.
This process, in which the Congress does not participate in any way,
continues through December when final policy decisions are made.
At that point, the President's budget becomes a statement of concrete
proposals reflected in specific dollar estimates.
Congressional consideration.—Congressional review and enactment, the second phase of the cycle, commences when the budget is
sent to Congress. The House of Representatives acts on the budget
first, and refers it to the Appropriations Committee. Twelve subcommittees study in detail the parts sent to them and make recommendations to the parent Appropriations Committee. The Appropriations
Committee then recommends actions to be taken by the House of
Representatives. As parts of the budget are approved by the House,
they are forwarded to the Senate, where a similar process is followed.
In case of disagreement between the two Houses of Congress, a conference committee (consisting of Members of both bodies) meets to
resolve the issues. The conference report is returned to the House
and Senate for approval, and then transmitted to the President for his
approval or veto.
Budget execution and control.—As the budget is approved, it becomes the basis for the program of each agency during the fiscal year.
However, not all the funds approved by Congress are spent in that one
year. The funds authorized for some programs (such as the building
of warships or other major construction items) will be spent over a
period of several years.




57

Therefore, when the Congress reduces or increases the amount of
new obligational authority requested by the President for a given year,
it does not necessarily alter expenditures in that year by the same
amount. Such a change may affect expenditures over a period of
several years.
The relationship between new obligational authority and expenditures estimated for 1966 is illustrated in the accompanying chart.
1966

Administrative Budget —

58



Relation of Authorizations to Expenditures

PART 4

PORTIONS OF THE PRESIDENT S BUDGET
MESSAGE
To the Congress of the United States:
I am presenting to you today the budget of the United States for the
fiscal year 1966.
A budget is a plan of action. It defines our goals, charts our courses,
and outlines our expectations. It reflects hard decisions and difficult
choices. This budget is no exception.
It is a budget of priorities. It provides for what we must do, but
not for all we would like to do.
It is a budget of both opportunity and sacrifice. It begins to grasp
the opportunities of the Great Society. It is restrained by the sacrifices we must continue to make in order to keep our defenses strong and
flexible.
This budget provides reasonably for our needs. It is not extravagant. Neither is it miserly.
It stands on five basic principles:
* Government fiscal policies must promote national strength, economic progress, and individual opportunity.
* Our tax system must continue to be made less burdensome, more
equitable, and more conducive to continued economic expansion.
* The Great Society must be a bold society. It must not fear to
meet new challenges. It must not fail to seize new opportunities.
* The Great Society must be a compassionate society.
always be responsive to human needs.

It must

* The Great Society must be an efficient society. Less urgent programs must give way to make room for higher priority needs. And
each program, old and new, must be conducted with maximum
efficiency, economy, and productivity.
The major features of the 1966 budget translate these principles into
action.



59

First, excise taxes are substantially reduced. Social security benefits,
including hospital insurance, are increased. These are combined with
other expenditure increases to yield an overall fiscal policy designed
to maintain our steady economic expansion.
Second, the budget supports a massive defense establishment of
steadily growing power, within reduced outlays.
Third, our international and space programs are being advanced at
a satisfactory rate, but with smaller increases than in earlier years.
Fourth, expanded programs and higher expenditures are proposed
to:
• Provide better and more education for our children.
• Extend the war against poverty.
• Promote advances in the Nation's health.
• Improve conditions in the urban areas where most of us live.
• Help the Appalachian region lift itself out of its present depressed
condition.
• Strengthen our social security protection.
• Increase economic opportunities in rural communities.
• Encourage sound use of our natural resources.
. * Conserve natural beauty in our land.
Fifth, a large part of the funds for needed program expansion has
come from savings, reductions, and economies in other parts of the
budget.
FISCAL POLICY
This budget recognizes that a growing economy is needed to promote national strength and progress. It is also needed to move us
toward a balanced budget. When the economy slows down, Federal
revenues fall and spending tends to increase. The result is larger, not
smaller, budget deficits.
Nearly 4 years ago, this Nation began its fourth postwar economic
expansion. With the help of last year's income tax reduction—the
largest and most comprehensive ever enacted—this expansion has already outlasted each of the previous three postwar recoveries.
During the past 4 years, the Nation's real output of goods and
services—the gross national product—has grown at an average rate
of about 5% per year.
60



New highs have been achieved in employment, income, and profits.
Unemployment has been reduced. Price stability has been maintained.
This is a creditable record of achievement. And we look forward to
continued growth in the year ahead. The Nation's output in calendar
year 1965 is expected to reach $660 billion, plus or minus $5 billion.
Nevertheless, we must keep in mind that our economy is still producing at a level well below its potential. Nearly 4 million people are
out of work. The unemployment rate is still nearly 5%. Plants and
machines are standing idle while human wants and needs go unmet.
An estimated 35 million people continue to live in poverty.
We cannot substitute last year's achievements for next year's goals;
nor can we meet next year's challenge with last year's budget.
The revenue and expenditure proposals presented in the 1966 budget
are carefully designed to promote continued economic expansion and
improved economic opportunities.
This budget takes into account the need to reduce the Nation's balance of payments deficit. During the last calendar year, the deficit
showed a significant decline. To help insure continued improvement,
I will intensify efforts to carry out Federal activities with the least
possible burden on our balance of payments.
BUDGET S U M M A R Y
Administrative
budget.—In preparing this budget, I have applied
exacting tests of efficiency and necessity to all proposed expenditures.
As a result, total administrative budget expenditures are being held
to $99.7 billion in 1966. Although expenditures will rise by a relatively small amount, they will decline as a percent of the gross national
product—to less than 15%, the lowest ratio achieved in 15 years.
Administrative budget receipts are expected to increase in 1966 to
$94.4 billion. This is $3.2 billion over the estimated level for 1965.
This increase reflects the economic growth anticipated in calendar year
1965. It also takes into account the revenue losses from proposed excise tax changes and from the second stage of income tax cuts enacted
last year.
The resulting 1966 administrative budget deficit of $5.3 billion is
$1 billion lower than the 1965 deficit, marking continued progress
toward a balanced budget.
As our population increases, as science and technology change our
methods of doing things, as our wants multiply with the growth in




61

our incomes, and as urbanization creates new problems, there is growing need for more public and private services. It is evident that unless
defense needs should decline substantially, Government expenditures
will continue to rise over the long run.
At the same time, we have good reason to expect that Government
expenditures in the years ahead will grow more slowly than the gross
national product, so that the ratio of Federal spending to our total
output will continue to decline.
The expenditures proposed in this budget reflect a careful
balancing of national goals against budgetary costs. The budget I
now present will, in my judgment, carry out the responsibilities of the
Federal Government efficiently and wisely. It was constructed on that
basis alone.
My budgets for both 1965 and 1966 have provided for major increases in areas of high national priority—particularly education,
health, aid to the needy, housing, and the war on poverty. Also, for
these 2 consecutive years, careful pruning of less urgent programs and
vigorous cost reduction efforts have, on balance, resulted in lower expenditures in other major sectors of the budget. The application of
these strict policies of priority and frugality is evident in the modest
growth in administrative budget expenditures.
THE CHANGING FEDERAL BUDGET
[Fiscal years.

In billions)
Administrative budget expenditures

Description
1964
actual

National defense and space
.
Interest
Health, labor, education, housing and
community development, economic
opportunity program, and aid to the
needy
.
All other
Total, administrative budget

Change,
1964 to
1965

1965
estimate

Change,
1965 to
1966

1966
estimate

$58.4
10.8

-$1.3
+.5

$57.1
11.3

-$0.4
+.3

$56.7
11.6

6.7
21.8

+.7
-.1

7.4
21.7

+3.6
-1.3

20.4

97.7

-.2

97.5

+2.2

99.7

11.0

Consolidated cash statement.—The administrative budget is based
on a definition of Federal spending which excludes such important
Federal activities as social security and highway construction that are
62



financed through trust funds. A more comprehensive measure of the
Government's finances is the consolidated cash budget which covers
all of the Government's programs.
On the consolidated cash basis, total payments to the public are
estimated at $127.4 billion in 1966. Total receipts from the public are
estimated at $123.5 billion, resulting in a net excess of payments of $3.9
billion. The estimated increase of $6.0 billion in cash payments in 1966
over 1965 is mostly in trust funds which are financed by special taxes.
About $9.5 billion of the nondefense payments recommended in this
budget—almost 2V2 times the size of the entire cash deficit—represent
an investment in physical and financial assets which will provide benefits to the Nation for many years to come. These payments are made
for Federal civil public works, equipment, and loans as well as for
highways, hospitals, and other State, local, and private assets.
Federal sector, national income accounts.—Another measure of
Federal finance which includes trust funds emphasizes the direct impact of Government fiscal activities on the economy. This measure is
based on the national income accounts. Under this concept, Federal
fiscal data are estimated on an accrual rather than a cash basis. Purely
financial transactions—such as loans—which do not directly affect production or income are excluded. On this basis, the deficit for 1966 is
estimated at $6.0 billion.
Federal expenditures as measured by the national income accounts
are estimated to rise by $6.0 billion in 1966. This increase—covering
both purchases of goods and services and other types of payments—
will provide a strong stimulus for continued economic growth.
FEDERAL REVENUES
The Revenue Act of 1964 has played a major role in widening and
strengthening our prosperity. At the beginning of this month, the
second stage of the rate reductions provided under the Act became
effective. In total, last year's tax law will decrease consumer and
business tax liabilities by about $14 billion in the current calendar
year.
With this substantial change in income taxes completed, it is now
appropriate to revise and adjust excise taxes as well. Some of the
present excises are costly and inefficient to administer. Some impose




63

onerous recordkeeping burdens on small business. Some distort consumer choices as among different kinds of goods.
Within the revenue requirements for continued progress toward a
balanced budget, I believe it is vital that we correct the most pressing
of these deficiencies this year. I plan to transmit to the Congress
recommendations to repeal some excise taxes and reduce others. In
addition to improving the tax system, the recommended changes will
increase purchasing power and stimulate further growth in the
economy.
These changes should become effective July i, 1965. They will reduce tax liabilities on a full-year basis by $1.75 billion. Revenues collected by the Treasury in 1966 will be reduced by $1.5 billion.
My other major revenue proposals this year involve important activities financed through trust funds.
I am recommending prompt enactment of a hospital insurance
program for elderly persons, who are finding hospital and medical
costs far greater than their ability to pay. This program should be
self-financing, with a combined employer-employee payroll contribution of 0.6% on the first $5,600 of income to start in calendar year 1966.
I am also recommending an increase from $4,800 to $5,600 in the
wage base on which social security taxes are paid. This would take
effect on January 1, 1966, and would be coupled with a smaller increase in the payroll tax than is scheduled at that date under existing
law. These changes will provide the funds for the needed increases
being proposed in old-age, survivors, and disability insurance benefits.
While I am recommending reductions in certain excise taxes, I am
also proposing increases in certain other excise taxes which are in the
nature of user charges. The excise taxes for which I am recommending reduction or repeal are not associated with the provision of particular Government services. However, certain existing excises on
transportation are in effect a charge for the use of facilities and services
provided by the Government. In these cases, I am proposing changes
in user charges for transportation so that different modes of transportation can compete on more equitable and efficient terms and users of
special Government services will pay a greater share of the costs.

64




The estimated cost of completing the Interstate Highway System—
which is financed by highway user taxes—has recently been increased
by $5.8 billion. To avoid serious delay in completing the system while
remaining on a pay-as-you-go basis, I will include in my excise tax
proposals specific recommendations for increasing certain highway
user charges.
In contrast to the users of the highways, the users of the airways
and inland waterways bear considerably less than the full cost of the
Government investments and services provided them. Accordingly, I
am recommending increased or new taxes on aviation gasoline and jet
fuels and a new tax on air freight for commercial aviation. Receipts
from the existing 2-cent tax on aviation gasoline should be kept in the
general fund rather than transferred to the highway trust fund, and
the 5% ticket tax on air passengers should be made permanent. A fuel
tax for inland waterway users is also being proposed.
I will continue to press for other user charges in Government programs where benefits are provided to specific, identifiable individuals
and businesses. Fairness to all taxpayers demands that those who
enjoy special benefits should bear a greater share of the costs. Legislation is needed for some of the charges, such as patent and meat inspection fees. In other instances, equitable user charges will be instituted through administrative action.
I will also present recommendations to correct certain abuses in the
tax-exempt privileges enjoyed by private foundations.
NEW O B L I G A T I O N A L AUTHORITY
This budget includes new obligational authority for 1966 of $106.4
billion in the administrative budget.
• $93.5 billion of this requires congressional action this year.
* $12.9 billion represents permanent authorizations that do not require further congressional action, mainly the appropriation for
interest on the public debt.
Most of the $34.5 billion in new obligational authority recommended
for 1966 for trust funds represents revenues from special taxes which
are automatically appropriated.




65

NEW OBLIGATIONAL AUTHORITY
(Fiscal years.

In billions]

Description

1964
actual

Total authorizations requiring current action by Congress:
Administrative budget funds
__ . .
Trust funds
.
_ _
...
Total authorizations not requiring current action by Congress:
Administrative budget funds
Trust funds.
. . . . .
Total new obligational authority:
Administrative budget funds.
Trust funds.. .
...

1965
estimate

1966
estimate

$87.9
.4

$94.5
1.4

$93.5
.5

13.2
31.2

12.8
30.3

12.9
34.0

101.1
31.5

107.3
31.8

106.4
34.5

The 1965 estimate in the administrative budget includes $6.0 billion
of recommended supplemental authorizations. These authorizations
will provide funds for several programs for which I am requesting
immediate consideration and enactment—for example, housing activities and aid to Appalachia. The new obligational authority and related expenditures under these supplemental proposals are reflected
fully in the estimates presented in this budget.
*

#

*

REDUCING GOVERNMENT COSTS
As we focus attention on improving the quality of American life, we
must also see to the quality of American Government.
The tasks we face are formidable. They require new dedication,
new vision, and new skills. We have neither the resources nor the
right to saddle our people with unproductive and inefficient Government organization, services, or practices.
This must be a year of renewal—a year that will be long remembered
for what we accomplish in bringing the public service to its highest
state of readiness.
To realize this renewal, action will be necessary on a wide front.
I pledge that this administration will strive to conduct the work of
the Government by the same exacting standards that would apply in
the most expertly managed private business.
Government organization.—We must reorganize and modernize
the structure of the executive branch in order to focus responsibilities
and increase efficiency. I will shortly propose certain reorganizations
66




which will constitute the initial and most urgent steps that I deem
necessary to consolidate functions and strengthen coordination of
related activities.
I will ask that permanent reorganization authority be granted to the
President to initiate improvements in Government organization, subject to the disapproval of the Congress.
Controlling employment.—In
this budget, as in the budget for
1965, I have insisted upon stringent criteria to control the growth of
Federal civilian employment. It is important that we have enough
people to carry on the Government's business efficiently, but we must
also see that we have no more employees than we need.
Realistic guidelines and goals have been established to aid administrators in the effective management of the Government's large and
diverse work force. Controls on employment have been established
for each agency. To remove the guesswork from determination of
employment needs, agencies are installing improved work measurement systems, and the Bureau of the Budget is providing advice and
assistance in introducing measures of productivity into agency management systems. The result of such efforts has been and will continue to be a reduction in the size of the Federal work force relative
to the work being accomplished. The effectiveness of these controls
may be seen in the fact that had Federal civilian employment kept its
1955 relationship to total population, Federal employees would have
totaled 2,747,000 on June 30, 1964, more than 275,000 above the actual
number as of that date.
Modest and highly selective increases in employment are proposed
in the budget for 1966, mainly to carry out new and expanded programs recommended in this budget and to reduce excessive overtime
in the Post Office Department. At the same time, we will take full
advantage of every opportunity to keep the work force at minimum
levels by eliminating functions, consolidating operations, closing unnecessary offices and installations, and abolishing vacancies. Total
civilian employment proposed for 1966 is about 1% above the totals for
the current year, and I am confident that we will be able to keep actual
employment somewhat below these estimates.
Management improvement
and cost reduction.—The past year
has been a successful one from the standpoint of improved management and cost reduction. Next year will be still better.



67

Led by the outstanding performance of the Department of Defense,
Government agencies last year undertook cost reductions that saved
almost $3.5 billion. These economies were not easy to come by. They
have resulted from the concentrated work of Government officials and
employees in all agencies, large and small. They reflect a wide variety
of actions ranging from the abolition of reports and other publications
to the introduction of computers, the application of modern business
equipment, the adoption of new purchasing methods, and decisions to
close major installations.
I am counting heavily on the continuation and acceleration of cost
reduction and management improvement efforts. Every dollar saved
in this way can be put to better use in carrying on more urgent business. And today every dollar is important. Among other things,
we must:
• Continue our war on excessive paperwork.
• Increase our capacity to find and correct management weaknesses
throughout the Government.
• Reexamine our career services, making certain that they are all
they should be with respect to selection, training, placement, promotion, rotation, retirement, and removal.
• Seek legislation that will remove legal barriers to efficient operation.
I have instructed the Director of the Bureau of the Budget to give
direction to a comprehensive, Government-wide cost reduction program to be put into effect in every department and agency. In general,
this program will require the head of each agency to:
• Take personal charge of cost reduction efforts.
• Set specific goals for reductions in cost.
• Reassess priorities for all programs and operations.
• Identify and remove roadblocks to economy.
• Verify reported savings.
I believe the Congress and the American people approve my goals
of economy and efficiency. I believe they are as opposed to waste as
I am. We can and will eliminate it.

68




CONCLUSION
Since I sent you my first budget a year ago:
• 4 million Americans have been born.
• 3.2 million young people have reached college age.
• 1.7 million new families have been formed.
• 1.3 million persons have entered the labor force.
• 1.5 million persons have reached retirement age.
Thus, our Nation faces growing responsibilities. But we also possess
growing resources to meet them.
One result of our expanding economy is a larger revenue potential.
This means a potential for:
• Necessary increases in Federal expenditures.
• Reductions in taxes.
• Reductions in the public debt.
No one of these goals is paramount at all times. Each must be balanced against the others to assure our continued progress toward a
Great Society.
This progress does not rest on economic growth alone. It is aimed
at improving the quality of our way of life. And it is aimed at insuring that all Americans share in this way of life.
The Federal Government must do its part.
This does not mean simply spending more.
It does mean spending more on some new and vital activities. But
it also means cutting back or eliminating activities which are less
urgent or no longer necessary.
Where there is waste, to end it; where there are needs, to meet
them; where there are just hopes, to move toward their fulfillment—
that is the object of the budget which I now submit to your consideration.
L Y N D O N B . JOHNSON.

January 25,1965.




69

TABLES O N THE BUDGET
Administrative Budget and Trust Fund Expenditures by Function, 1959-66
The following two tables show administrative budget and trust fund expenditures since 1959,
according to the functions they serve. The functional categories provide a meaningful
historical comparison because all expenditures for activities of a similar nature are grouped
together even if they are made by different agencies, or if—through reorganizations or
otherwise—they are shifted from one agency to another over the years.
ADMINISTRATIVE BUDGET EXPENDITURES BY
[Fiscal years.

FUNCTION

I n millions of dollars]
Actual

Estimate

Description
1959

1960

1961

1962

1963

1964

1965

1966

13,032
14, 532
11, 594
6,319

13,000
16,632
11, 874
6,376

14,195
15,351
11, 932
7,021

14, 820
13, 275
12,220
6,700

14,800
13,220
12,160
6,400

1,338

373

1, 261

National defense:

Department of Defense—military:
Military personnel
Purchase of weapons and e q u i p m e n t . . .
Operation and maintenance
Research and development
Military construction, civil defense,
and other

Subtotal, military
Atomic energy
Military assistance
Defense-related activities

11,801 11, 738 12,085
14,409 13, 334 13,095
10, 378 10,223 10,611
6,131
2,866
4,710

1,085

1, 320

41,223 41,215 43, 227 46,815 48, 252 4 9 , 7 6 0 4 8 , 1 0 0
2,806
2,758
2,765
2,700
2, S41
2,623
2, 713
1, 390 1,721
1,485
1,200
2,340
1,609
1, 449
92
24
172
160
379
244
104

17,900
2,530
1,100
48

1,769

1,210

1, 305

46,483

45,691

47,494

51,103

52, 755

54,181

52,160

Jl, 578

Food for Peace
Economic and financial programs:
Development loans

1.120

1,327

1,653

1,726

1, 779

1,704

1,661

1,661

66

202

258

Supporting assistance
Technical cooperation
Other
Conduct of foreign affairs
Foreign information and exchange activities

1,138
146
1,955
237

995
149
35
217

1,013
169
487
216

347
155
618
272
738
249

760
260
494
245
67
346

768
272
371
226
-158
297

862
365
370
190
33
346

870
398
390
205
-82
321

Subtotal

International affairs and finance:

Subtotal

139

137

158

197

201

207

216

221

4,802

3,064

3,954

4,301

4,151

3,687

4,043

3,984

11

113
125

279
232

565
359

1,516
483

2,768
641

3,085
693

3, 386
703

Space research and technology:
Manned space flight
Scientific investigations in space
Meteorology, communications, and other
space applications
Other research, technology, and supporting operations
Subtotal

25

8

17

61

92

112

110

107

109
145

154

217

272

460

650

1,012

904

401

744

1, 257

2, 552

4,171

4,900

5,100

4,275
376
315
311
291

2,370
368
330
289
293

2, 345
397
301
349
324

3,093
426
303
234
341

3,954
404
342
300
391

4,144
410
342
251
414

3,103
441
199
242
493

2, 716
424
200
138
466

5, 568

3, 650

3, 717

4, 397

5, 390

5, 560

4,477

3,944

1,184
201
85
68
71
61

1, 235
220
74
68
65
51

1,394
331
91
73
61
55

1, 564
280
94
81
68
60

1,699
303
112
94
71
73

1,747
332
130
105
91
73

1, 885
383
145
121
109
92

1,837
359
186
114
111
84

1, 670

1, 714

2,006

2,147

2, 352

2,478

2,735

2,691

1

Agriculture and agricultural resources
(not including Food for Peace):
Farm income stabilization
Agricultural land and water resources—
Rural electrification and telephone loans.
Farming and rural housing loans
Research and other agricultural services..
Subtotal

Natural resources:
Land, water, and power resources
Forests
Recreational resources..
Fish and wildlife
Minerals
General resources surveys and other
Subtotal

70




ADMINISTRATIVE BUDGET EXPENDITURES BY FUNCTION—Continued
[Fiscal years. In millions of dollars]
Actual

Estimate

Description
1959

1960

1961

494
436
774

568
508
525

716
569
914

234
58
30

265
59
38

2,025

1962

1963

1964

1965

271
67
36

781
654
797
7
427
74
33

808
672
770
101
366
84
41

835
658
578
401
401
91
39

868
705
718
385
556
96
43

834
728
714
261
124
101
42

1,963

2,573

2,774

2,843

3, 002

3, 372

2, 804

108
97

130
134

162
150

261
163

222
178

306
149

406
221

509
236

-41

-20

-35

-237

-264

-248

-313

-336

842

-30

75

-123

-439

-347
*

-624

-477

-69
33

-122
30

-84
51

211
74

167
70

59

-48
79

-30
107

970

122

320

349

-67

-80

-280

10

1,969
700
924

2,061
815
510

2,170
938
809

2,437
1,128
591

2,788
1,354
224

2,994
1,671
345

3,002
1, 792
484
347

3,499
2, 190
565
1, 346

218
66

234
70

241
85

275
108

284
140

308
158

353
230

402
326

3,877

3,690

4,244

4,538

4,789

5, 475

6,208

8, 328

259
225
106
141

327
261
120
156

332
286
143
181

337
350
183
207

392
428
206
219

404
383
310
241

408
428
325
347

971
782
405
505

732

866

943

1,076

1,244

1, 339

1,509

2,663

2,071
1,152
921
574
234
335

2,049
1,265
961
383
328
281

2,034
1,532
1,030
237
312
268

2,017
1,635
1,084
142
236
287

2,116
1,698
1,145
88
-109
248

2, 158
1,743
1, 229
59
44
259

2, 173
1,834
1,280
37
-186
245

2, 100
1,827
1, 315
28
-863
217

5,287

5,266

5,414

5,403

5,186

5,492

5, 383

4,623

566
295
255
149
95
107

558
372
263
158
84
108

607
372
289
170
140
131

653
419
300
192
153
158

715
444
323
194
142
160

791
576
335
192
174
211

842
598
376
232
171
198

853
5%
388
243
169
213

2,417

2,462

1966

Commerce and transportation:
Aviation
. _
Water transportation
__ _
Postal service
...
_. _.
Area redevelopment
. . _
Advancement of business
Regulation of business
Highways-. __

. _ __

Subtotal __

Housing and community development:
Urban renewal and community facilitiesPublic housing. Aids to private housing:
Federal Savings and Loan Insurance
Corporation.
Federal National Mortgage Association.
Federal Housing Administration and
other __
National capital region .
Subtotal-

Health, labor, and welfare:
Public assistance_ __
_ Health services and research
Labor and manpower School lunch, special milk, and food
stamp
Vocational rehabilitation and other.
Subtotal

Education:
Elementary and secondary education
Higher education
..
Science education and basic research
Other aid to education
Subtotal

Veterans benefits and services:
Disability and survivors compensation
Non-service-connected pensions.Hospitals and medical care..
Education and training
Housing loan programs
Other benefits and services.- _ Subtotal

General government:
Tax collection and central fiscal operations
__ .
Property and records management
Protective services and alien control
Legislative and judicial functions.
Central personnel management
Territories and possessions, and other
Subtotal

1,466

1,542

1,709

1,875

1,979

2,280

7.671

Interest

9,266

9,050

9,198

"9,980

10, 765

Allowance for Appalachia
Allowance for contingencies

3
100
355

694

654

633

513

Total administrative budget expenditures
80,342

76,539

81,515

87,787

92,642

Deduct interfund transactions.-




11, 286 11, 594

-

107
400

833

600

97,684 97,481

99,687

664

71

T R U S T F U N D EXPENDITURES BY FUNCTION
[Fiscal y e a r s .

I n m i l l i o n s of dollars]

Estimate

Actual

Description
1959

Total trust fund expenditures.

1961

1962

1963

1964

1965

229
21

256
48

196
13

366
15

679
44

487
62
*

811
-106
*

645
94
2,493
1,263
14,306

458
2,831
1,439
16,358

416
183
2,505
-273
19,236

398
112
2,662
1,524
20,382

135

673
17
-78
9C8

811
16
203
515

19,521

National defense
International affairs and finance
Space research and technology
Agriculture and agricultural resources.
Natural resources
Commerce and transportation
Housing and community development Health, labor, and welfare
Education
Veterans benefits and services
General government
Deposit funds (net)
Deduct interfund transactions

1960

21,212

22,793

1

116

1

651
10

-60

1

1966
982
258
#

507
496
615
495
122
137
137
175
2,877
3, 482
3,932
3,690
-36
1, 889
233
783
21,855 22, 733 23, 386 2 6 , 5 4 9
2
2
2
1
2
666
835
514
733
641
18
19
20
20
19
-567
146
30
-544
-47
521
505
528
599
579

25,141

26,545

28,885

29,045

32, 898

*Less t h a n one-half m i l l i o n dollars.

Government Employment and Population, 1942-66
The
Federal
branch.
Both

following

table presents data on e m p l o y m e n t

Government

include

all

and

employment—full-time

population.
and

The

figures

part-time—in

the

for

the

executive

Legislative a n d judicial branch e m p l o y m e n t is e x c l u d e d .
the total population a n d State and local e m p l o y m e n t h a v e risen m o r e than

executive branch e m p l o y m e n t in the last t w o decades.

T h i s trend w i l l continue in

Population

Government employment
Year

1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1966 (estimate)

Federal
executive
branch
(thousands)

2,272
3,274
3,304
3,787
2,666
2,082
2,044
2,075
1,934
2,456
2,574
2,532
2,382
2, 371
2, 372
2, 391
2, 355
2,355
2, 371
2,407
2, 485
2,490
2,469
2,469
2,496

State and
All governlocal g o v e r n mental
ments
units
(thousands) (thousands)

3,310
3,184
3,092
3,104
3,305
3,568
3,776
3,906
4,078
4,031
4,134
4,282
4,552
4, 728
5,064
5,380
5,630
5, 806
6,073
6, 295
6, 533
6, 813
7, 140

5,582
6,458
6,396
6,891
5,971
5,650
5,820
5,981
6,012
6,487
6,708
6,814
6,934
7,099
7,436
7,771
7,985
8,161
8,444
8,702
9,018
9, 303
9,609

Federal
1966.

F e d e r a l as
p e r c e n t of
all g o v e r n mental
units
40.7
50.7
51.7
55.0
44.6
36.8
35.1
34.7
32.2
37.9
38.4
37.2
34.4
33.4
31.9
30.8
29.5
28.9
28.1
27.7
27.6
26.8
25.7
24.9
24.3

Federal
Total
employment
United
States
per 1,000
(thousands) population

135,361
137,250
138,916
140,468
141,936
144,698
147,208
149,767
152,271
154,878
157,553
160,184
163,026
165, 931
168, 903
171, 984
174, 882
177, 830
180,684
183, 756
186, 656
189, 375
192,072

16.8
23.9
23.8
27.0
18.8
14.4
13.9
13.9
12.7
15.9
16.3
15.8
14.6
14.3
14.0
13.9
13.5
13.2
13.1
13.1
13.3
13.1
12.9
12.7
12.6

Notes:
E m p l o y m e n t d a t a are for J u n e .
P o p u l a t i o n d a t a are for J u l y 1 a n d i n c l u d e H a w a i i a n d A l a s k a .
A n official projection of p o p u l a t i o n a n d of S t a t e a n d local g o v e r n m e n t e m p l o y m e n t for 1965 a n d 1966 is
n o t a v a i l a b l e . T h e p e r c e n t a g e s a n d ratios s h o w n for t h e s e y e a r s are c o n s i s t e n t w i t h a range of reasonable e s t i m a t e s b a s e d o n r e c e n t t r e n d s i n p o p u l a t i o n a n d S t a t e a n d local e m p l o y m e n t .

72



Receipts From and Payments to the Public, 1959-66
T h e following table presents total receipts from the public by source and payments to the
public by function.

These data combine the administrative budget and trust fund

and eliminate transactions taking place entirely within the Government.

figures,

A f e w other adjust-

ments are also made to shift data recorded on an accrual basis to a cash basis.
[Fiscal years.

In millions of dollars)
Estimate

Actual
Description
1959

1960

1961

1962

1963

1964

1965

1966

36,719
17,309
10,578
8,767
1,333
925

40,715
21,494
11,676
11,067
1,606
1,105

41,338
20,954
11,860
12,405
1,896
982

45,571
20,523
12,534
12,561
2,016
1,142

47,588
21,579
13,194
14,862
2,167
1,205

48,697
23,493
13,731
16,832
2,394
1,252

47,000
25,600
14,372
16,685
2,800
1,415

48,200
27,600
13,709
18,731
3,200
1,520

1,701

2,167

2,398

2,729

3,009

3,042

2,950

2,900

478

482

504

501

494

494

494

491

3,851

4,766

4,905

4,288

5,641

5,596

6,068

7,139

81,660

95,078

97,242

101,865

109,739

115,530

117,384

123,490

46,673

45,915

47,685

51,462

53,429

54,514

52,847

52,546

3,420
(1,120)

2,806
(1,327)

3,608
(1,653)

3,976
(1,726)

3,805
(1.779)

3,492
(1,704)

3,636
(1,661)

4,153
(1,661)

Receipts from the public:
Individual income taxes.
Corporation income taxes, _
F.xcise taxes.
. . . .
Kmployment taxes
Estate and gift taxes
Customs
Deposits by States, unemployment insurance
Veterans life insurance premiums
.
_
Other budget and trust receipts
.
._
Total, receipts from the
public
_ .

Payments to the public:
National defense.. „. . . . .
International affairs and finance. . . . . .
Of which Food for Peace.
Space research and technology
.
Agriculture and agricultural
resources (not including
Food for Peace)
Natural resources
_
Commerce
and
transportation
Housing and community development
Health, labor, and welfare
F.ducation, .
Veterans benefits and services.
Interest
.
General government.
Deposit funds (net)
Undistributed adjustments

145

401

744

1,257

2,552

4,171

4,900

5,100

6,030
1,754

3,645
1,822

3,728
2,101

4,458
2,223

5,703
2,456

5,846
2,595

4,650
2,847

4,113
2,852

4,545

4,819

5,107

5,487

5,777

6,545

7,362

6,549

2,141
18,017
733
5,910
5,350
1,475
-60
-1,382

1,440
19,107
867
5,907
7,233
1,558
-78
-1,114

-103
22,364
945
6,187
7,257
1,678
203
-1,960

1,691
23,975
1,052
6,092
6,940
1,837
-544
-2,224

-268
25,698
1,214
5,971
7,427
1,953
-194
-1,771

1,674
27,285
1,299
6,107
8,011
2,221
-567
-2,862

-178
28,868
1,463
5,985
8,461
2,353
-47
-1,756

652
34,091
2,611
5,111
8,813
2,396
30
-1,620

Total, payments to the
public..
_

94,752

94,328

99,542

107,662

113,751

120,332

121,393

127,398

Kxcess of receipts ( + ) or payments ( —)

-13,092

+750

-2,300

-5,797

-4,012

-4,802

-4,009

- 3 , 908




73

Expenditures and New Obligational Authority by Agency
T h e following tabic indicates the 1 9 6 6 expenditure estimates for the major agencies of the
Federal Government.
agency.

It also shows the amount of spending authority being requested for each

Because of the long lead time required to design, order, produce, and deliver such

complex goods as military and space equipment, and for other reasons, not all the n e w obligational authority granted will result in expenditures during the same year.

[Fiscal year 1966 estimate. In millions of dollars]
New obligational
authority 1

Expenditures
Description

Legislative Branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Mutual defense and development:
Military Assistance
Economic Assistance
Public works acceleration program
Office of Economic Opportunity
Other
Department of Agriculture
Department of Commerce
Department of Defense:
Military
Civil
Department of Health, Education, and Welfare
Department of the Interior
Department of Justice
Department of Labor
Post Office Department
Department of State
Treasury Department
Atomic Energy Commission
Federal Aviation Agency
General Services Administration
Housing and Home Finance Agency
National Aeronautics and Space Administration
Veterans Administration
Other
District of Columbia
Allowance for Appalachia
Allowance for contingencies
Deduct interfund transactions
Total

AdministraAdministrative budget Trust funds tive budget Trust funds
funds
funds

193
89
29

2
*

225
90
29

2
1

1,100
2,100
145
1, 346
179
6,357
810

976
2

1,170
2,210

1,139
1

1,500
713
6,622
1,099

67
3,976

*

63
3, 913

47,900
1,337
7,776
1,174
377
565
714
416
12, 862
2,530
750
612
454
5,100
4,649
113
103
107
400

5
30
20, 398
124
171
3,345

600

599

99,687

32, 898

*

10
21
*

*

178
*

507
3,297
455

47,395
1,380
9,780
1,324
374
729
858
407
12,957
2,481
729
627
712
5,260
5,683
1,316
99

5
3C
19, 608
106
3, 982
10
21
*

*

162
*

714
4,229
458

650

106, 417

34,512

'Less than one-half million dollars.
» Of which $12.9 billion in administrative budget funds and $34.0 billion in trust funds do not require
current action by the Congress.

74



Administrative Budget Totals and Public Debt, 1789-1966
T h e administrative b u d g e t surplus or deficit d u r i n g a given y e a r does not alone determine
the c h a n g e

in the public debt.

Changes

in the F e d e r a l

f e w other factors also influence the c h a n g e in the debt.

Government's

cash balance and a

A significant part of the public debt is

held by F e d e r a l G o v e r n m e n t trust f u n d s .
A s explained in this booklet, the administrative b u d g e t totals are not as comprehensive as
t h e totals f o r Federal receipts f r o m

and

payments

to the p u b l i c .

However,

for most

years

prior to the b e g i n n i n g of social security in 1 9 3 8 , the differences are insignificant.
[In m i l l i o n s of dollars]

Fiscal
year

Admin- Administrative i s t r a t i v e
budget budget
receipts e x p e n d itures

Surplus
( + ) or
deficit
(-)

Public
d e b t at
e n d of
year 1

Fiscal
year

Admin- Administrative istrative
budget budget
receipts e x p e n d itures

Surplus
(+>or
deficit
(-)

1789-1849.

1,160

1,090

+70

63

1850-1899.

13,895

14,932

-1,037

1,437

1932
1933
1934

1,924
1,997
3,015

4,659
4,598
6,645

-2,735
-2,602
-3,630

1900
190 1
1S02
190 3
1904

567
588
562
562
541

521
525
485
517
584

+46
+63
+77
+45
-43

1,263
1,222
1,178
1,159
1,136

1935
1936
1937
1938
1939

3,706
3,997
4,956
5,588
4,979

6,497
8,422
7,733
6,765
8,841

-2,791
-4,425
-2,777
-1,177
-3,862

190 5
1906
190 7
190 8
1909.

544
595
666
602
604

567
570
579
659
694

-23
+25
+87
-57
-89

1,132
1,143
1,147
1,178
1,148

1940
1941
1942
1943
1944

5,137
7,096
12,547
21,947
43,563

9,055
13,255
34,037
79,368
94,986

-3,918
-6,159
-21,490
-57,420
-51,423

191 0
191 1
191 2
191 3
191 4

676
702
693
714
725

694
691
690
715
725

-18
+ 11
+3

1,147
1,154
1,194
1,193
1,188

1945
1946
1947
1948
1949

44,362
39,650
39,677
41,375
37,663

98,303
60,326
38,923
32,955
39,474

-53,941
-20,676
+754
+ 8,419
-1,811

191 5
191 6
191 7
191 8
1919.

683
762

3,630
5,085

746
713
1,954
12,662
18,448

-63
+48
-853
-9,032
-13,363

1,191
1,225
2,976
12,455
25,485

195C
1951
1952
1953
1954

36,422
47,480
61,287
64,671
64,420

39,544
43,970
65,303
74,120
67,537

-3,122
+3,510
-4,017
-9,449
-3,117

192 0
192 1
192 2
192 3
192 4

6,649
5,567
4,021
3,849
3,853

6,357
5.C58
3,285
3,137
2,890

+291
+509
+736
+ 713
+963

24,299
23,977
22,963
22,350
21,251

1955
1956
1957
1958
1959

60,209
67,850
70,562
68.55C
67,915

64,389
66,224
68,966
71,369
8C.342

-4,180
+ 1,626
+ 1,596
-2,819
-12,427

192 5
192 6
192 7
192 8
192 9

3,598
3,753
3,992
3,872
3,861

2,881
2,888
2,837
2,933
3,127

+ 717
+ 865
+ 1,155
+939
+734

20,516
19,643
18,512
17,604
16,931

1960
1961
1962
1963
1964

77,763
77,659
81,409
86,376
89,459

76,539
81,515
87,787
92,642
97,684

+ 1,224
-3,856
-6,378
-6,266
-8,226

193 0
193 1

4,058
3,116

3,320
3,577

+738
-462

16,185
16,801

1965 est
1966 est

91,200
94,400

97,481
99,687

-6,281
-5,287

1,100

•Less t h a n one-half million dollars.
I n c l u d e s G o v e r n m e n t e n t e r p r i s e d e b t g u a r a n t e e d b y t h e U.S. T r e a s u r y .

1

NOTES.—Refunds of receipts are excluded f r o m a d m i n i s t r a t i v e b u d g e t receipts a n d e x p e n d i t u r e s s t a r t i n g in
1913; c o m p a r a b l e d a t a are n o t available for prior years.
C e r t a i n i n t e r f u n d t r a n s a c t i o n s are excluded f r o m a d m i n i s t r a t i v e b u d g e t receipts and expenditures s t a r t i n g in
1932. For years prior t o 1932 the a m o u n t s of such t r a n s a c t i o n s are n o t significant.




75

Federal Finances and the Gross National Product, 1942-65
Since the gross national product (GNP) is the total of all the goods and services produced
by the Nation in a given year, its trend is a useful measure of the growth of the economy.
By calculating annual Federal outlays as a percentage of GNP, it is possible to tell at a glance
how these outlays have changed over a period of time in relation to the change in the economy
as a whole.
Only Federal purchases of goods and services represent the use of currently produced
resources by the Federal Government—in effect the Government's direct share of the GNP.
In contrast, both administrative budget expenditures and Federal payments to the public
include funds lent or transferred to others, or given to State and local governments, which
do not represent the use of current economic resources by the Federal Government.
[Amounts in billions of dollars]

Fiscal year

Gross
national
product

Administrative
budget expenditures

Cash payments
to the public

Federal purchases of goods
and services

Public debt >

Amount Percent Amount Percent Amount Percent Amount Percent
ofGNP
of GNP
of GNP
or GNP

1942
1943
1944

140.5
178.4
202.8

34.0
79.4
95.0

24.2
44.5
46.8

34.5
78.9
94.0

24.6
44.2
46.4

30.0
72.4
85.6

21.4
40.6
42.2

77.0
140.8
202.6

54.8
78.9
99.9

1945
1946
1947
1948
1949

218.3
202.8
223.3
246.6
261.6

98.3
60.3
38.9
33.0
39.5

45.0
29.7
17.4
13.4
15.1

95.2
61.7
36.9
36.5
40.6

43.6
30.4
16.5
14.8
15.5

90.0
41.3
16.9
16.6
21.8

41.2
20.3
7.6
6.7
8.3

259.1
269.9
258.4
252.4
252.8

118.7
133.1
115.7
102.3
96.6

1950
1951
1952
1953
1954

263.9
310.7
338.8
359.7
362.0

39.5
44.0
65.3
74.1
67.5

15.0
14.2
19.3
20.6
18.7

43.1
45.8
68.0
76.8
71.9

16.4
14.7
20.1
21.3
19.9

20.0
26.5
47.7
56.8
53.9

7.6
8.5
14.1
15.8
14.9

257.4
255.3
259.2
266.1
271.3

97.5
82.2
76.5
74.0
75.0

1955
1956
1957
1958
1959

377.0
408.4
433.0
440.1
466.6

64.4
66.2
69.0
71.4
80.3

17.1
16.2
15.9
16.2
17.2

70.5
72.5
80.0
83.5
94.8

18.7
17.8
18.5
19.0
20.3

45.0
45.2
48.3
50.5
53.9

11.9
11.1
11.2
11.5
11.6

274.4
272.8
270.6
276.4
284.8

72.8
66.8
62.5
62.8
61.0

1960
1961
1962
1963
1964

494.7
505.0
539.3
568.0
604.0

76.5
81.5
87.8
92.6
97.7

15.5
16.1
16.3
16.3
16.2

94.3
99.5
107.7
113.8
120.3

19.1
19.7
20.0
20.0
19.9

53.0
54.9
60.0
63.6
66.1

10.7
10.9
11.1
11.2
10.9

286.5
289.2
298.6
306.5
312.5

57.9
57.3
55.4
54.0
51.7

1965 (estimate)—

640.0

97.5

15.2

121.4

19.0

65.9

10. 3

316.9

49. 5

1

Includes Government enterprise debt guaranteed by the U.S. Treasury.

76



U.S. GOVERNMENT PRINTING OFFICE: 1 9 6 5

O—759-738

E X E C U T I V E

ECUTIVE Of PICE OF THt PRESIDENT

.

BUREAU O f THE BUDGET




BRANCH

OF

THE

G O V E R N M E N T

E X E C U T I V E OFFICE O F T H E PRESIDENT • B U R E A U O F T H E




BUDGET


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102