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SPECIAL
ANALYSES
OF THE UNITED STATES GOVERNMENT

FISCAL YEAR 1 9 7 3

SPECIAL
ANALYSES
OF THE UNITED STATES GOVERNMENT

FISCAL YEAR 1 9 7 3

FOREWORD
This volume of Special Analyses contains facts and figures on various
features of the recommendations transmitted by the President in
The Budget of the United States Government, 1973. Its purpose is to
present special analytical information about significant aspects of
Government activities. This complements the detailed financial
and program information which is contained in the Budget Appendix.
Part 1 provides analyses and tabulations which cover Government
finances and operations as a whole, and reflect the ways in which
Government finances affect the economy.
Part 2 furnishes Government-wide program and financial information in seven social program areas—education, manpower, health,
income security, housing, civil rights, and crime reduction.
Part 3 discusses trends and developments in selected areas of
Government activity—aid to State and local governments, public
works, research and development, and environmental quality.
GENERAL NOTES
1. All years referred to are fiscal years, unless otherwise noted.
2. Detail in the tables, text, and charts of this volume may not
add to the totals because of rounding.

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 1972
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 - Price $1.60

TABLE OF CONTENTS
Page
PART 1. ECONOMIC A N D FINANCIAL ANALYSES

A. Federal transactions in the national income accounts
B. Funds in the budget
C. Borrowing, debt, and investment
D. Investment, operating, and other budget outlays
E. Federal credit programs
F. Principal Federal statistical programs
G. Balances of budget authority
H. Civilian employment in the executive branch_
PART 2. FEDERAL SOCIAL PROGRAMS
I. Federal education programs
J. Federal manpower programs
K. Federal health programs
L. Federal income security programs
M. Federal housing programs
N. Federal civil rights activities
0 . Federal programs for the reduction of crime
PART 3. SPECIALIZED ASPECTS A N D VIEWS OF FEDERAL PROGRAMS
P. Federal aid to State and local governments
Q. Federal public works activities
R. Federal research and development programs
S. Federal environmental programs

7
18
31
45
69
87
97
106
115
117
136
153
179
202
209
224
237
239
256
279
296

PART 1

ECONOMIC AND FINANCIAL
ANALYSES

INTRODUCTION
Part 1 provides analyses and tabulations which cover Government
finances and operations as a whole, and reflect the ways in which Government finances affect the economy. These special analyses encompass those designated A through H.
Special Analysis A presents the Federal budget estimates in terms
of the national income accounts. It is designed to explain the relationships of the unified budget of the Federal Government to the national
income accounts, which constitute the most widely used measure of
aggregate economic activity in the United States.
Special Analysis B classifies budget information by the groups of
funds (Federal and trust) which comprise the budget. It also presents
aggregate data on the gross receipts and outlays of all funds.
Special Analysis C summarizes current developments and trends in
Federal borrowing, debt, and interest, and the investment of Federal
and trust funds in Federal securities. It includes a summary of both
Federal and federally assisted borrowing from: the public to display
some measure of the Government's impact on the credit markets.
Special Analysis D classifies budget outlays in terms of the duration
and nature of the benefits derived, distinguishing those of an investment or development type from those which primarily yield current
benefits. Apart from this analysis and the distribution between the
loan account and the expenditure account, the U.S. budget, unlike
those of some other governments, includes outlays which are for
"capital" or investment-type activities in the same accounts in which
"current" activities and costs are shown.
Special Analysis E covers Federal credit programs—direct loans,
guarantees of private loans, and loans of federally sponsored credit
agencies. It includes an analysis of loan subsidy costs, and provides
an aggregate measure of total credit supplied to the public under
Federal auspices.
Special Analysis F reflects the year-to-year level of activity under
the principal programs of the Federal Government for collecting
current statistics, and current spending for periodic statistics obtained
in census-type surveys usually conducted every 5 or 10 years.
Special Analysis G analyzes the unobligated and obligated balances
of budget authority for Federal and trust funds carried forward at
the end of each fiscal year.
Special Analysis H deals with the levels of civilian employment in
the executive branch. It also contains figures on total Federal personnel (including military personnel).

SPECIAL ANALYSIS A
FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS

The budget is designed to serve many purposes:
• To serve the broadest national objectives, it proposes an allocation of resources between the private and public sectors, within
the public sector and, through its effect on investment decisions,
within the private sector;
• It is an economic document that reflects the taxing and spending
policies of the Government for promoting growth of the national
economy, high employment, relative price stability, and strengthening of the Nation's balance-of-payments position;
• It sets forth the President's requests to Congress for appropriation
action on existing or new programs, and changes in tax legislation;
and
• It is a report to the Congress and the people on how the Government
has spent the funds entrusted to it in past years.
No single budget concept can completely satisfy all these purposes.
The budget document and related Treasury reports are designed to
provide complete, detailed information on the finances of the Federal
Government. For those concerned with aggregate economic activity
in the country, however, the national income accounts (NIA) of the
United States are the most widely used measures—and interest is
focused heavily on the Federal sector of these accounts.
The purpose of this analysis is to explain the relationships of the
budget to the Federal sector of the national income accounts, and to
translate the budget estimates into national income account terms.
It is divided into two major sections: (1) The size and trends of major
components in the Federal sector; and (2) the relationship between
the Federal sector and the budget.
FEDERAL SECTOR RECEIPTS AND EXPENDITURES

Total receipts forecast in the budget for the Federal sector of the
NIA are estimated to rise by $25.1 billion between 1972 and 1973,
reaching a total of $227.9 billion in 1973. Expenditures are expected
to rise by $18.1 billion amounting to $255.9 billion in 1973, resulting
in a deficit of $28 billion.
Table A-l shows total Federal sector receipts and outlays by category for 1971-73, along with the deficits. These deficits are the product
of the temporary slowdown in the economy resulting in lower receipts
and higher expenditures than would occur under full employment. As
the economy moves back toward its potential these deficits will
automatically be offset by higher receipts and reductions in expenditures for unemployment benefits and other cyclical spending.

THE BUDGET FOR FISCAL YEAR 1973

Table A-1. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL
INCOME ACCOUNTS (in billions of dollars)
Description

1971

1972

1973

RECEIPTS

Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts

.._.

87.7
32.5
20.3
53.5

91.3
33.0
19.8
58.7

98.3
40.7
20. 7
68.2

194.0

202.8

227.9

95.3
(73.0)
(22.4)
69.9
(67.5)
(2.4)
27.0
14.2
5.9
.1

103.0
(73.3)
(29.7)
79.8
(77.0)
(2.8)
36.2
13.4
5.4

107.0
(76.7)
(30.4)
87.4
(84.5)
(2.9)
40.6
14.8
6.0

212.4

237.8

255.9

18.4

35.0

28.0

EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Wage accruals less disbursements
Total expenditures
Deficit

Trends in Federal sector receipts.—As shown in table A-1, the
receipts are divided into four major categories. The largest category—
personal tax and nontax receipts—normally provides over two-fifths
of the total. Since the bulk of these receipts are derived from individual
income taxes, they tend to respond rapidly to the level of economic
activity.
Since corporate profits are very erratic, corporate profits tax accruals
are the most volatile category of receipts. The NIA category differs
from the budget category of corporate profits taxes in that: (1) It
includes the deposit of earnings by the Federal Reserve System as
corporate taxes while the budget records them as miscellaneous
receipts, and (2) it records tax accruals while the budget records cash
receipts.
Indirect business tax and nontax accruals are composed mainly of
excise taxes and customs duties, but also include rents and royalties
paid by business to the Government. This category has been becoming
a much less important part of the Federal tax structure over the past
two decades largely because of reduction or repeal of some excise taxes.
Contributions for social insurance constitute the second largest
category of Federal sector receipts. The rapid rise in these receipts over
the past two decades has been caused by the growth in the labor force
and wage rates, expanded coverage or enactment of new social insurance programs, and the higher contribution rates needed to finance
liberalization of benefits under social insurance programs.
Table A-2 shows the Federal sector receipts relative to broad measures of economic activity.

SPECIAL ANALYSES

Table A-2. FEDERAL SECTOR RECEIPTS RELATED TO ECONOMIC
ACTIVITY

Total

Personal
tax and

Indirect

Time period
of GNP

of personal
income

profits

percent of
GNP

Contributions for

compensation of
employees

5-YEAR AVERAGES
1946-50 __
1951-55 __
1956-60. . _ .
1961-65
1966-70

17.4
18.8
18.5
18.9
19.8

9.0
10.4
10.5
10.6
12.9

35.2
45.9
43.0
41.0
40.1

3.3
2.9
2.6
2.6
2.1

3.9
3.9
5.0
6.5
7.9

ANNUAL DATA
1963
1964
1965
1966 .
1967 _
1968 . .
__ __
1969
___ _
1970
197L.__ __
.
1972 estimate

19.2
18.9
18.4
18.4
19.1
19.4
21.2
20.4
19.2
18.6

10.9
10.6
9.9
10.2
10.6
10.9
12.2
12.2
10.6
10.3

41.4
40.4
38.7
37.8
38.3
40.0
42.4
42.0
40.6
36.9

2.6
2.5
2.6
2.2
2.0
2.1
2.1
2.0
2.0
1.8

6.7
6.7
6.5
6.9
7.9
7.8
8.2
8.3
8.6
8.8

Trends in Federal sector expenditures.—Federal sector expenditures, like receipts, are divided into several major groupings, depending
upon the nature of the transaction. The primary division is between
purchases of goods and services (defense and nondefense) and all other
transactions. Purchases represent that portion of the Nation's output
that is bought directly by the Federal Government; the other categories consist primarily of transfers of income to other levels of
government, individuals or other groups which, in turn, can use them
to finance their own purchases of goods and services.
A major shift in the composition of Federal sector expenditures has
been underway for several years. The chart shows the relative decline
of defense spending and the corresponding rise in domestic programs,
especially grants-in-aid and domestic transfer payments. In calendar
year 1971 total domestic transfer payments and grants-in-aid were
larger than total purchases of goods and services for the first time in
40 years.

THE BUDGET FOR FISCAL YEAR 1973

Distribution of Federal Sector Expenditures by Category
Percent

Other
Non-Defense
Purchases
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Grants-in-Aid

1961

1965

1969

Two major factors warrant highlighting: (1) The relative expansion
of Federal programs devoted to coping with domestic needs, and (2)
the relative decentralization of decisionmaking regarding the ultimate
use of Federal money. Since the Federal Government normally exercises much more direct control over purchases than over grants and
transfers, the shift from purchases to grants and transfers is a major
factor in decentralizing decisionmaking.
Defense purchases of goods and services.—This category includes most
of the expenditures of the Department of Defense, the military assistance program, the Atomic Energy Commission, and other defenserelated activities. I t has now been reduced to the second largest single
component of Federal sector outlays. Defense spending fluctuates
widely, depending on the state of international tensions. At the peak of
World War II, defense purchases constituted over 40% of the total
GNP. The Korean and Vietnam conflicts commanded fewer of our
resources—defense purchases peaked at 13%% of GNP in the Korean
conflict and slightly over 9% in the Vietnam conflict. In 1971 they
totaled 7.2% of GNP and are expected to be 6.7% this year. However,
the decline in absolute spending has been reversed; the continued
decline relative to GNP is because the economy is expected to rise
at a much faster rate than the increase in defense purchases.

SPECIAL ANALYSES

Nondefense purchases of goods and services.—This category covers the

goods and services purchased for Federal civilian operations including
such programs as maintenance of national forest, park, and recreation
areas; space exploration; promotion of commerce; acquisition and
disposal of agricultural commodities, construction of flood control and
navigation projects; operation of the Federal airway system; a wide
variety of medical and other scientific research; Federal law enforcement activities; and maintenance of veterans hospitals.
For the past decade the National Aeronautics and Space Agency had
larger nondefense purchases than any other agency. Indeed, it accounted for about 60% of the $8.4 billion growth in this category
between 1961 and 1966. As a result of subsequent reductions, however,
NASA purchases in 1973 will be about half the 1966 level in current
prices and substantially less than half after taking account of inflation.
The Department of Health, Education, and Welfare now has the
largest volume of nondefense purchases. Purchases by this department
are largely to finance the administrative costs of grant and transfer
programs and to conduct medical research.
Domestic transfer payments.—This is now the largest category of
Federal sector expenditures. Spending in these programs has expanded
rapidly, mainly because of larger numbers of beneficiaries and higher
benefit payments under the social insurance programs. Approximately
two-thirds of the payments are for retirement and disability, with the
old-age and survivors insurance fund (OASI) constituting over 70%
of retirement and disability payments and nearly one-half of all
domestic transfer payments. Other major components of retirement
and disability are civil service retirement, railroad retirement, disability insurance, and military retired pay.
Table A-3. DOMESTIC TRANSFER PAYMENTS (in billions of dollars)

Fiscal year

Total

1960
1961 _
1962
1963
1964 _ .
1965
1966
1967
1968
1969
1970
1971
1972 estimate
1973 estimate
1

Less than $50 imillion.

20.6
23.6
25.1
26.4
27.3
28.3
31.8
37.2
42.7
48.5
54.9
67.5
77.0
84.5

Retirement and
disability

13.1
14.4
16.4
18.0
19.1
20.2
23.9
25.3
27.9
32.0
35.5
42.2
47.3
54.1

Hospital
and
supplementary
medical
insurance

Food
stamps

(1)

(*)
(1)

0)
0)
3.2
5.1
6.3
6.8
7.5
8.5
9.9

0.1
.1
.2
.2
.6
1.5
2.0
2.3

Veterans
insurance
and
benefits

Unemployment
benefits

4.4
4.6
4.6
4.8
4.6
4.7
4.7
5.3
5.5
6.2
6.9
8.0
9.1
9.4

2.7
4.2
3.6
3.1
2.9
2.5
2.1
2.1
2.2
2.3
3.0
5.7
7.]
5.7

Other

0.4
.4
.5
.5
.6
.8
1.2
1.2
1.6
1.6
2.1
2.6
3.1
3.3

THE BUDGET FOR FISCAL YEAR 1973

Another large group of domestic transfer payments is for medical
care under the hospital and supplementary medical insurance programs. These transfers did not exist prior to 1967, but by 1973 they
are expected to provide $9.9 billion to beneficiaries.
The food stamp program began in 1961 and grew gradually until
1970, when it more than doubled and is continuing to expand at a
rapid rate. In practice, most expenditures under the income security
and health categories of grants-in-aid provide benefits for the same
low-income groups that are assisted by food stamps. Total outlays
for the three categories together were $2.5 billion in 1960; in 1965
they totaled $4.0 billion; by 1969 they were $8.5 billion and they
are expected to total $18.3 billion in 1973. This growth reflects the
rapid expansion of public assistance payments in recent years plus
expansion of the food stamp program.
Veterans insurance and benefits have traditionally been a major
category of outlays. They include transfer payments made by the
Veterans Administration but not Defense Department retired pay,
which is included in retirement and disability payment grouping.
Nearly half of the increase in this category between 1966 and 1973
is for educational benefits (the GI bill); most of the remainder of the
increase is for veterans compensation and pensions.
The other major group of domestic transfer payments is unemployment benefits. There has been a gradual rise in expenditures under
this program over time because of higher average benefit payments.
These benefit payments are large in 1971-73 because of the relatively
high rate of unemployment and the availability of extended unemployment benefits. As the unemployment level decreases, the level of
benefit payments should decrease significantly.
Grants-in-aid.—This group of outlays is composed of many programs designed to help State and local governments to: (1) provide
public services, and (2) finance programs for the needy.
Table A-4. FEDERAL GRANTS-IN-AID (in billions of dollars)

Fiscal year

1960
1961
1962.._
1963
1964
1965
_
1966
1967
1968
1969..
1970. _
1971
1972 estimate. _
1973 estimate

Total

6.8
6.9
7.6
8.4
9.8
10.9
12.7
14.8
17.8
19.4
22.6
27.0
36.2
40.6

Income
security

2.3
2.4
2.6
2.9
3.1
3.2
3.3
3.3
4.6
4.8
5.7
8.1
11.2
10.8

Health

0.2
.3
.4
.5
.7
.7
1.3
2.0
2.8
3.5
4.1
4.6
5.9
5.3

Education and
manpower

Transportation

Community
development
and
housing

0.5
.5
.6
.7
.8
1.1
2.2
3.2
3.9
3.9
4.3
5.0
6.0
7.1

3.0
2.6
2.8
3.0
3.7
4.1
4.0
4.0
4.3
4.4
4.6
4.9
5.1
5.5

0.1
.1
.2
.2
.2
.4
.4
.6
.8
1.1
1.7
1.9
2.1
2.8

Revenue
sharing
and
other 1

0.8
.9
.0
0
.4
.5
.6
6
.5
1.8
2.1
2.4
5.8
9.1

1
A general program of revenue sharing is proposed to begin in 1972 with outlays of $2.2
billion in 1972 and $5.0 billion in 1973.

SPECIAL ANALYSE©

The categories of income security and health are almost entirely
devoted to providing assistance to low-income persons. Most outlays
for these programs—which include public assistance, Medicaid, and
vocational rehabilitation—are established by statutory formulas and
have risen dramatically in recent years. Special Analysis K (Federal
Health Programs) and Special Analysis L (Federal Income Security
Programs) provide more specific coverage of these activities.
Another group of grant programs is devoted to education and manpower activities. The largest education grant programs are for elementary and secondary education (which are focused heavily on economically deprived areas), higher education, and Federal aid to impacted
areas (for school districts with children of Federal civilian or military
personnel). A new program in this group is for emergency school
assistance to overcome problems of racial isolation. Manpower
training programs and public service jobs are a rapidly expanding
segment of Federal grants-in-aid. Special Analysis I (Federal Education Programs) and Special Analysis J (Federal Manpower Programs)
provide detailed discussions of these programs.
Transportation has been a major component of grant outlays since
the mid-1950's. We have financed a nationwide system of roads that
is unsurpassed in the world. While progress toward completion of
this system is continuing, heavy attention is now being given to
improving the safety and effectiveness of our aviation, passenger
railroad, and urban mass transit systems.
The rapid increase in grants for community development and
housing is concentrated largely in the urban renewal and Model
Cities programs. While the budget classifies payments for low-rent
public housing as grants, in the NIA they are counted as nondefense
purchases. The final category in table A-4 includes grants for pollution
control and abatement, crime control, and general revenue sharing,
all of which are expected to grow rapidly in 1973.
A more detailed discussion of grant-in-aid programs is presented in
Special Analysis P of this budget. Although the scope of that analysis
differs somewhat from the NIA, most of the programs are common to
both. The principal differences between the Special Analysis P and
the NIA grants are: (1) Special Analysis P includes some outlays
(mainly for food stamps, the Office of Economic Opportunity, and
hospital construction) that the NIA treats as transfer payments;
(2) Special Analysis P generally excludes payments for research, while
the NIA includes research payments to public universities as grants;
and (3) Special Analysis P includes aid in kind, while the NIA treats
these as nondefense purchases.
Other Federal sector expenditures.—Four other categories complete
the Federal sector expenditures. The principal growth in recent years
is for net interest paid. This growth has been caused primarily by
higher interest rates; however, interest rates have recently fallen so
the increase in interest in 1973 is due principally to changes in the
size of the debt.
Foreign transfer payments are mainly of three types—expenditure
of dollars to assist economic development programs, grants of foreign
currencies that are earned from the sale of surplus agricultural products, and payments for social security and similar programs to

THE BUDGET FOR FISCAL YEAR 1973

individuals living abroad. Although payments to individuals are
gradually rising (roughly proportionate with the rise in GNP), total
foreign transfer payments have been stable (and a declining proportion
of GNP) for many years.
Subsidies less current surplus of Government enterprises consist of
two elements that are consolidated for statistical reasons: (a) Subsidy
payments to resident businesses; and (b) the "current surplus" or
"deficit" of Government enterprises.
(a) A subsidy is a monetary grant to a unit engaged in commercial
activities (mainly businesses and farms). Examples of subsidies are:
Government payments to farmers for land retirement, payments to
air carriers, and the operating differential subsidy of the Maritime
Administration.
(b) Government enterprise is the term applied to those functions of
the Government (usually appearing in the budget as public enterprise
revolving funds) for which operating costs are to a great extent covered by the sale of goods and services to the public, as distinguished
from those financed by tax receipts. Government enterprises conduct
operations that are of a business-type nature. The difference between
their sales and current operating expenses constitutes the surplus or
deficit of Government enterprises. The largest of these enterprises are
the Commodity Credit Corporation (CCC), the Postal Service, and
the Tennessee Valley Authority.
Wage accruals less disbursements is an adjustment item occasionally
made in the NIA to take account of the fact that wages and salaries
are not always received at the same time as they are earned. National
income is typically recorded in the period when earned, rather than
when received—i.e., an accrual basis of accounting. Personal income,
including wage and salary disbursements, is regularly estimated on a
cash basis—following the usual thinking and practice of households.
Ordinarily, wage and salary payments disbursed in one period but
earned in the preceding period are approximately offset by those
earned in the current period, but not received until the following
period, so that no adjustment is made between national income and
personal income. An exception occurred in 1970 due to a retroactive
pay increase for Federal employees.
RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR OF THE
NATIONAL INCOME ACCOUNTS

Conceptually, the national income accounts include all the Nation's
current income and production activities, and do not measure transactions—such as loans—that represent an exchange of assets rather
than income or production. Loan transactions have a significant economic impact, affecting both income and output, but they are best
analyzed as part of credit rather than fiscal policy. Special Analysis
C (Borrowing, Debt, and Investment) and Special Analysis E (Federal
Credit Programs) are both designed to facilitate a study of the
financial market implications of the budget.
Budget outlays are divided into two major segments—the expenditure account and the loan account. All transactions included in the
loan account are excluded from the Federal sector, so this discussion
focuses exclusively on how the Federal budget expenditure account
relates to the Federal sector account.

SPECIAL ANALYSES

Table A-5 shows the major differences between the budget and the
Federal sector estimates. These differences are explained in the following paragraphs.
Table A-5. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR,
NIA (in billions of dollars)
Description

1971

1972

1973

actual

RECEIPTS
Total budget receipts
Government contribution for employee retirement (grossing)
Other netting and grossing
Adjustment to accruals
Other
Federal sector, NIA receipts

188.4

197.8

220.8

3.1
1.5
1.1
-.1

3.2
1.5
.4
-.1

3.5
1.7
2.5
-.5

194.0

202.8

227.9

211.4

236.6

246.3

-1.1
-2.1

-1.0
-1.9

-1.5

3.1
1.5
-.7
.4

3.2
1.5
-.7
_*

3.5
1.7
3.0
2.7

212.4

237.8

255.9

EXPENDITURES
Total budget outlays
Loan account
Financial transactions in the expenditure account
Government contribution for employee retirement (grossing) ___
Other netting and grossing
Defense timing adjustment
Other
Federal sector, NIA expenditures

* Less than $50 million.

Lending and financial transactions.—The loan account in the budget
includes only those domestic credit transactions where there are definite requirements for full repayment of the loans, plus all foreign
loans made on commercial terms. Credit programs that do not meet
these requirements are included in the expenditure account. The
Federal sector, however, excludes not only all lending transactions
in the loan account, but also some financial transactions counted
as expenditures in the budget—such as foreign loans of the Agency
for International Development, and tobacco and foreign loans in the
Commodity Credit Corporation (CCC). CCC nonrecourse commodity
loans are treated as purchases of goods under the national income
accounts concept.
Government contribution j or employee retirement.—The contributions
of Government agencies, as employers, to retirement trust funds are
deducted from total budget expenditures since these contributions
represent intragovernmental transactions. However, the NIA considers Government payments for employee retirement to be part of
the compensation paid to Government employees (Government
purchases of goods and services); the receipts are counted as contributions for social insurance. Therefore, the Federal sector includes the
Government's contributions to retirement funds in both receipts and
expenditures. About 70% of these payments go to the civil service
retirement fund and most of the remainder go for Federal employees
insured under social security.

THE BUDGET FOR FISCAL YEAR 1973

Other netting and grossing,—The budget normally counts as receipts
only income from taxation or revenues due to the exercise of governmental power to compel payment. Money received in the course of
business-type transactions, therefore, is normally shown as offsets
against expenditures. For instance, receipts from two major insurance
programs operated by the Veterans Administration (National Service
Life Insurance and U.S. Government Life Insurance) are netted
against expenditures in the budget since these programs are voluntary,
commercial-type activities. However, in the NIA, these are treated as
receipts, in the same way as receipts from compulsory Government
insurance programs. Adjustments of this type also affect total receipts
and expenditures equally and thus do not alter either the budget or
Federal sector surplus or deficit.
Timing adjustments.—The budget records receipts at the time the
cash is collected regardless of when the income is earned; expenditures (except interest) are generally recorded at the time the checks are
issued. The NIA attempts to record most receipts paid by the business
sector in the time period in which the income is earned rather than
when taxes are actually paid; personal income taxes, however, are
recorded at the time of payment by the individual taxpayer. For
instance, corporate income taxes in the NIA are recorded as taxes
when the profits are earned (accrued) regardless of when the cash is
received by the Treasury.
The principal timing adjustment on the expenditures side is for
defense purchases. Procurement items (such as ships or airplanes) are
recorded in the Federal sector as defense purchases at the time of
delivery to the Federal Government rather than when they are fabricated or when they are paid for; work in process is counted as part of
private business inventories until the articles are completed and delivered to the Government. Both the budget and the Federal sector
record public debt interest when it accrues.
Other.—This category includes some miscellaneous adjustments,
largely for certain specialized aspects of the national income accounts,
such as the purchase and sale of land, which are included in the budget
but not in the national income accounts. Certain nondefense timing
adjustments are included here because of the difficulty in separating
them from other adjustment categories. It also includes adjustments
for certain foreign currency transactions which are not included in the
budget.

Table A-6. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS, 1962-1973 (in billions of dollars)

196 2

RECEIPTS, NATIONAL INCOME BASIS
Personal taxes and nontaxes
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts, national income basis
EXPENDITURES, NATIONAL INCOME BASIS
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Wage accruals less disbursements
Total expenditures, national income basis
Excess of receipts or expenditures (—), national income
basis

Estimate

Actual

Description
IS>63

1964

1965

196 6

1967

196 8

1969

1970

1971

1972

1973

47.3
22.9
14.2
19.9

49.6
23.5
15.0
22.1

50.7
25.7
15.6
23.5

51.3
27.7
16.9
24.6

57.6
31.0
15.7
28.5

64.5
31.2
15.8
35.7

71.4
33.7
17.1
38.3

90.0
37.3
18.6
44.3

93.8
32.8
19.2
48.8

87.7
32.5
20.3
53.5

91.3
33.0
19.8
58.7

98.3
40.7
20.7
68.2

104.2

110.2

115.5

120.5

132.8

147.2

160.6

190.3

194.6

194.0

202.8

227.9

60.9
(50.5)
(10.4)
27.2
(25.1)
(2.1)
7.6
6.8
3.8

63.4
(50.4)
(13.0)
28.5
(26.4)
(2.1)
8.4
7.5
3.6

65.7
(50.9)
(14.7)
29.5
(27.3)
(2.2)
9.8
8.1
3.8

64.4
(48.9)
(15.5)
30.5
(28.3)
(2.2)
10.9
8.5
4.1

71.7
(54.4)
(17.3)
34.2
(31.8)
(2.3)
12.7
9.0
4.5

85.3
(67.7)
(17.6)
39.4
(37.2)
(2.2)
14.8
9.9
5.1

94.9
(75.9)
(18.9)
44.8
(42.7)
(2.1)
17.8
10.9
4.1

99.3
(78.0)
(21.3)
50.7
(48.5)
(2.2)
19.4
12.3
4.1

99.2
(77.9)
(21.3)
56.9
(54.9)
(2.0)
22.6
14.0
4.6
—.1

95.3
(73.0)
(22.4)
69.9
(67.5)
(2.4)
27.0
14.2
5.9
.1

103.0
(73.3)
(29.7)
79.8
(77.0)
(2.8)
36.2
13.4
5.4

107.0
(76.7)
(30.4)
87.4
(84.5)
(2.9)
40.6
14.8
6.0

106.4

111.4

116.9

118.5

131.9

154.5

172.5

185.9

197.2

212.4

237.8

255.9

-2.1

-1.2

-1.4

+2.0

+.9

-7.3

-11.9

+4.4

-2.6

-18.4

-35.0

-28.0

Source.—Actual data for 1962—71 are based on the estimates prepared by the Department of Commerce. Data for 1972 and 1973 are based on estimates by the Office
of Management and Buget in cooperation with the Department of Commerce.

SPECIAL ANALYSIS B
FUNDS IN THE BUDGET

This analysis classifies budget information by the groups of funds
which comprise the budget. It also presents information on the
nature of receipts for the largest trust funds; and on the gross receipts
and expenditures of all funds in the aggregate.
BREAKDOWN OF TOTALS, BY FUND GROUPS

Table B-l shows the breakdown of total budget receipts and outlays between the Federal funds and the trust funds. The two groups
together, after deducting for transactions that flow between them,
make up the budget totals.
Table B-l. BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP
(in millions of dollars)
Description

1971
actual

1972
estimate

1973
estimate

RECEIPTS

Federal funds:
Total in fund accounts
Interfund transactions
Proprietary receipts from the public

137,945
-1,194
-2,966

141,987
-1,113
-3,085

157,962
-1,282
-6,063

Receipts, Federal funds

133,785

137,788

150,617

Trust funds:
Total in fund accounts
Interfund transactions
Proprietary receipts from the public

68,492
—640
-1,659

75,989
—744
-2,083

86,399
—814
-2,371

66,193

73,163

83,214

Receipts, trust funds
Intragovernmental transactions
Total budget receipts

—11,586 —13,124 —13,046
188,392

197,827

220,785

167,811
-1,194
—2,966

186,718
-1,113
—3,085

194,128
-1,282
—6,063

163,651

182,519

186,784

61,659
-640
-1,659

70,041
-744
-2,083

75,704
-814
-2,371

59,361

67,215

72,519

OUTLAYS
Federal funds:
Total in fund accounts
Interfund transactions
Proprietary receipts from the public
Outlays, Federal funds
Trust funds:
Total in fund accounts
Interfund transactions
Proprietary receipts from the public
Outlays, trust funds
Intragovernmental transactions
Total budget outlays
Budget deficit
18

—11,586 —13,124 —13,046
211,425

236,610

246,257

23,033

38,783

25,472

SPECIAL ANALYSES

FEDERAL FUNDS

The Federal funds are those which the Government administers
as owner (as distinguished from those administered in a trustee or
fiduciary capacity). There are four subgroups of Federal funds—the
general fund, special funds, public enterprise funds, and intragovernmental revolving and management funds.
Table B-2. FEDERAL FUND RECEIPTS AND OUTLAYS (in millions of dollars)
Description

1971
actual

1972
estimate

1973
estimate

RECEIPTS BY SOURCE
Individual income taxes
Corporation income taxes
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total receipts Federal funds

86,230
26,785
10,510
3,735
2,591
3,934

86,500
30,100
9,175
5,200
3,210
3,603

93,900
35,700
9,735
4,300
2,850
4,132

133,785

137,788

150,617

382
141
47

476
170
63

503
189
71

2,787
1,485
176
8,554
1,194
74,551
1,367
21,329
2,890
269
916
1,791
449
2,896
21,087
2,275
701
500
3,381
2,183
9,492
2,807

3,097
1,051
436
11,609
1,289
74,996
1,642
26,069
3,462
1,031
1,230
3,753
526
2,594
24,225
2,358
1,287
510
3,180
1,943
10,737
4,236

3,064
830
387
11,003
1,416
75,897
1,811
26,445
4,214
-1.179
1,476
3,585
558
2,541
27,839
2,422
1,541
110
3,191
1,409
11,631
4,556

250
300

775
500

163 651

182,519

186,784

-29,866

-44,731

-36,167

OUTLAYS BY AGENCY
Legislative Branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Foreign assistance
Economic opportunity
Other
Agriculture
Commerce
Defense-Military i
Defense-Civil
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
....
_
State
Transportation
Treasury
Atomic Energy Commission
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
PostalService
Veterans Administration
Other independent agencies
Allowances for:
Pay raises (excluding Department of Defense)
Contingencies
Total outlays Federal funds
Excess of outlays ( - )
1

Includes allowance for military retirement systems reform and civilian and military pay raises
for the Department of Defense.

THE BUDGET FOR FISCAL YEAR

1973

Receipts and outlays.—The receipts of the general and special funds
in 1973 are estimated at $151 billion, as presented in table B-2.
Outlays of all the Federal funds, estimated at $187 billion, are distributed as shown. The proprietary receipts of the general fund and
special funds, the interfund receipts, and the receipts of the public
enterprise funds and the intragovernmental funds, have all been offset
in arriving at the outlays for each agency.
Obligations.—The obligations (net) for Federal funds are estimated
at $201 billion for 1973, as set forth in table B-3. These transactions
largely flow from the budget authority of $201 billion for the year,
although in part the obligations were authorized by prior years
budget authority.
Table B-3. OBLIGATIONS INCURRED, NET, IN FEDERAL FUNDS
(in millions of dollars)
Department or other unit

Legislative Branch
The Judiciary-__
Executive Office of the President
_
Funds appropriated to the President:
International security assistance
International development assistance
Office of Economic Opportunity
Other
Agriculture
Commerce
Defense-Military i
Defense-Civil
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Atomic Energy Commission
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Postal Service....
Veterans Administration
Civil Service Commission
Export-Import Bank
Federal Home Loan Bank Board
Railroad Retirement Board
Other independent agencies
Allowances for:
Pay raises (excluding the Department of Defense)
Contingencies. _
_
__
Total

1971
actual

__..

1972
estimate

1973
estimate

388
147
48

559
172
62

474
191
71

1,953
1,095
1,311
494
8,450
1,250
72,128
1,450
22,281
3,879
308
1,133
2,311
472
2,847
21,101
2,186
1,514
696
3,331
2,242
9,602
896
761
-111
20
2,679

1,435
1,900
697
610
12,366
1,504
77,113
1,692
27,661
4,399
1,226
1,658
4,337
533
2,685
24,245
2,754
2,506
711
3,440
2,549
10,755
1,298
301
-250
21
3,113

1,929
2,169
753
-30
11,479
1,575
80,314
1,949
29,267
4,700
-1,053
1,761
3,858
574
3,390
27,866
2,583
2,529
129
3,391
2,485
11,718
1,746

260
500

800
700

192,815

200,670

166,862

-217
22
3,549

Includes allowances for military retirement systems reform and civilian and military pay raises
for the Department of Defense.

Balances of prior authority.—Table B-4 shows the balances of
budget authority carried forward in Federal funds at the end of each
fiscal year. To the extent that valid Government obligations have been
incurred and remain unpaid, amounts sufficient to pay them may be
carried over into the next year. Unobligated balances may be carried

SPECIAL ANALYSES

Table B-4. FEDERAL FUND BALANCES OF BUDGET AUTHORITY
(in millions of dollars)
Department or other unit

Start 1971
Obligated

Unobligated

End 1971
Obligated

Unobligated

End 1972
Obligated

Unobligated

End 1973
Obligated

Legislative Branch
14
72
21
102
104
94
76
The Judiciary
9
15
*
17
*
18
Executive Office of the
President.—
7
*
7
1
6
5
6
Funds appropriated to the
President:
International security
assistance
1,703
4 2,199
8 2,100
2,484
International development assistance.
4,079 7,532 3,865 7,907 4,224 8,075 4,922
Office of Economic Opportunity
1,147
17
923
26
569
32
492
Other
797
190 1,087
109 1,240
-23
776
Agriculture
5,855 1,526 5,754 1,424 6,518 1,501 7,000
Commerce
1.151
230 1,185
254 1,399
233 1,558
Defense—Military (including pay raises)
25,483 14,744 23,013 12,923 25,130 10,933 29,547
Defense—Civil
235
336
318
217
371
133
510
Health, Education, and
Welfare
8,505
514 9,306
570 10,893
624 13,715
Housing and Urban Development
7,524 15,449 8,513 13,914 9,450 12,519 9,935
Interior
780
340
816
467 1,011
371 1,137
Justice
276
29
491
144
920
40 1,205
Labor
634
416 1,138
424 1,722
349 1,995
State
46
7
68
12
73
14
89
Transportation
1,134
948 1,082 3,343 1,173 2,716 2,022
Treasury
135
21
148
18
169
271
195
Atomic Energy Commission
1,096
336 1,008
458 1,404
19 1,565
Environmental Protection
Agency....
_—
828
468 1,631
240 2,850
182 3,838
General Services Administration
.
120
305
316
249
517
145
535
National Aeronautics and
Space Administration.. 1,513
216 1,463
196 1,723
24 1,923
Postal Service
858
217
913 10,551 1,519 9,420 2,595
Veterans Administration..
859 1,655
964 1,845
982 1,963 1,069
Civil Service Commission.
4
3
4
3
6
4
7
Export-Import Bank
2,903 2,215 3,848 1,458
Federal Deposit Insurance
Corporation
3,000
3,000
3,000
Federal Home Loan Bank
Board
12 7,206
92 7,382
62 7,594
60
Other independent agencies
.
.
1,685
903 2,094 4,716 2,117 4,075 2,661
Allowances
210
435
Total

69,391 58,901 72,280 71,963 78,480 64,313 92,372

Unobligated

97
*

8,566
37
223
1,814
189
11,927
11
395
12,069
261
17
351
8
1,615
561

131
92
11
8,358
2,014
4
3,000
7,861
3,230
62,844

* Less than $500 thousand.

forward in accordance with specific provisions of law, usually in
order to permit completion of projects as contemplated at the time
the appropriations were first made, but also to provide funding for
activities of a continuing nature (such as business-type enterprises)
or for standby emergency purposes (such as1backup for insurance of
the Federal Deposit Insurance Corporation).
1

For a more detailed review of balances, see Special Analysis G, Balances of Budget Authority.

THE BUDGET FOR FISCAL YEAR 19 73
PUBLIC ENTERPRISE FUNDS

The public enterprise funds are a subgroup of Federal funds, and
data thereon are included on a net basis in tables B-2 through B-4.
The public enterprise funds carry on a cycle of business-type operations, primarily with the public, on behalf of the Government. Some
are incorporated enterprises; others are unincorporated. The general
fund usually supplies them with capital, although in a few cases they
may borrow from the public.
Receipts and outlays.—Receipts of public enterprise funds are estimated at $26,029 million in 1973, and gross outlays are planned to
total $31,812 million (table B-5), resulting in net outlays of $5,783
million. The Postal Service fund receipts include the appropriations
from the general fund, whereas prior to 1972 they did not.

SPECIAL ANALYSES

Table B-5. PUBLIC ENTERPRISE FUND TRANSACTIONS (in millions of dollars)
Applicable receipts
Description

Funds appropriated to the
President:
Foreign assistance
Other
Agriculture:
Commodity Credit Corporation i
Farmers Home Administration
Other
Commerce
Defense:
Military
Civil (Panama Canal Company)
Health, Education, and Welfare,
Housing and Urban Development:
Government National Mortgage Association
Urban renewal fund
Low-rent public housing fund.
Federal Housing Administration
Other
Interior
Labor..
Transportation
Treasury__.__
......
General Services Administration
Postal Service 2
Veterans Administration
Other independent offices:
Emergency Loan Guarantee
Board
Export-Import Bank
Farm Credit Administration.
Federal Home Loan Bank
Board:
Federal Savings and Loan
Insurance Corporation. _
Other
National Credit Union Administration
......
Small Business Administration
Tennessee Valley Authority..
Total
Receipts from the public
Receipts from other accounts...

Gross outlays

1971
actual

1972
estimate

1973
estimate

1971
actual

1972
estimate

1973
estimate

185
214

272
68

266
75

1,023
21

828
37

617
41

5,188

3,376

3,563

8,010

7,815

7,866

2,612
44
43

3,512
48
45

4,291
51
48

2,444
44
18

3,516
56
22

3,834
138
21

180
31

188
71

200
159

179
102

202
118

203
218

600
579
724

739
592
820

1,066
635
895

901
1,581
722

740
1,592
830

659
1,635
905

711
242
31
149
36
1

1,020
249
47
153
91
3

1,172
255
49
165
33
11

706
459
120
147
205
1

1,166
388
147
151
364
2

1,275
341
145
163
418
11

2
6,906
778

2
9,727
940

2
10,666
963

1
9,089
542

2
10,253
579

1
10,651
621

2
113
5

4
5

1,600
4

*
151
5

1,784
5

247
23

285
28

258
28

56
24

59
31

36
32

395
621

323
709

321
782

707
988

838
1,291

631
1,289

22,375

23,482

26,029

29,731

31,243

31,812

(19,991)
(2,383)

(18,853)
(4,629)

(21,859)
(4,170)

•Less than $500 thousand.
Receipts include advances from foreign assistance and special export programs of $703 million
in 21971, $1,320 million in 1972, and $895 million in 1973.
Receipts include grants from the general fund of $ 1,418 million in 1972 and $ 1,424 million in 1973.
1

THE BUDGET FOR FISCAL YEAR 1 9 7 3
TRUST FUNDS

The trust funds are administered in a fiduciary capacity by the
Government. They include one subgroup, trust revolving funds, which,
like the public enterprise funds, carry on a businesslike cycle of operations and are normally stated on a net basis (outlays less receipts).
Cash operations.—Trust fund receipts are estimated at $83 billion
in 1973, with outlays planned at $73 billion, as shown in table B-6.
The transactions of the Federal old-age and survivors and disability
insurance funds are far larger than any other trust funds.
Table B-6. OUTLAYS AND RECEIPTS OF TRUST FUNDS (in millions of dollars)
Outlays
Description

Funds to which receipts are
appropriated:
Federal old-age and survivors
and disability insurance
trust funds
Health insurance trust funds_
Unemployment trust fund.__
Railroad employees retirementfunds..
Federal employees retirement
funds
Airport and airway trust
funds
Highway trust funds
Foreign military sales trust
fund
Veterans life insurance funds.
Other trust funds (nonrevolving)
Trust revolving funds (table
B-7)
Subtotal
Interfund transactions
Proprietary receipts from the
public
Total

1971
ctual

1972
estimate

Receipts
1973
estimate

1971
actual

1972
estimate

1973
estimate

35,874
7,875
6,132

40,053
8,974
7,316

45,514
10,436
6,127

38,892
8,534
4,321

41,593
10,627
5,614

46,242
15,347
5,786

1,919

2,113

2,098

1,880

2,035

2,181

3,259

3,659

4,168

5,851

6,516

7,271

287
4,689

1,377
4,782

596
5,027

1,184
5,729

1,569
5,557

756
6,052

970
743

1,200
861

1,500
575

966
784

1,350
820

1,650
831

294

323

325

351

308

283

-382

-618

-663

61,659
-640

70,041
-744

75,704
-814

68,492
-640

75,989
-744

86,399
-814

-1,659

-2,083

-2,371

-1,659

-2,083

-2,371

59,361

67,215

72,519

66,193

73,163

83,214

This group of funds reflects an excess of receipts of $6 to $11
billion each year, as follows (in millions of dollars):
Total receipts, trust funds
Total outlays, trust funds
Excess of receipts, trust funds

1971 actual

1972 estimate

1973 estimate

66,193
59,361

73,163
67,215

83,214
72,519

* 6,833

5,948

10,695

1
Excludes $100 million of collections on the redemption of securities issued by the Federal National Mortgage Association which were owned by trust funds at the time the Association became
privately owned in 1969.

SPECIAL ANALYSES

The activities of the trust revolving fund subgroup are shown in
table B-7. These funds include those used by the Civil Service Commission to buy insurance for Government employees.
Table B-7. TRUST REVOLVING FUND TRANSACTIONS (in millions of dollars)
Applicable receipts
Description

Civil Service Commission (employees' life insurance and
health benefits)
Federal Deposit Insurance Corporation
All other trust revolving funds__
Total trust
funds1

1972
estimate

1973
estimate

1971
actual

1972
estimate

1973
estimate

1,562

1,838

2,203

1,372

1,644

1,974

441
131

477
136

494
143

256
122

54
135

61
142

2,133

2,451

2,840

1,751

1,833

2,177

(1,360)
(773)

(1,477)
(974)

(1,711)
(1,129)

revolving

Receipts from the public
Receipts from other accounts...
1

Gross outlays

1971
actual

Excludes right-of-way revolving fund which is a part of the highway trust funds.

Receipts by funds.—Table B-8 presents information, classifying the
trust fund receipts by major fund, and, for each such fund, by source.
Table B-8. TRUST FUND RECEIPTS (in millions of dollars)
[Amounts under proposed legislation are shown separately]

Description

Federal old-age, survivors, and disability insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments)
Proposed legislation (mainly social insurance taxes and contributions)
Subtotal Federal old-age, survivors, and disability insurance
trust funds
Health insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments)
Proposed legislation (mainly social insurance taxes and contributions)
Subtotal health insurance trust funds
Unemployment trust fund:
Social insurance taxes and contributions _
Interest on Federal securities
Other receipts
Subtotal unemployment trust fund.

1971
actual

35,845
1,942
640
466

38,892

6,127
200
87
2,119

1972
estimate

1973
estimate

39,959
2,111
657
538

46,849
2,406
774
526

-1,671

-4,313

41,593

46,242

6,547
197
85
1,928

7,501
180
100
1,950

1,871

5,616

8,534

10,627

15,347

3,674
637
10

4,964
637
13

5,136
637
13

4,321

5,614

5,786

THE BUDGET FOR FISCAL YEAR

1973

Table B-8. TRUST FUND RECEIPTS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately!—Continued
Description

Railroad employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities.*
Receipts from other trust funds
Other (mainly receipts of special Federal payments)
Subtotal railroad employees retirement funds
Federal employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement (including
payment on prior year liabilities)
Other receipts
Proposed legislation (Federal payment as employer for employee
retirement)
Subtotal Federal employees retirement funds

1971
actual

1972
estimate

1973
estimate

980
251
626
22

1,023
272
720
21

1,110
286
764
22

1,880

2,035

2,181

1,950
1,235

2,004
1,432

2,075
1,635

2,663
3

3,003
14

3,548
12

63
5,851

6,516

7,271

563
621

676
827
66

752
4

1,184

1,569

756

Highway trust funds:
Excise taxes
_.
Interest on Federal securities
Other receipts
Proposed legislation: Excise taxes

5,542
184
4

5,349
200
8

5,518
235
4
295

Subtotal highway trust funds

5,729

5,557

6,052

Foreign military sales trust fund

966

1,350

1,650

Veterans life insurance trust funds:
Interest on Federal securities

302

321

337

482

499

494

784

820

831

351

308

283

68,492
—640
-1,659
66,193

75,989
—744
-2,083
73,163

86,399
—814
-2,371
83,214

Airport and airway trust fund:
Excise taxes
Special Federal payment
Proposed legislation: Federal payment
Subtotal airport and airway trust fund

Other receipts
Subtotal veterans life insurance trust funds
Other trust funds (nonrevolving)
Subtotal
Interfund transactions
Proprietary receipts from the public
Total receipts

SPECIAL ANALYSES

Outlays by funds.—Corresponding information on outlays, classifying the data for the larger funds, is found in table B-9.
Table B-9. T R U S T FUND OUTLAYS (in millions of dollars)
[Amounts under proposed legislation are shown separately]

Description

Federal old-age, survivors, and disability insurance trust funds:
Benefit payments
Payments to other trust funds
Administrative expenses and other
Proposed legislation (mainly benefit payments)
Subtotal Federal old-age, survivors, and disability insurance trust funds

1971
actual

1972
estimate

1973
estimate

34,482
626
765

38,502
720
818
13

40,407
764
843
3,500

35,874

40,053

45,514

Health insurance trust funds:
Benefit payments
Administrative expenses and other
Proposed legislation (mainly benefit payments)

7,477
398

8,505
467
2

9,405
511
520

Subtotal health insurance trust funds

7,875

8,974

10,436

Unemployment trust fund:
Withdrawals for benefit payments
Administrative expenses and other
Proposed legislation: Administrative expenses

5, 324
808

6,434
862
20

5,255
872

Subtotal unemployment trust fund

6,132

7,316

6,127

Railroad employees retirement funds:
Benefit payments and claims
Administrative expenses and other
Proposed legislation (mainly benefit payments)

1,889
30

2,084
29
*

2,069
29

1,919

2,113

2,098

3,072
174
12

3,463
188
8

3,960
199
9

3,259

3,659

4,168

287
4,689
970
743
294
—382

1,377
4, 782
1,200
861
323
—618

596
5,027
1,500
575
325
—663

Subtotal railroad employees retirement funds
Federal employees retirement:
Benefit payments and claims
Refunds to former employees
Administrative expenses and other
Subtotal Federal employees retirement
Airport and airways trust fund
Highway trust funds (mainly grants to States)
Foreign military sales trust fund
Veterans life insurance trust funds
Other trust funds (nonrevolving)
Trust revolving funds (table B-7)
Subtotal
Interfund transactions
Proprietary receipts from the public
Total outlays
*Less than $500 thousand.

61,659
—640
—1,659

70,041
—744
—2,083

75,704
—814
—2,371

59,361

67,215

72,519

THE BUDGET FOR FISCAL YEAR

1973

Balances of the trust funds.—The balances of the trust funds continue to increase, as shown in the following end-of-year figures (in
millions of dollars):
1970
actual

Open book balances
__
Investments in U.S. securities:
Public debt
Agency debt
Total

4,528

1971
actual

1972
estimate

1973
estimate

6.043

6,571

7,223

90.654
2.051

96,457
1.666

102,201
1,341

112,246
1,341

97.234

104.166

110,114

120.809

A summary of the balances by fund is presented in table B-10.
The amounts include both open book balances with Treasury and
investments 1in U.S. securities. Part of the balances is obligated, part
unobligated. The balances on an authorization basis exceed the cash
balances because for a few accounts budget authority is not the same
as receipts; these differences are listed in the note appended to the
table.
Table B-10. T R U S T FUND BALANCES (in millions of dollars)
Description

Federal old-age and survivors and disability insurance
trust funds
Health insurance trust funds
Unemployment trust fund
Railroad retirement accounts
Federal employees retirement funds
Airport and airway trust fund
Highway trust funds
Foreign military sales trust fund
Veterans life insurance funds
Other trust funds (nonrevolving)
Trust revolving funds
Total

As of June 30
1970
tctual

1971
actual

1972
estimate

1973
estimate

37.696
2,735
13,117
4,843
22,497
2,614
468
7,143
588
5,534

40.755
3,393
11,293
4,857
25,109
897
3,654
464
7,184
645
5,916

42,295
5,046
9,565
4,805
27.966
1,088
4,428
614
7,143

628

588

6,534

7,197

97,234

104,166

110,114

120,809

43.023
9,957
9,202
4,911
31,069
1,248
5,453
764
7,399

Note.— The balances shown here cover the amounts on deposit with Treasury, and the U.S. securities held. In addition, certain funds have authority to obligate in advance of receiving moneys, and
to borrow from the public. The reconciliation is as follows:
Balance available on an authorization basis
109,860
116,678
123,902
134,612
Unnnanced contract authorizations:
Airport and airway trust fund
—840
—780
—688
—588
Highway trust funds
-12,478 -13,638 -14,758
-15,669
Foreign military sales trust fund
-1,962
—2,202
-3,132
-3,682
Office of Saline Water
-3
-3
Unappropriated receipts:
Available as needed, on an indefinite basis __
18
22
17
18
Available for appropriation by Congress:
Soldiers' Home permanent fund
111
108
105
102
Airport and airway trust fund
387
271
588
Highway trust funds
2,522
3,586
4,391
5,423
Retained as permanent endowment
6
6
6
6
Balance available on a cash basis
1

97,234

104,166

110,114

120,809

For an analysis distinguishing obligated and unobligated balances, see table G-4 in Special
Analysis G, Balances of Budget Authority.

SPECIAL ANALYSES

For 1973, as in many recent years, the largest net investments are
expected to be those of the trust funds established by the Social Security Act as amended.
FLOW OF GOVERNMENT-ADMINISTERED FUNDS

Table B - l l gives gross receipts from and payments to the public
(except borrowing and repayments of borrowing) for all Governmentadministered funds, other than the deposit funds which are in the
nature of suspense accounts.
The table differs from the budget primarily with respect to grossing
and netting. The amounts which are grossed here, but treated as
offsets elsewhere, are as follows (in millions of dollars):
Receipts regularly offset in individual accounts:
Receipts of public enterprise funds (table B-5)
Receipts of trust revolving funds (table B-7)
Reimbursements to other appropriations and funds:
Department of Defense—Military
Other agencies
Receipts offset in the budget by agency and function
(table 13)
Total

1971
actual

1972
estimate

1973
estimate

19,991
1,360

18,853
1,477

21,859
1.711

2,521
1,206

2,520
1,167

2,580
1,312

4,874

5,423

8,772

29,952

29,440

36,234

A second difference from the budget is the distribution here of the
transactions treated elsewhere as unclassified adjustments to outlays.
The third difference lies in the inclusion here of three Governmentadministered funds which are outside the budget totals, but treated
as annexed budgets in the appendix to the budget. The figures used
for these funds are (in millions of dollars):
Receipts
Payments
Excess of receipts or payments ( - )

1971
actual

1972
estimate

1973
estimate

61
28

1,459
2,650

3,997
5,031

-1,190

-1,034

THE BUDGET FOR FISCAL YEAR 19 73

Table B-11. GROSS FLOW OF GOVERNMENT ADMINISTERED FUNDS
(in millions of dollars)
1971
actual

1972
estimate

1973
estimate

RECEIPTS BY SOURCE
Individual income taxes
Corporation income taxes
Employment taxes
Unemployment insurance
Premiums for insurance and retirement
Excise taxes
Estate and gift taxes
Customs...
_
Other receipts from the public:
General and special funds
Public enterprise funds
Trust funds (excluding trust revolving funds)
Trust revolving funds
_
Reimbursements to appropriations and other funds
Government-administered funds outside the budget
Subtotal other receipts
Total receipts from the public. _ _

86,230
26,785
41,699
3,674
3,205
16,614
3,735
2,591

86,500
30,100
46,367
4,364
3,361
15,200
5,200
3,210

93,900
35,700
55,113
5,016
3,554
16,300
4,300
2,850

7,052
19,991
1,679
1,360
3,727
61

6,845
18,853
2,104
1,477
3,687
1,459

10,432
21,859
2,391
1,711
3,892
3,997

33,870
218,404

34,425
228,727

44,284
261,016

82,337
5,377
3,435
11,958
5,338
18,920
5,909
8,889
15,217
55,293
11,152
15,179
2,401
_
_

83,026
7,227
3,240
12,625
6,925
20,781
7,151
10,390
17,920
64,812
12,732
15,305
3,766
2,250

84,271
9,372
3,225
13,697
7,451
21,376
8,521
11,541
19,309
69,129
13,375
15,952
4,029
5,000

250
300

775
500

241,404

268,700

287,522

23,000

39,973

26,506

PAYMENTS BY FUNCTION
National defense (including DOD pay raises)
International affairs and
finance
Space research and technology
Agriculture and rural development
Natural resources and environment
Commerce and transportation
Community development and housing
Education and manpower
Health
Income security
Veteran benefits and services
Interest
General government.
General revenue sharing
Allowances for:
Pay raises (excluding DOD)
Contingencies
Total payments to the public
Excess of payments

„

SPECIAL ANALYSIS C
BORROWING, DEBT, AND INVESTMENT

The major fiscal responsibilities of the Federal Government include
not only the collection of revenue and the disbursement of cash
necessary to finance the day-to-day operation of Government programs, but also:
• The borrowing of additional cash to meet requirements not
covered by current revenue and to refinance maturing debt;
• The management and investment of balances which trust funds
and other accounts do not currently need for outlays; and
• The provision of advice and assistance, including Government
guarantees, for borrowing by certain non-Federal borrowers.
This analysis summarizes current developments and trends in
Federal borrowing and in agency investment in U.S. Government
securities. It also discusses the size and growth of the Federal debt
and of the interest on the Federal debt, the statutory limitation on
the Federal debt, and expected developments in borrowing by Government-sponsored enterprises. This analysis concludes with a brief
description of the trends in Federal and federally assisted borrowing.
Special Analysis E examines the related subject of Federal credit
programs, including direct loans, loans by Government-sponsored
enterprises, and Government-guaranteed loans. The factors in both
Special Analyses C and E are significant in determining the impact
on financial markets of the programs contained in the 1973 Federal
budget.
BORROWING AND REPAYING DEBT

The Federal Government borrows for two principal reasons. First,
it sells debt to the public in order to finance budget deficits. Second,
it sells debt to the Government agencies that accumulate surpluses in
separate funds, primarily in trust funds, required by law to be invested
in Federal Government securities. The gross Federal debt includes
both the debt held by the public and the debt held by the agencies.
Almost all the gross Federal debt has been issued by the Treasury,
but a small portion has been issued by certain Government agencies.
Since Treasury borrowing from the agencies is an internal transaction
between two funds both within the Government itself, only borrowing
from the public directly affects financial markets. Borrowing from the
public—whether by the Treasury or by an agency—has a significant
impact on financial markets and thereby on the economy, and it is
consequently an important concern of Federal fiscal policy.
Table C-l summarizes Federal borrowing from 1971 through 1973.
Total Federal borrowing net of the refunding of securities, or the
rise in gross Federal debt, was $26.9 billion in 1971. The net borrowing
from the public was $19.4 billion, of which $7.8 billion was borrowed
from the Federal Reserve System and $11.6 billion from the general
public (i.e., commercial banks, other financial institutions, and
31

THE BUDGET FOR FISCAL YEAR

1973

individuals, both domestic and foreign). Net borrowing from the
public is expected to be $39.5 billion in 1972 and $27.5 billion in 1973.
The net borrowing from the agencies was $7.4 billion in 1971 and is expected to be $6.8 billion in 1972 and $9.9 billion in 1973. By the
end of 1973, 75% of the gross Federal debt is expected to be held
by the public (including the Federal Reserve System) and the remaining 25% by the agencies. Ninety-seven percent of the gross Federal
debt will have been issued by the Treasury.
Table C-1. NET CHANGES IN FEDERAL DEBT (in millions of dollars)
Description

Gross Federal debt:
Public debt (issued by Treasury)
Agency debt (issued by agencies)
Gross Federal debt!
Less debt held by Government agencies:
Public debt
Agency debt
Debt held by Government agencies
Total, debt held by the public
Debt held by the Federal Reserve System
Debt held by the general public

Increase or decrease ( - )

Debt outstanding
1973
end 1973
estimate estimate

1971
actual

1972
estimate

27,211
-347

46,495
-178

36,126
1,255

479,926
13,239

26,864

46,317

37,381

493,165

7,718
-302

7,168
-351

9,900
-19

119,956
1,881

7,417

6,817

9,881

121,837

19,448

39,500

27,500

"371,328

7,804
11,644

NA
NA

NA=Not available.
Excludes the $825 million of special non-interest-bearing notes issued to the International Monetary Fund.
1

Table C-2 shows how borrowing from the public is related to the
budget deficit. In 1971, the deficit was $23.0 billion, of which the major
part, $19.4 billion, was financed by borrowing from the public. The
remaining $3.6 billion of the deficit was financed largely by an increase
in the sum of several monetary liabilities, which include checks outstanding, accrued interest payable on the public debt, deposit funds,1
and miscellaneous accounts. A very small portion was financed by
seigniorage (the value of minted coins less the cost of their production)
and other means. A decrease in the Government's holdings of cash and
other monetary assets is another means of financing the deficit, but in
1971 these holdings remained virtually constant. The extent to which
the deficit can be financed by means other than borrowing from the
public is very limited, and in some years an increase in cash assets or a
decrease in monetary liabilities is large enough that the other means
of financing the deficit are negative in total. In such years the Government must borrow from the public to finance the changes in these
assets or liabilities as well as to finance the budget deficit. During
1972 and 1973, as in 1971, the deficit is expected to be financed
principally by borrowing from the public.
1
Most deposit funds are Government liabilities temporarily being held as deposits—e.g.. State
income taxes withheld from Federal employees' salaries but not yet paid to the States.

SPECIAL ANALYSES

Table C-2. MEANS OF FINANCING THE FEDERAL BUDGET DEFICIT
(in millions of dollars)
Description

Budget deficit

1971

1972

1973

actual

estimate

23,033

38,783

25,472

19,448

39,500

27,500

Means of financing the deficit:
Borrowing from the public
Other:
Decrease or increase (—) in cash and monetary assets
Increase or decrease (—) in liabilities for:
Checks outstanding, etc.1
Deposit fund balances
Seigniorage on coins
Other
Subtotal, means of financing other than borrowing from the
public
Total, means of financing

*
2,164
88
-5
940
-125
-1,501
378
540
532
2
104 3-1,220 3 - 1 , 0 5 4
3,585

-717

-2,028

23,033

38,783

25,472

*Less than $500 thousand.
1
Includes military payment certificates, accrued interest (less unamortized discount) payable
on2 public debt, and, as offsetting assets, certain collections in transit.
This consists of the collections resulting from the redemption of securities owned by Government-administered funds which had been issued by the Federal National Mortgage Association,
now privately owned, at the time when it was Government-owned and therefore included within
the3 budget totals.
This consists of the net disbursements of the Export-Import Bank (a wholly Government-owned
corporation) beginning Aug. 17, 1971, when it was removed by statute from the budget totals.

Borrowing from the agencies is closely related to the surpluses of
the trust funds, which, as shown in table C-6, own most of the Government agencies' holdings of Federal debt. The relationship between
agency borrowing and trust fund surpluses can be seen by comparing
the purchase of Federal debt by the agencies, given in table C-l, with
the aggregate surplus of the trust funds, presented immediately after
table B-6 of Special Analysis B.
SIZE AND GROWTH OF FEDERAL DEBT

Gross Federal debt has risen substantially over most of the past
four decades from about $16 billion in 1929 to $409.5 billion at the end
of fiscal year 1971. Table C-3 presents the detail of this change since
1954 and shows that a sizeable part of the increase is held in Federal
Government accounts (primarily trust funds) rather than being owed
to the public. From the end of 1954 to the end of 1971, gross Federal
debt rose by 51% while Federal debt held by the public rose by 36%.
Federal debt held by the private institutions and individuals who
comprise the general public rose still less, by 20%—an annual compound rate of growth of 1.1% over the 17 years—because the Federal
Reserve System bought a large quantity of Federal debt, thereby
expanding the reserves of the banking system and providing for
growth in the Nation's money stock.

Digitized for480-700
FRASER
O—72

THE BUDGET FOR FISCAL YEAR

1973

Table C-3—COMPARISON OF TRENDS IN FEDERAL DEBT AND GROSS
NATIONAL PRODUCT (in billions of dollars)
Debt outstanding, end of year
Held by
Fiscal year

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972estimate
1973 estimate

Gross
Federal
debt 1

270.8
274.4
272.8
272.4
279.7
287.8
290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1
382.6
409.5
455.8
493.2

The public

Federal
Government
accounts

Total

46.3
47.8
50.5
52.9
53.3
52.8
53.7
54.3
54.9
56.3
59.2
61.5
64.8
73.8
79.1
87.7
97.7
105.1
112.0
121.8

224.5
226.6
222.2
219.4
226.4
235.0
237.2
238.6
248.4
254.5
257.6
261.6
264.7
267.5
290.6
279.5
284.9
304.3
343.8
371.3

Federal
Reserve
System

25.0
23.6
23.8
23.0
25.4
26.0
26.5
27.3
29.7
32.0
34.8
39.1
42.2
46.7
52.2
54.1
57.7
65.5
NA
NA

GNP

Debt held
by public
as percent
of GNP

The
general
public

199.5
362.1
203.0
378.6
198.5
409.4
196.4
431.3
200.9
440.3
209.0
469.1
210.7
495.2
211.4
506.5
218.7
542.1
222.4
573.4
222.8
612.2
222.5
654.2
222.5
721.2
220.8
769.8
238.4
826.1
225.4
897.6
227.2
953.2
238.8 1,008.2
NA 1,089.5
NA
NA

62.0
59.9
54.3
50.9
51.4
50.1
47.9
47.1
45.8
44.4
42.1
40.0
36.7
34.8
35.2
31.1
29.9
30.2
31.6
NA

NA=Not available.
Excludes the special non-interest-bearing notes issued to the International Monetary Fund
and international lending agencies.
1

During the depression of the 1930's and during World War II,
Federal debt held by the public rose greatly, not only in absolute
amount but also, as shown in the following chart, as a proportion of
total net indebtedness: Federal, State and local, and private. Whereas
Federal debt held by the public was only 9% of total net debt at
the end of calendar year 1929, it was 62% by the end of calendar
year 1945. Federal borrowing was large, particularly during World
War II, and borrowing by other sectors was restricted by low incomes
and poor creditworthiness during the depression and b}^ controls
and scarcities during the war.
In every year since 1945, however, private debt has increased as a
proportion of total debt and Federal debt held by the public (including the Federal Reserve System) has decreased as a proportion
of the total. State and local government debt has risen in amount
every year and has risen in proportion to total debt for the period
as a whole, although since 1963 its proportion has been about constant.
From the end of calendar year 1953 to the end of 1970, Federal debt
held by the public rose 33%, State and local government debt rose
367%, and private debt rose 320%. By the end of calendar year 1970,
Federal debt held by the public was only 17% of total debt. As a
result of these trends, Federal debt and borrowing, although still
significant, have become relatively much smaller influences in the
financial markets.

SPECIAL ANALYSES
Percent Distribution of Indebtedness

1940
1930
End of Calendar Year

1950

1960

1970

1
Federal indebtedness is the Federal debt held by the public (including the Federal Reserve
System).

During this same period the Federal debt has decreased relative to
gross national product. As shown in table C-3, debt held by the
public equaled 62% of gross national product at the end of 1954 but
declined steadily to 30% by the end of 1971.
The interest cost of the debt may be more significant than the
amount of debt for some types of comparison designed to measure
the importance of Federal indebtedness. The interest cost of the debt
held by the public has risen much faster than the debt itself, due to
a strong upward trend since World War II in the interest rates that
must be paid on new borrowings and on refunded debt. Between
1954 and 1971 the Federal debt held by the public grew 36%, but,
as shown in table C-4, the interest paid to the public more than
tripled. For this period as a whole, interest, payments to the public
grew faster than gross national product. In the first 5 years, 1954-58,
interest was equal to 1.40% of gross national product, whereas by
the last 5 years, 1967-71, the proportion had risen slightly to 1.58%.
On the other hand, the proportion of budget outlays devoted to paying
interest on the debt held by the public did not show any trend. The
proportion was 7.64% in 1954-58 and at 7.57% was virtually the same
in 1967-71.

THE BUDGET FOR FISCAL YEAR 1973

Table C-4. COMPARISON OF TRENDS IN INTEREST ON FEDERAL DEBT,
GROSS NATIONAL PRODUCT, AND BUDGET OUTLAYS (in billions of dollars)
1nterest on 1.he gross Federal debt

Interest on debt
held by the public
as a percent of

Paic1 to
Fiscal year

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972 estimate
1973 estimate

Total

Federal
Government
accounts

The public
Total

6.4
6.4
6.8
7.3
7.8

1.2
.2
.3
.4
4

5.2
5.2
5.6
5.9
6.3

7.8
9.5
9.3
9.5

4
5

6.4
8.1
7.8
7.9
8.7

10.3
11.0
11.8
12.6
14.2
15.6
17.7
20.0
21.6
22.1
23.4

6
6

.8
9
2.1
2.5
3.0

3.5
4.4
5.3
5.8
6.4

9.3
9.8
10.5
11.7
12.7
14.2
15.6
16.3

16.3
17.1

Federal
Reserve
System l

0.5
0.4
0.5
0.7
0.7
0.8

.0
.0
.0
.1
.2
.4
.7
2.0
2.4

2.9
3.5
3.7
NA
NA

The
general
public

GNP

Budget
outlays 2

4.7
4.8
5.1
5.3
5.6

1.43
1.37
1.36
1.38
44

5.6
7.1

7.31
7.56
7.91
7.74
7.68
6.96
8.74
7.97
7.40
7.78
7.80
8.31
7.77
7.39
7.09
7.68
7.95
7.73
6.88
6.93

6.8

6.9
7.6
8.0
8.4
8.8
9.7
10 3
11.3
12.2
17.6

NA
NA

54
46
51
.51
.50
.45
1.52
1 54
1 58
1 64
1.62
1.49

N A = N o t available.
1

Estimated.
2 Budget outlays for 1954-73 are given in the Budget, part 8, table 21.

Since the end of World War II the composition of the Federal debt
has changed, with an increasingly large proportion of Federal securities
having a relatively short maturity. One contributing factor, although
by no means the sole cause, was the statutory ceiling of 4%% on
interest rates payable on marketable
Treasury securities whose
maturities exceeded 7 years 2 (marketable securities currently constitute about four-fifths of the debt held by the public). Because
long-term market rates have been higher than i}i% in recent years, the
ceiling prevented the Treasury from selling long-term marketable
obligations after 1965. The ceiling thereby helped to increase the
gross dollar volume of offerings each year. Since 1965, the average
maturity of Treasury marketable debt has declined from about 5%
years to about 3K years, and the amount of debt that must be refunded each year now exceeds $100 billion. This restriction on Treasury
borrowing, enacted in 1918, was relaxed in March 1971 by a law
which allowed the Treasury to issue up to $10 billion of long-term
bonds at interest rates above 4%%. Subsequently during calendar
year 1971, $2.0 billion of bonds were sold at interest rates averaging
2
Until 1967 the ceiling applied to marketable Treasury securities whose maturities exceeded 5
years.

SPECIAL

ANALYSES

BORROWING BY FEDERAL AGENCIES 3

A few Government agencies are authorized to sell their own debt
instruments to the public or to other Government agencies and funds.
This agency borrowing is part of the gross Federal debt. The disbursement of such borrowed money is a budget outlay, and the
authorization to borrow is budget authority.
Table C-5. AGENCY BORROWING * (in millions of dollars)

Description

Borrowing from the public:
Agriculture: Farmers Home Administration2
Rural Electrification Administration
Defense
Health, Education, and Welfare2
Housing and Urban Development:
College housing loans 2
Public facility loans 2
Federal Housing Administration
Housing for the elderly 2
Government National Mortgage Association 2_
Postal Service
Veterans Administration 2
Export-Import Bank 3
Small Business Administration 2
Tennessee Valley Authority
All other
Total borrowing from the public
Borrowing from other funds:
Agriculture: Farmers Home Administration2
Defense
Health, Education, and Welfare 2
Housing and Urban Development:
College housing loans 2
Public facility loans 2
Federal Housing Administration
Housing for the elderly 2
Government National Mortgage Association 2_
Veterans Administration 2
Small Business Administration 2
Tennessee Valley Authority

Increase or decrease (—)
in debt
1971
actual

1972
estimate

-72

-109

-78
-6
-690
-5
-30
-3
-93

1973
estimate

Debt
outstanding
end 1973
estimate

-78
-4

-23
45
-84
-2

330
45
1,293
133

-271
-4
57

-27
-2
64

-143

-106
732
-79
384

250
-87
107
-141
595
3

-82
250
-260
926
-44
510
3

309
96
538
66
874
500
767
3,657
282
2,455
14

-45

173

1,274

11,358

-9
-14
4

-55
-15
-2

-15

168
199
65

-270
3
-1
2

-136
-2
-6

12
7
-12
-24

-4

-48
-12
-70
—5 .

156
47
59
32
479
523
154

Total borrowing from other funds.

-302

-351

-19

1,881

Total agency borrowing *

—347

-178

1,255

13,239

*Less than $500 thousand.
Excludes agency borrowing from Treasury.
Certificates of participation in loans.
Reclassified by statute outside the budget totals as of Aug. 17, 1971.

1
2
3

3
The Export-Import Bank, which was reclassified by statute outside the budget totals as of Aug.
17, 1971, is included in borrowing by Federal agencies because its debt remains part of gross Federal
debt.

THE BUDGET FOR FISCAL YEAR 1973

Net changes in outstanding agency debt were shown in total in
table C-l and are shown by agency in table C-5. For 1971 and 1972
the repayment of agency debt exceeds new agency borrowing by $0.3
billion and $0.2 billion, respectively, and for 1973 new borrowing is
expected to be larger by $1.3 billion.
About a third of the agency debt of $13.2 billion estimated to be
outstanding on June 30, 1973, will consist of $4.5 billion in certificates of participation in pools of loans issued in prior years by the
Government National Mortgage Association, as trustee on behalf of
the Department of Agriculture, the Department of Health, Education,
and Welfare, the Department of Housing and Urban Development,
the Veterans Administration, and the Small Business Administration.
The issuance of certificates of participation was discontinued after
1968.
Almost all the rest of the agency debt consists of notes sold by the
Export-Import Bank, family housing mortgages issued by the Department of Defense and the Coast Guard, revenue bonds issued by
the Tennessee Valley Authority, bonds sold by the Postal Service,
and debentures issued by the Federal Housing Administration in
settlement of some of the insurance claims arising from Federal
mortgage insurance.
The Treasury provides capital to business-type Government
enterprises both in the form of capital stock and in the form of "debt."
Since these two instruments are the same in substance and since it
would be misleading to double count the agency borrowing from the
Treasury and the resulting Treasury borrowing from the public, the
amounts of "loans" are shown as part of Government ownership
equity on the enterprise statements of financial condition in the
Budget Appendix. For the same reasons, these amounts are excluded
from figures on agency "borrowing" and "debt" throughout the
budget.
AGENCY INVESTMENT IN FEDERAL SECURITIES

Trust funds and some public enterprise funds accumulate cash in
excess of current requirements in order to meet future claims and
demands. Such temporary cash surpluses are usually invested in
Treasury debt, or, to a very small extent, in agency securities. Neither
purchases nor redemptions of these securities are counted as budget
outlays or receipts.
As shown in table C—6, net investment by Government agencies
and trust funds in Government securities was $7.4 billion in 1971
and is estimated to be $6.8 billion in 1972 and $9.9 billion in
1973. The total holdings of Federal securities by Government agencies
and trust funds will reach an estimated $121.8 billion by June 30, 1973.
Altogether they will hold 25% of the gross Federal debt. Two major
trust funds—the Federal Old-Age and Survivors Insurance Fund and
the Civil Service Retirement and Disability Insurance Fund—will
account for 52% of these holdings, and the other trust funds will
account for 4 1 % more.

SPECIAL ANALYSES
Table C-6. AGENCY INVESTMENT IN FEDERAL SECURITIES
(in millions of dollars)
In

Description

Investment in public debt (issued by Treasury):
Health, Education, and Welfare:
Federal old-age and survivors ins. trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical ins. trust fund
Housing and Urban Development:
Federal Housing Administration
Government National Mortgage Association
Other
Interior: Indian tribal funds
Labor: Unemployment trust fund
Transportation: Highway trust fund
Treasury: Exchange Stabilization fund
Postal Service
Veterans Administration:
National service life insurance fund
Other trust funds
Other
Civil Service Commission:
Civil Service retirement and disability fund
Other trust funds
Federal Deposit Insurance Corp.: Trust fund
Federal Home Loan Bank Board: FSLIC
Railroad Retirement Board: Trust funds
All other

in holdings
1971
actual

1972
estimate

1973
estimate

Holdings
end 1973
estimate

1,309
1,278
397
244

710
630
1,530
203

306
221
4,536
257

31,786
6,879
9,045
717

-7
222
18
-175
-1,647
1,033
1,378

180
-257
10
-8
-1,628
785

160
206
15
-17
-363
1,025

1,333

-833

1,323
844
102
1
9,150
5,445
1,390
500

153
-39
59

35
-44
57

280
-26
61

6,383
689
601

2,735
232
180
212
101
37

2,943
197
431
82
-58
38

3,045
225
434
222
102
43

30,240
1,569
5,526
2,805
4,689
272

7,718

7,168

9,900 119,956

-6

-35
-15
-20

-50
-50

135
-31

-4
-16

-100

-70

-25

310

-100

375
144
50

Total investments in agency debt

-35
-16
-110
-302

Total agency investments in Federal securities.

7,417

Total investments in public debt
Investment in agency debt:
Agriculture: CCC
Health, Education, and Welfare:
Federal old-age and survivors ins. trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Housing and Urban Development:
Federal Housing Administration
Government National Mortgage Association
Interior: Indian tribal funds
Labor: Unemployment trust fund
Veterans Administration: National service life insurance fund
Civil Service Commission: Civil Service retirement
and disability fund
Federal Home Loan Bank Board: FSLIC
Railroad Retirement Board: Trust funds

-351
6,817

-6

______

555
__

-5

-19

204
139
1

1,881

9,881 121,837

THE BUDGET FOR FISCAL YEAR 19 73

LIMITATIONS ON FEDERAL DEBT

Since enactment of the Second Liberty Bond Act in 1917, a general
statutory limitation has been placed on the amount of certain types
of Federal debt that can be outstanding. The limit currently applies
to the total of:
• All public debt issued by the Treasury since September 1917,
whether held by the Government or by the public;
• Agency debt in the form of participation certificates issued
during 1968 under the Participation Sales Act of 1966; and
• Other debt issued by Federal agencies (and the District of Columbia Armory Board) which, according to explicit statutes, is
fully guaranteed as to principal and interest by the United
States.
The statutory limit based on this definition is $430 billion for the
period beginning March 17, 1971, and ending on June 30, 1972. This
limit includes a temporary increase of $30 billion, which expires on
June 30, 1972, after which the permanent limit of $400 billion becomes
effective.
The outstanding debt subject to limitation is compared, in table
C—7, with the gross Federal debt and the Federal debt held by the
public in 1971, 1972, and 1973. The debt subject to limitation is
almost as large as the gross Federal debt.
Table C-7. DEBT SUBJECT TO GENERAL STATUTORY LIMITATION
(in millions of dollars)
End of year
Description
1971
actual

1972
estimate

1973
estimate

Federal debt held by the public

304,328

343,828

371,328

Add: Federal securities held by Government agencies

105,140

111, 956

121,837

409,467

455, 784

493,165

627

625

1,683
2,625
1,355
4,540

1,590
250
2,732
1,945
3,455

8
10,838

11
10, 608

1,492
500
3,657
2,455
3,345
45
14
12,133

Federal debt subject to statutory limitation._
Add:
District of Columbia Stadium bonds
Special notes held by International Monetary Fund

398,630

445,177

481,033

20
825

Total debt subject to statutory limitation

399,475

Gross Federal debt
Deduct:
Public debt not subject to limitation
Agency debt not subject to general limitation:
Department of Defense
Postal Service
Export-Import Bank
Tennessee Valley Authority
Participation certificatesl
Rural Electrification Administration
Other
Total Federal debt not subject to limitation

446,022

481,878

1
Certificates of participation issued by Government National Mortgage Association as trustee
(or 5 departments and agencies (excluding those issued during 1968).

SPECIAL ANALYSES

The Federal debt held by the public is projected to increase by $39.5
billion in 1972 and by $27.5 billion in 1973. The debt subject to
statutory limitation is expected to rise by $46.5 billion and $35.9
billion, respectively. The greater growth in the debt subject to limitation is due primarily to the investment in Federal debt by Government trust funds and other agencies. Their holdings are not part of
the debt held by the public but are nevertheless almost all subject to the
statutory limitation.
Almost the only agency debt subject to the general statutory
limitation, in addition to the participation certificates sold in 1968,
is the debentures issued by the Federal Housing Administration. The
remaining agency debt, however, in most cases requires explicit
statutory authorization. For example, outstanding revenue bonds
issued by the Tennessee Valley Authority are currently limited to $5
billion.
BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES 4

Six Government-sponsored enterprises, in which there is currently
no Government investment, borrow under Government auspices. The
transactions of these enterprises are not included within the Federal
budget.
The borrowing programs of all six enterprises are subject to Federal
supervision. All, in addition, consult the Treasury Department, either
by law or by custom, in planning their market offerings. The Federal
National Mortgage Association and the Federal home loan banks are
required to obtain Treasury approval of the terms and timing of
specific offerings, and the Treasury Department is authorized to
purchase limited amounts of their obligations. Four of the enterprises
are systems of regional lending institutions that pool their borrowings.
In addition to their Federal sponsorship, all of the established enterprises have a history of successful financial performance. Hence,
despite the absence of Federal guarantees, the obligations of these
enterprises are sold at interest rates only slightly higher than those
prevailing on Treasury issues.
As shown in table C-8, all but one of these Government-sponsored
enterprises borrowed more than they repaid in 1971, and each anticipates net borrowing in 1972 and 1973. Total net new borrowing by
the six Government-sponsored enterprises as a whole is expected to
be $8.6 billion in 1972 and $9.2 billion in 1973. The large increases
in expected borrowing primarily reflect strong support for the housing
market to be provided by the Federal National Mortgage Association, the Federal home loan banks, and the Federal Home Loan
Mortgage Corporation. Special Analysis E discusses the lending by
these enterprises.
4
Although the Export-Import Bank was reclassified by statute outside the budget totals, it remains
Government owned and therefore is not classified as a Government-sponsored enterprise. Its debt
is included in gross Federal debt.

THE BUDGET FOR FISCAL YEAR

1973

Table C-8. NET CHANGES IN DEBT OF GOVERNMENT-SPONSORED
ENTERPRISES (in millions of dollars)
Increase or decrease ( - )
Description
1971
actual

Housing and Urban Development: Federal National
Mortgage Association. _
Farm Credit Administration:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank Board:
Federal home loan banks
Federal Home Loan Mortgage Corporation
Total

1,830

1972
estimate

5,527

1973
estimate

Debt outstanding
end 1973
estimate

4,312

24,835

228
776
545

174
861
591

199
991
605

2,185
7,595
8,026

-2,551
615

739
700

1,478
1,585

9,546
2,900

9,170

55,087

1,503

8,592

The administration has proposed creating certain new Governmentsponsored enterprises to assist in the financing of expenditures for
purposes not supported by the present enterprises.
TOTAL FEDERAL AND FEDERALLY ASSISTED BORROWING

The total of Federal and federally assisted borrowing includes not
only borrowing by the Federal Government and by Governmentsponsored enterprises but also guarantees, in whole or in part, of
borrowing by specific groups of non-Federal borrowers. These programs are discussed in Special Analysis E. Table C-9 summarizes the
developments in Federal borrowing and in the two categories of
federally assisted borrowing—borrowing by Government-sponsored
enterprises and Government guaranteed borrowing—together with
the adjustments necessary to eliminate double counting. The following chart depicts the trends in Federal and federally assisted
borrowing between 1962 and 1973.
Federal borrowing from the public is expected to be $39.5 billion
in 1972 and $27.5 billion in 1973. Total Federal and federally assisted
borrowing from the public is expected to be $66.5 billion in 1972 and
$58.5 billion in 1973.

SPECIAL ANALYSES

Table C-9. NET BORROWING FROM THE PUBLIC BY GOVERNMENT,
GOVERNMENT-SPONSORED ENTERPRISES, AND GOVERNMENTGUARANTEED BORROWERS (in billions of dollars)
Borrowing or repayment ( —) Debt outstanding
1971
1973
end 1973
1972
actual

Description

19.4

39.5

27.5

371.3

Borrowing by Government-sponsored enterprises
Less increase in holding of Federal debt
Plus repayment of debt of Government-sponsored
enterprises held in Government accounts

1.5
-.7

8.6
.2

9.2
*

55.1
-3.8

Net Government-sponsored borrowing from public.

8.8

9.2

51.3

Federal borrowing from the public
2

Government-guaranteed borrowing by non-Federal borrowers 3
Less borrowing from Government or Governmentspoasored enterprises:
Federal National Mortgage Association
Government National Mortgage Association
Federal Home Loan Mortgage Corporation
Export-Import Bank

16.1

23.3

25.9

189.4

2.2
.3
.5
-.1

4.9
-.1
.5
-.1

4.4
-.6
.4
-.1

24.9
4.4
1.4
.1

Net Government-guaranteed borrowing from public by non-Federal borrowers

13.3

18.

21.8

158.6

Total, Federal and federally assisted borrowing
from the public

33.7

66.5

58.5

581.3

*Less than $50 million.

» See table C-l.

2 See table C-8.

3 See table E-3.

Federal and Federally Assisted Borrowing
$ Billions

1962

'63

'64

Fiscal Years

'65

'66

"67

'68

'69

'70

'71

'72

"73

Estimate

SPECIAL ANALYSIS D
INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS

This analysis focuses on the distinction between outlays that are
of an investment or ''capital" nature and outlays directed to operating,
or "current," purposes.
To facilitate the analysis, the outlays presented in the budget as
loan and expenditure accounts are classified in the following three
categories:
Investment-type outlays—yield benefits over several years, and
consists of investments in: Federal assets of both a physical and financial nature; State, local, and private physical assets; developmental
expenditures to add to the Nation's capacity for better education,
technical innovation, and health services.
Current outlays—provide benefits in the year that they are made.
Included are aid and special services to agriculture, business, labor,
homeowners, tenants, veterans, and for international commitments
and Federal welfare obligations. Also included is retirement and social
insurance representing Federal trusts established to provide an assured
income to contributors or their families in the event of unemployment,
retirement, disability, or death. And other services and current operating expenses, including transactions such as: Operation and administration of Federal departments and agencies; repair, maintenance, and
operation of physical assets; regulatory and control activities; and
interest are also included.
Unclassified outlays—which cannot be classified in either of the
above two categories are placed in this residual classification. It
includes: Allowance for revenue sharing, containing amounts covering
the President's proposal for general revenue sharing, as well as additions to the detailed budget estimates that would accompany the
conversion of various Federal aids to proposed special revenue-sharing
grants; allowance for pay increases for civilian agencies (the corresponding pay increases for the military and civilian personnel of the
Department of Defense are included in the national defense details);
allowance for contingencies; and certain financial adjustments that
cannot conveniently, or precisely, be distributed, such as proprietary
receipts and the employer share of employee retirement.
Each of the major classifications is subdivided so that civil and
national defense outlays can be separately analyzed. The national
defense grouping in this analysis corresponds to the national defense
function in the budget; the civil grouping includes all other functions
in the budget.

THE BUDGET FOR FISCAL YEAR 1973
Table D-l. SUMMARY OF INVESTMENT, OPERATING, AND OTHER
BUDGET OUTLAYS (in billions of dollars)
Outlays
1971
actual

T972
estimate

1973
estimate

INVESTMENT-TYPE OUTLAYS

Additions to Federal assets:
Civil:
Loans and other financial investments
Physical assets:
Public works_
Major commodity inventories
Major equipment and other physical assets
National defense
Additions to State, local, and private assets:
Civil
National defense
Developmental outlays:
Civil
National defense
Subtotal, investment type outlays:
Civil
National defense

_ _.

1.8

3.3

1.2

2.6
—.6
.5
21.1

3.7
.1
.8
20.7

3.9
.1
.7
18.5

7.5
*

8.4
*

9.0
*

18.8
9.0

21.6
9.5

22.3
9.7

30.6
30.1

37.8
30.1

37.3
28.1

34.8
1.5
51.7

41.4
1.9
58.1

43.0
2.2
63.8

15.2
7.3
47.2

15.3
11.3
46.9
.8

16.0
15.1
47.1
3.4

109.0
48.7

126.1
49.6

137.9
52.7

CURRENT OUTLAYS
Current expenses for aids and special services:
Civil
National defense
Retirement and social insurance benefits—civil
Other services and current operating expenses:
Civil:
Interest
Other
National defense
Allowances, Department of Defense
Subtotal, current outlays:
Civil
National defense
UNCLASSIFIED
Payments to other funds
Allowances:
Pay raises (excluding Department of Defense)
Contingencies
Employer share, employee retirement (—)
Proprietary receipts from the public ( - ) 1
Total budget, outlays

—2.6
—4.4

.2
.3
—2.7
—4.9

.8
.5
—2.9
—8.1

211.4

236.6

246.3

*1 Less than $50 million.
Excludes loan repayments deposited in miscellaneous receipts and offset in the loan and expenditure accounts as follows:
1971
1972
1973
Loan repayments offset in the loan account
Repayments offset in the expenditure account

—0. 2
—.2

—0. 3
—.3

• The proportion of the budget dedicated to civil purposes is
expected to be $168 billion, 68% of the total 1973 budget.
• Additions to Federal civil assets are expected to be $6.0 billion
in 1973, a decrease of $1.8 billion, or 23% under 1972.

SPECIAL ANALYSES

• Investments in State and local, and private assets will be $9.1
billion, an increase of $0.6 billion, growing by 8%.
• Development investments in education, training, and health will
amount to $15.1 billion in 1973, an increase of $0.3 billion, or
2% over, 1972.
• Outlays for research and development will increase 3.5% or $0.6
billion to $16.7 billion in 1973.
• Current outlays for homeowners and tenants will have an estimated growth of $0.5 billion, and will be $1.4 billion in 1973.
• Retirement and social insurance systems will be $63.8 billion in
1973, an increase of $5.7 billion over 1972, making these benefit
payments 26% of the total 1973 budget.
Table I>2. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS
Percent of total outlays
1969
actual

1970
actual

1971
actual

1972
estimate

1973
estimate

INVESTMENT-TYPE OUTLAYS
Additions to Federal assets:

Loans
.
Other financial investments
Public worksites and direct construction
Major commodity inventories
Major equipment
Other physical assets—acquisition and improvement

1.8
.1
1.2
.2
.1

1.5
.1
1.1
.3
.1

.7
.1
1.2
—.3
.1

1.3
.1
1.6

Subtotal, additions to Federal assets

3.4

3.2

2.0

3.3

2.4

3.0
.6

3.0
.5

3.1
.4

3.3
.4

3.6

3.5

3.7

4.8
3.5
.1

5.3
3.2
.1

5.8
3.1
.1

6.2
2.8
.1

6.1
2.8
•1

8.1

8.5

8.9

9.1

9.0

15.4

15.2

14.5

16.0

15.2

2.3
.9
.4
-.2
4.1
.9
2.5
1.9

2.2
.9
.4
-.0
4.4
.7
3.3
2.4

2.3
1.0
.5
.1
4.7
.6
4.5
2.5

1.9
1.1
.5
.4
4.8
.8
5.5
2.5

2.1
1.0
.5
.6
4.9
.7
5.3
2.4

12.7

14.3

16.2

17.5

.3
.2
1.6
.1
.1

Additions to State, local, and private assets:

State and local assets
Private assets
Subtotal, additions to State, local, and
private assets
Other development outlays:

Education, training, and health
Research and development
Engineering and natural resources surveys l
Subtotal, other development outlays
Total, investment-type outlays
CURRENT OUTLAYS
Current outlays for aids and special services:

Agriculture
Business
Labor
Homeowners and tenants
Veterans
International aids
Welfare aids
.
Other aids and special services
Subtotal, current expenses for aids and
special services
See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR 1973
Table D-2. CIVIL INVESTMENTS AND CURRENT OPERATING
OUTLAYS-Continued
Percent of total outlays
1969

1970

actual

1971

actual

1972

1973

estimate

CURRENT OUTLAYS—Continued
Retirement and social insurance benefits:
Insurance benefits
Unemployment benefits
Other retirement and social insurance benefits..

18.5
1.1
1.3

19.1
1.4
1.3

20.8
2.5
1.2

20.8
2.7
1.1

22.7
2.1
1.1

Subtotal, retirement and social insurance
benefits

20.9

21.8

24.4

24.5

25.9

Other services and current operating expenses:
Repair, maintenance and operation of physical
assets (excluding special services)
Regulation and control
Other operation and administration
Interest

.4
.5
—1.6
7.0

.5
.5
1.8
7.5

.5
.8
2.2
7.2

.5
.8
3.5
6.5

.5
.9
4. 7
6.5

9.5

10.3

10.6

11.2

12.6

Total, current outlays

43.1

46.3

51.3

53.3

56^0

Total, investment-type outlays and current
outlays

58.5

61.5

65.8

69.3

71.2

Subtotal, other services and current operating expenses

Includes offsets for interbudgetary transactions.
Note.—Subtotals and totals may not add due to rounding.
OUTLAYS OF AN INVESTMENT NATURE

Outlays of an investment nature are divided into three categories:
(1) Additions to Federal assets; (2) additions to State, local, and private
assets; and (3) developmental outlays. The investment-type portion
of civil outlays is $37.3 billion, approximately 15% of the budget.
Defense investments are $28.1 billion, comprising 11% of the 1973
defense budget.
Additions to Federal assets.—This category comprises additions
to both financial and physical assets of the Federal Government.
Civil Federal assets in 1973 will be $37.3 billion, decreasing by $0.4
billion, or 1% from the 1972 level.
The financial assets are primarily direct loans—for example, loans
to finance private housing construction and encourage homeownership,
to help small businesses, to finance rural electric and telephone systems,
and to promote economic development abroad. Federal financial
assets include both loans and other financial investments that are
classified in the expenditure account, as well as loans in the loan
account. Other financial investments include the capital provided for
certain international organizations.
Civil loans and financial assets are estimated at $1.2 billion and
represent 0.5% of the 1973 budget. Loans are expected to increase by
$0.8 billion and other financial investments by $0.5 billion. Special
Analysis E discusses financial investments in greater detail.
Additions to physical assets include outlays for public works,
(see Special Analysis P, Federal public works activities), such as

SPECIAL ANALYSES

dam construction, flood control projects, Federal power systems,
changes in major commodity inventories and outlays for major
equipment (including military equipment) and for the acquisition
and improvement of real property and other physical assets.
Additions to civil physical assets are $4.8 billion in 1973, an increase
of $0.3 billion over 1972. The major change is in outlays for sites
and direct construction, which are expected to increase $0.2 billion.
Additions to State, local, and private assets.—Federal outlays
in this category add to State, local, and private assets. Grants that
add to the physical assets of State and local governments are primarily for the construction of highways (mainly through the highway
trust fund), hospitals, airports, waste-treatment works, watershed
protection projects, schools in federally affected areas, and public
facilities under economic development programs for depressed regions.
Outlays that increase the value of privately owned assets are largely
for the conservation and improvement of private farmland and water,
for grants for construction of private nonprofit hospitals and other
health facilities, and for construction subsidies to the merchant fleet.
Civil additions to State, local, and private assets in 1973 will be
$9.0 billion, an increase of $0.6 billion, primarily in Federal contribution to highways, hospitals, and other facilities. The increase, although substantial, will be at a slower rate, falling from an annual rate
of 13% in 1972 to 8% in 1973. However, the 1973 increase could
be much greater if State and local governments use the discretion permitted under proposed revenue-sharing program to add to their
physical assets.
Developmental outlays.—Federal outlays of this type are principally for research and development, education and health, and other
programs that improve the Nation's knowledge, technical skills, and
physical vigor. The Federal outlays shown in this category do not
fully reflect the Government's contribution to the productivity of the
economy. Certain
other programs that further this end are classified
in accordance wxith their principal purpose; thus, veterans educational
benefits are listed as veterans aids rather than as developmental outlays. Similarly, the training of military personnel or other Government personnel is treated as an operating expense and not as part of
the Government's education and training programs.
Civil developmental outlays are $22.3 billion, an increase of $0.7
billion from 1972, and is growing by 3%, a decrease from the 15%
rate in 1972.
Civil outlays for education, training, and health are $15.1 billion
in 1973. This amount is 2% over 1972 outlays, an increase of $0.3
billion.
Current civil outlays for research and development are $7.0 billion,
in 1973 and reflect an increase of $0.3 billion from the 1972 level
The rate of increase in 1973 is 5% above 1972 growth rate of 3 % .
OUTLAYS OF A CURRENT NATURE

Outlays of a current nature are divided into the following categories:
(1) Current expenses for aids and special services; (2) retirement and
social insurance benefits; and (3) other services and current operating
expenses.

480-700 O—72
4

THE BUDGET FOR FISCAL YEAR

1973

The current outlays for civil functions are $138 billion, an increase
of $12 billion from 1972. The rate of increase, however, will decline
from 16% in 1972 to 9% in 1973.
Current expenses for aids and special services.—Outlays classified under this heading provide aids or special services to certain
groups, mainly in the year in which the outlays are made. In addition to such items as outlays for the farm programs of the Commodity Credit Corporation, maritime operating subsidies, veterans
pensions, and grants to foreign nations for economic and military
assistance, this category includes: (1) Administrative and other
operating expense, attributable to investment-type programs that
benefit specific groups; and (2) the costs of maintaining the physical
assets related to those programs.
Only part of the Federal Government's aid to special groups is
reflected in this classification, which is limited by definition to current expenses. For example, subsidies for the construction of private
merchant ships are classified as additions to private assets. Similarly,
outlays for which the Federal Government increases its holdings of
assets or collateral (as the acquisition of farm commodities bj the
Commodity Credit Corporation) are treated as additions to Federal
assets. Many indirect Government aids are excluded from this classification either because they are not reflected in outlays or cannot be
readily measured. Examples of such indirect benefits are preferential
tax treatments.
Although outlays in this category essentially provide a direct aid
or special service yielding immediate benefits, some of the items
included contribute indirectly to the Nation's future development.
Among these are grants for several community development purposes.
Civil outlays will grow at 4%, increasing by $1.6 billion to a 1973
level of $43.0 billion. The rate of growth, however, of this category
has slowed down. There is a 15% increase ($0.7 billion) for agriculture,
and a 64% increase ($0.5 billion) for homeowners and tenants. Welfare
aid is expected to be slightly up from 1972.
Retirement
and social insurance benefits.—This category
applies only to trust funds. It covers benefit programs that: (1) Are
financed from special taxes or contributions; and (2) provide insurance
against the loss of income due to unemployment, retirement, disability,
or death. It does not include outlays for Government employees'
health and life insurance expenditures, which are in the form of premium payments to approved companies.
A large part of the growth in retirement and social insurance
benefits is the result of a growing number of recipients as well as
cost-of-living increases. Outlays for these benefits are expected to
rise 10% in 1972, to $63.8 billion. These benefits will be 26% of the
budget in 1973.
Other services and current operating outlays.—The outlays
reported under this heading support a wide range of activities. They
consist mainly of: Pay and subsistence of military personnel; repair,

SPECIAL ANALYSES

maintenance, and operation of physical assets of the national military
establishment and general purpose public buildings; conduct of
foreign affairs; tax collection; payment of interest on the national
debt; and operation and administration of other direct Federal
programs not elsewhere classified.
These outlays are expected to increase by $4.5 billion and will
reach $31.1 billion in 1973. Increases of $0.3 billion for regulation and
control, $3.4 billion for other operation and administration, and $0.6
billion in interest payments are expected.
UNCLASSIFIED

Certain transactions cannot be properly classified into any of the
categories described above. The major examples of such transactions
include revenue sharing and the special allowances for civilian agency
pay increases, and for unforeseeable contingencies. Particularly
difficult to classify are intragovernmental transactions.
Interfund and intragovernmental receipts arise as a result of
transactions between Government agencies or funds. These transactions occur entirely within Government accounts and are deducted
from outlays to avoid double counting. In order to provide a measure
of outlays by character, most interfund and intragovernmental
receipts are allocated to a particular category when ever possible. Thus,
for example, interest received by the social security and other trust
funds is deducted from the Interest category in order to derive a
measure of interest outlays affecting the public.
Proprietary receipts from the public, arising from market-oriented
or business-type activities of the Government, are unclassified and
offset against total outlays to highlight the net impact of the budget.
In addition, Government agency contributions for employee retirement, which help to finance retirement benefits, are deducted as a
lump-sum unclassified amount.
RELATIONSHIP TO CAPITAL BUDGET

The U.S. Government does not produce a capital budget in the
sense of a long-range program for the acquisition of assets, with
separate financing of capital outlays. Some foreign governments and
some State and local governments fund a portion of their capital
expenditures by separate borrowing. They exclude most or all such
expenditures from their computation of budget totals, except for
annual charges to amortize these capital outlays over a number of
years.
While not a precise measure of the difference between capital and
current items, this analysis does provide useful general magnitudes.
However, it does not make any allowance for depreciation and obsolescence on existing physical assets, anticipated losses on loan programs,
or profit or loss on sales of assets at figures different from their book
value. Agencies record such allowances for transactions only where
the data will serve program and management needs, as in the case of
the public enterprise funds. As a result, it is not possible to determine
directly from this analysis the net addition to the value of federally
owned assets.

THE BUDGET FOR FISCAL YEAR

1973

Recoverability of outlays.—In general, Government outlays for
assets are not expected to be recovered by specific revenues. However,
most loans, investment in commodity inventories, the construction of
powerplants, and outlays for range and forest improvements on public
domain and national forest lands are offset in whole or in part by
receipts to the Treasury through repayments and sales, specific
charges, or recoveries. Where activities are carried on through revolving funds, such as in the case of most loan programs, receipts are
credited directly against disbursements and only the difference is
included in the total of outlays in the budget and in this analysis. All
other receipts from the public arising from market-oriented or businesstype activities of the Government are offset against total outlays.
Whether recovered by specific revenues or not, investment and
developmental outlays for both physical and human capital add to
the wealth and income of the Nation, and by helping to expand the
tax base, augment the Government's potential future revenues.
However, this analysis does not attempt to measure the degree of
recoverability of developmental outlays, the potential gain in public
revenues that will be forthcoming from them, nor the duration of
future benefits and their discounted present value.
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays

ADDITIONS TO FEDERAL ASSETS
Loans:

Loan account—civil:
To domestic and private borrowers:
Department of Agriculture:
Commodity Credit Corporation: Price support and related programs
Rural Electrification Administration
Farmers Home Administration:
Rural housing insurance
Emergency credit revolving fund
Agricultural credit insurance
Other i
Other*
Department of Commerce:
Economic development administration: Industrial development loans and guarantees and other
Other
Department of Health, Education, and Welfare: Office of
Education and other
Department of Housing and Urban Development:
Housing production and mortgage credit: Federal Housing
Administration:
Federal Housing Administration fund
Special assistance functions
Management and liquidating functions
Other
Other
See footnotes at end of table.

120
452

137
401

58
467

—183
18
—67
12
*

-53
-77
-37
-6
1

-115
-46
-446
*

38
-10

34
2

33
4

153
360
—117
73
41

197
193
-318
35
41

242
79
-663
1
41

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Dcicription

1971

1972

1973

Investment-type outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Loans—Continued

Loans account—civil— Continued
To domestic and private borrowers—Continued
Veterans Administration:
Loan guaranty revolving fund
Veterans direct loans
Other
.
Federal Home Loan Bank Board: Federal Savings and Loan
Insurance Corporation
Small Business Administration:
Business loans and investment
Disaster loans
Other agencies
Total to domestic and private borrowers
To State and local governments:
Department of Housing and Urban Development
Department of Transportation:
Federal Highway Administration: Right-of-way revolving fund (trust fund)
Urban Mass Transportation Administration
District of Columbia
Other agencies
Total to State and local governments
To foreign borrowers

___

Total loan account—civil

Loan account—national defense: To domestic and private
borrowers: Other agencies
Total loan accounts
Expenditure account—civil:
To domestic and private borrowers:
Department of Agriculture: Commodity Credit Corporation:
Price support and related programs
Department of Health, Education, and Welfare
National Institutes of Health: Health manpower and otherOffice of Education: Higher education
_
Other agencies
Total to domestic and private borrowers
To State and local governments: Other agencies.
To foreign borrowers:
Funds appropriated to the President: International development assistance
___
__
Department of Agriculture: Public Law 480: Public Law 480
credit sales
_
See footnotes at end of table.

-92
-71
39

-72
-217
24

-52
-258
14

-79

-11

-12

61
162
31

118
125
55

113
-12
-40

993

634

-532

33
58*
27

51
167*
42

55
*
166
33

175

332

314

-49

1,119

1,014

-202

-1

-4

1,118

1.012

-206

—919

661

—200

42
197
22

50
248
28

50
243
28

-659

988

121

-5

830

595

417

493

569

661

THE BUDGET FOR FISCAL YEAR 19 73

Table D-3.

INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays—Continued
ADDITIONS TO FEDERAL ASSETS—Continued
Loans—Continued
Expenditure account—civi'—Continued
To foreign borrowers—Continued
Other agencies

—3

—2

1,320

1,161

1,075

Total loan repayments deposited in miscellaneous receipt
accounts

-222

-202

-208

441

1,949

984

-1

122
303
87
-5

170
197
18
7

280

508

392

284

-28

-57

-98

Total expenditure account—national defense

479

333

186

Total expenditure accounts

920

2,283

1,170

2,039

3,295

964

201
—2

325
—2

460
—2

200

323

458

114
21
6

147
49
10

153
48
6

875
54
23

1,032
59
28

1,156
63
27

Total to foreign borrowers

Total expenditure account—civil
Expenditure account—national defense:
To domestic and private borrowers: other agencies
To foreign borrowers:
Funds appropriated to the President: International security
assistance:
Foreign military credit sales
Military credit sales to Israel
Liquidation of foreign military sales fund
Other agencies
Total to foreign borrowers
Total loan repayments deposited in miscellaneous receipt accounts

Total loans
Other financial investments—civil:
Investments in quasi-public institutions, trust funds, and international institutions:
Funds appropriated to the President: International financial
institutions
Department of Labor
Total investments in quasi-public institutions, trust funds,
and international institutions
Public works—sites and direct construction:
Civil:
Department of Agriculture:
Forest Service:
Forest roads and trails
Other i
Other
_.
Department of Defense—Civil:
Corps of Engineers:
Construction, general
Flood control, Mississippi River and tributaries
Construction local funds (trust funds)
See footnotes at end of table.

-2
6

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

Investment-type

1971
actual

1972
estimate

1973
estimate

outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Public works—sites and direct construction—Continued

Civil—Continued
Other 1
Department of Health, Education, and Welfare
Department of the Interior:
Bureau of Indian Affairs: Construction of schools and roads_
National Park Service: Construction and other
Bureau of Reclamation:
Construction and rehabilitation
Colorado River Basin project
Other 1
.-----:
.Bonneville Power Administration: Construction
Other
,_
Department of Transportation:
Coast Guard: Acquisition, construction, and improvements.
Federal Aviation Administration: Airway system investment and development (airport and airway trust fund) _ _
Other
General Services Administration: Public buildings
National Aeronautics and Space Administration
Postal Service.
Veterans Administration: Hospitals and other
Tennessee Valley Authority
Other agencies
Total public works, civil

8
35

19
80

21
82

50
29

86
81

92
58

192
11
102
21

230
37
26
90
32

278
64
36
85
53

160
7
123
44
87
80
481
35

246
17
199
43
276
107
654
78

241
29
308
60
258
96
529
118

2,617

3,668

3,912

1,031
108
3
243

1,344
177
3
237

1,147
195
2
237

Total public works, national defense

1,384

1,761

1,581

Total public works—sites and direct construction

4,001

5,428

5,493

-652
66

23
43

146
-2

-587

144

-187
-25
33
30
-18 .

-31
25

National defense:
Department of Defense—Military:
Military construction
Family housing
Other
Atomic Energy Commission

Major commodity inventories:

Civil:
Department of Agriculture: Commodity Credit Corporation:
Agricultural commodities
Department of the Interior: Helium fund
Total major commodity inventories, civil
National defense:
Funds appropriated to the President: Expansion of defense
production
Other agencies
Federal interfund transactions (—)
Total major commodity inventories, national defense

-172

-6

Total major commodity inventories

-759

138

See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR 19 73

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Major equipment:
Civil:
Department of Transportation:
Coast Guard
Other i
Postal Service
Other agencies 1

30
*
122
24

64
1
160
33

60
6
186
27

Total major equipment, civil

176

257

279

National defense:
Department of Defense—Military: Procurement
Atomic Energy Commission

18,858
179

17,944
159

16,082
149

Total major equipment, national defense

19,037

18,103

16,231

Total major equipment

19,213

18,360

16,509

—78
66

237

3 05

271

130
24

150
24

115
25

2
—13
—11

2
—54
—4

2
—43
—4

Total other physical assets, civil

358

502

445

National defense:
Department of Defense—Military
Atomic Energy Commission

—2
386

9
460

—1
470

Total other physical assets, national defense

384

469

470

Total other physical assets—acquisition and improvement.

742

970

915

25,436

28,448

24,477

202
*

237
2

230

Other physical assets—acquisition and improvement:
Civil:
Department of Agriculture:
Rural Electrification Administration: Loans security acquisition.
Reforestation and range improvements and other
Department of Housing and Urban Development: Housing
production and mortgage credit and other
Department of the Interior:
Land and water conservation
Other 1
General Services Administration:
Real property activities
Surplus real property credit sales
Other agencies l

Total, additions to Federal assets
ADDITIONS TO STATE, LOCAL. AND PRIVATE
ASSETS
State and local assets:
Civil:
Funds appropriated to the President:
Appalachian regional development
Public works acceleration
See footnotes at end of table.

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays—Continued

ADDITIONS TO STATE, LOCAL, AND PRIVATE
ASSETS—Continued
State and local assets—Continued
Civil—Continued
Department of Agriculture:
Watershed and flood prevention operations
Resource conservation and development
Rural water and waste disposal grants
Rural housing for domestic farm labor and other
Department of Commerce: Economic development facilities
and other
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration: Health
services planning and development and other
National I nstitutes of Health: Health manpower
Office of Education:
Higher education
Other
Social and Rehabilitation Service
Department of Housing and Urban Development:
Community planning and management
Community development:
Grants for neighborhood facilities
Open space land programs
Grants for basic water and sewer facilities
Department of the Interior:
Land and water conservation
Bureau of Sport Fisheries and Wildlife and other
Department of Justice: Law enforcement assistance
Department of Transportation:
Federal Aviation Administration: Grants-in-aid for airports
(airport and airway trust fund in 1971 and 1972)
Federal Highway Administration:
Federal-aid highways (trust fund)
Other i . . .
""--r
National Highway Traffic Safety Administration
Urban Mass Transportation Administration
Environmental Protection Agency
Intergovernmental agencies: Federal contribution, Washington
Metropolitan Area Transit Authority
Other agencies
Total State and local assets, civil
National defense: Department of Defense—Military
Total State and local assets
Private assets:
Civil:
Department of Agriculture:
Agriculture Stabilization and Conservation Service
Soil Conservation Service
Other
Department of Commerce: Ship construction
See footnotes at end of table.

74
12
20
5
153

87
16
53
4
162

96
20
49
3
193

120
101

105
99

82
79

193
29
1

135
26
10

75
26
13

23
39
121

35
69
130

35
80
150

62
49
10

110
91
40

130
88
64

131

200

4,540

4,571

4,771

3
153
478

1
260
908

1
351
1,100

35
7

89
6

164
6

6,517

7,431

8,071

6,531

7,446

8,089

256
176
6
139

253
192
10
161

261
195
-7
198

THE BUDGET FOR FISCAL YEAR 19 73

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays

ADDITIONS TO STATE, LOCAL AND PRIVATE
ASSETS—Continued
Private assets—Continued

Civil—Continued
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration:
Health services planning and development and mental
health
National Institutes of Health: Health manpower
Office of Education: Higher education and other
Other 1
Other agencies *
Total, private assets, civil
National defense: General Services Administration
Total private assets
Total additions to State, local, and private assets

171
55
95
6
41

150
56
75
36
36

119
60
50
47
38

945
*

968
*

962
*

946

969

962

7,477

8,414

9,051

17
861
155

31
447
178

43
223
187

171
113
460
52
123
29

234
120
559
57
149
26

336
174
586
113
160
30

65
171
144

63
269
146

65
386
152

1,802
508

1,876
496
81
42
75
478
849
73
182
51
-4

1,872
453
381
19
80
509
843
87
198
65
16

OTHER DEVELOPMENTAL EXPENDITURES
Education, training, and health:

Civil:
Funds appropriated to the President:
Appalachian regional development programs
Economic Opportunity Program
Department of Agriculture: Extension service and other
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration:
Mental health
Heal th services planning and development
Health services delivery
Preventive health services
Indian health services
Other 1
National Institutes of Health:
National Institute of General Medical Sciences
Health manpower
Other
Office of Education:
Elementary and secondary education
School assistance in federally affected areas
Emergency school assistance
Civil rights education
Education for the handicapped
Vocational and adult education
Higher education
Library resources
Educational renewal
Salaries and expenses
Other
See footnotes at end of table.

70
60
396
717
83
150
50
16

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays
OTHER DEVELOPMENTAL EXPENDITURES—Continued
Education, training, and health—Continued
Civil—Continued
Depaitment of Health, Education, and Welfare—Continued
Social and Rehabilitation Service:
Grants to States for public assistance
Work incentives
Social and rehabilitation services
Other
Other i
Department of the Interior: Bureau of Indian Affairs: Education and welfare services
Department of Justice: Law enforcement assistance and other.
Department of Labor:
Manpower Administration:
Salaries and expenses
Manpower training services
Emergency employment assistance
Veterans Administration: Medical care and other
Action
National Foundation on the Arts and the Humanities 1
National Science Foundation
Other agencies
Total education, training, and health, civil
National defense: Atomic Energy Commission and other
agencies
Total education, training and health
Research and development:
Civil:
Funds appropriated to the President:
Economic opportunity program
Other
Department of AgricultureAgricultural Research Service 1
Cooperative State Research Service *
Forest Service 1
Other 1
Department of Commerce:
National Oceanic and Atmospheric Administration 2
National Bureau of Standards
Other
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration:
Mental health
Health services planning and development
Other
National Institutes of Health
Office of Education: Educational renewal and other
National Institute of Education
Social and Rehabilitation Services: Research and training
and other
Other!
See footnotes at end of table.

3,407
129
557
21
75

4,455
195
609
25
91

3,480
270
704
20
102

166
36

196
69

207
82

25
1,114

29
149
138

56
1,416
660
123
90
51
107
145

56
1,486
1,100
153
96
79
110
148

12,164

14,765

15,072

12,179

14,780

15,086

54
14

45
17

47
17

178
68
49
22

194
77
57
25

201
82
54
24

65
32
29

81
36
43

107
50
47

123
38
50
912
113

118
41
34
1,043
125
2

130
47
38
1,223
108
50

45
31

73
44

62
85

107

THE BUDGET FOR FISCAL YEAR 19 73

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Investment-type outlays

OTHER DEVELOPMENTAL EXPENDITURES—Continued
Research and development—Continued
Civil—Continued
Department of the Interior:
Geological survey
Bureau of Mines: Conservation and development of mineral
resources and other
Saline water conversion and other l
Department of Transportation:
Federal Aviation Administration:
Civil supersonic aircraft development
Civil supersonic aircraft development termination
Engineering and development (airport and airway trust
fund)
Other
Other
Environmental Protection Agency
National Aeronautics and Space Administration l
Postal Service
Veterans Administration
National Science Foundation
__
__
Other agencies
Total research and development, civil
National defense:
Department of Defense—Military:
Military personnel
Research, development, test, and evaluation
Other
Atomic Energy Commission
Total research and development, national defense
Total research and development

50
82

71
91

81
93

193
78

62
71

8
6

26
43
104
101
3,348
59
63
334
119

56
27
157
157
3,150
76
68
400
165

56
25
198
174
3,142
92
76
451
168

6,467

6,653

7,007

331
7,303
5
1,303

348
7,780
5
1,308

345
7,923
6
1,375

8,942

9,441

9,649

15,409

16,095

16,656

Engineering and natural resources surveys—civil:

Department of the Interior:
Geological survey
Other i
Other agenciesl
Intragovernmental transactions (—)
Total engineering and natural resources surveys

59
36
79
—17

61
43
93
—17

65
57
99
—16

157

179

204

Total other developmental expenditures

27,745

31,054

31,947

Total investment-type outlays

60,657

67,916

65,475

See footnotes at end of table.

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES
Agriculture—civil:
Department of Agriculture:
Agricultural Stabilization and Conservation Service:
Expenses and other
Sugar Act program
Commodity Credit Corporation:
Price support and related programs
National Wool Act
Other
Farmers Home Administration:
Rural housing insurance
Agricultural credit insurance
Salaries and expenses and other *
Consumer and Marketing Service
Other i
Other agencies
Total agriculture
Business—civil:
Department of Commerce:
Patent Office._
...
Maritime Administration: Operating-differential subsidies and
other
Other 1
Department of Defense—civil:
Corps of Engineers—civil
T h e P a n a m a Canal
Department of Transportation:
Coast Guard: Navigation and other 1_____
Federal Aviation Administration: Operations and o t h e r l
Federal Railroad Administration
Other
_
......
Civil Aeronautics Board: Payments to air carriers
Small Business Administration: Business loans and investments
and other
Other agencies!
Federal interfund transactions ( - )
Total business
Labor—civil:
Department of the Interior: Bureau of Mines: Health and safety.
Department of Labor:
Manpower Administration: Unemployment trust fund and
other
Employment Standards Administrationl
Occupational Safety and Health Administration
Other
:
Equal Employment Opportunity Commission
Totallabor
See footnotes at end of table.

158
86

175
85

167
92

4,274
75
3

3,617
99
*

4,298
81

—3
44
105
69
108
15

82
95
98
69
111
15

82
54
121
68
118
16

4,934

4,447

5,097

278
110

278
132

243
180

186
-13

252
-7

266
-14

400
883
26
6
55

432
992
123
7
60

445
960
68
7
54

117
44
-25

302
21
-30

238
18
-29

2,123

2,621

2,501

820
53

970
86

39
16

51
22

1,013
46
64
63
30

955

1,174

1,270

THE BUDGET FOR FISCAL YEAR

1973

Tatlc D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays—Continued

CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Homeowners and tenants—civil:

Funds appropriated to the President
Department of Housing and Urban Development:
Housing Production and Mortgage Credit:
Federal Housing Administration
Special assistance functions
Other
Housing management: Housing payments and other
Other
Federal Home Loan Bank Board
Total homeowners and tenants

—394
51
-27
733
18
—104

-356
144
-7
1,264
10
-213

-410
166
26
1,779
23
-206

277

843

1,379

5,800
1,620
1,768
257
627
85
-51
47
—128

6,187
2,194
2,099
283
757
90
-48
88
-259

6,583
2,382
2,342
306
503
68
-11
90
-261

Veterans—civil:

Veterans Administration:
Compensation and pensions
Readjustment benefits
Medical care
General operating expenses
National service life insurance.
U.S. Government life insurance
Other 1
Other agencies *
Intragovernmental transactions (—)
Total veterans

10,025

11,391

12,002

460
358
26

584
672
23

796
638
46

425
1
89
-135
27

545

178

82
-4
47

1,251

1,949

1,768

1,487
56

1,849
47

2,107
48

Total international aids, national defense

1,543

1,896

2,155

Total international aids

2, 795

3,845

3,923

International aids:

Civil:
Funds appropriated to the President:
I nternational security assistance
International development assistance 1
Contingencies
Department of Agriculture:
Public law 480 donations of agricultural commodities
Foreign Economic Development Service
Action
Export-Import Bank of the United States
Other agenciesl
Total international aids, civil
National defense:
Funds appropriated to the President: International security
assistancel
Department of Defense—Military: Military construction

See footnotes at end of table.

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971

1972

1973

actual

estimate

Current Outlays—Continued

CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Welfare aids—civil:

Funds appropriated to the President: Disaster relief
Department of Agriculture:
Removal of surplus agricultural commodities
Child nutrition programs
Special milk program
Food stamp program
Department of Health, Education, and Welfare:
Social and Rehabilitation Service:
Grants to States for public assistance
Social and rehabilitation services
Assistance to refugees in the United States
Other services
Social Security Administration: Special benefits for disabled
coalminers
Welfare reform
Department of the Interior: Bureau of Indian Affairs: Education and welfare services
Total welfare aids
Other aids and special services—civil:
Funds appropriated to the President:
Appalachian regional development programs
Economic opportunity program 1
Department of Commerce:
Social and Economic Statistics Administration: 19th decennial
census and other !
Other 1
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration:
Health services delivery. „.
__
Other
National Institutes of Health
Social Security Administration:
Payments to social security trust funds
Federal old-age and survivors insurance trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust fund
Other
Office of Child Development
Departmental management and other
Department of Housing and Urban Development:
Community planning and management: Comprehensive
planning grants and other
Community development:
Model Cities
Urban renewal capital grants
Other
Departmental management
Other
See footnotes at end of table.

125

150

100

393
520
91
1,568

645
664
95
2,066

722
595
94
2,305

6,231
30
85
37

8,594
34
104
43

8,027
55
132
56

318

568

555
350

9,460

13,039

13,076

8
569

10
564

8
565

68
53

32
60

19
65

95
73
19

88
81
23

91
107
28

2,573
545
188
149
245
*
4
40

2,417
554
208
166
293
*
216
59

2,602
582
208
175
327

328
1,031
2
59
2

450
1,000
21
44
11

625
1,000
20
47
14

379
65

THE BUDGET FOR FISCAL YEAR 19 73

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Other aids and special services—civil—Continued

Department of the Interior:
Bureau of Indian Affairs:
Resources management
Tribal funds (trust funds)
Other 1
Other*
Department of Transportation:
Federal Highway Administration:
Federal-aid highways (trust fund)
Other
.......
National Highway Traffic Safety Administration:
State and community highway safety
Otheri
Other
Postal service
Other agenciesl
Intragovernmental transactions (—)

70
89
15
12

74
96
17
14

81
96
17
14

84
15

89
36

93
46

66
32
25
1,915
64
—2,659

73
31
35
1,432
76
—2,349

50
42
39
874
74
—2,515

5,824

5,975

5,933

36,394

43,334

45,182

31,101
3,381
5,442
2,035

34,541
3,961
6,265
2,240
15

36,171
4,236
6,952
2,456
3,992

95
1,900
—1

110
2,094

93
2,079

43,953

49,226

55,979

5,225

6,320

5,157

Civil Service Commission: Civil service retirement and disability fund
Other trust funds

3,234
25

3,632
28

4,139
31

Trust interfund and intragovernmental transactions (—)__

—781

—1,136

—1,546

2,478

2,524

2,623

51,657

58,070

63,760

Total other aids and special services
Total current expenses for aids and special services

RETIREMENT AND SOCIAL INSURANCE BENEFITS
Insurance benefits—civil:

Department of Health, Education, and Welfare: Social Security
Administration:
Federal old-age and survivors insurance trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust fund
Proposed legislation
Department of Labor: Manpower Administration: Unemployment trust fund
Railroad Retirement Board (trust fund)
Trust interfund transactions (—)
Total insurance benefits
Unemployment benefits—civil: Department of Labor: Unemployment trust fund
Other retirement and social insurance benefits—civil:

Total other retirement and social insurance benefits
Total retirement and social insurance benefits
See footnotes at end of table-

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars) — C o n t i n u e d
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES
Repair, maintenance, and operation of physical assets (excluding
special services):
Civil:
Department of Agriculture: Forest Service *
Department of Defense—Civil:
Corps of Engineers:
Operation and maintenance, general
Other
Miscellaneous accounts
Department of the Interior:
Bureau of Land Management *
National Park Service *
Bureau of Reclamation *
Other
- — -.-- :
General Services Administration: Public buildings
Tennessee Valley Authority
Other agencies l
Federal interfund transactions (—)

95
39
*

113
40
*

146
40
1

80
109
71
54
411
-164
61
—*

85
122
93
61
435
-132
69

77
149
90
62
460
-87
92

Total repair, maintenance, and operation of physical assets,
civil

1,056

1,186

1,273

20,894
421
148
—2

20,450
472
169
*

20,397
535
169
*

Total repair, maintenance, and operation of physical assets,
national defense

21,461

21,091

21,102

Total repair, maintenance, and operation of physical assets-

22,517

22,277

22, 374

National defense:
Department of Defense—Military:
Operation and maintenance
Family h o u s i n g s
Atomic Energy Commission
General Services Administration

Regulation and control—civil:
The Judiciary
Department of Agriculture:
Agricultural Research Service
Animal and Plant Health Service 1
Consumer and Marketing Service l
Other
Department of Health, Education, and Welfare: Food and Drug
Administration and other
Department of Justice:
Legal activities and general administration
Federal Bureau of Investigation
Immigration and Naturalization Service
Federal Prison System i
.-.-—.
Law Enforcement Assistance Administration
Bureau of Narcotics and Dangerous Drugs
Department of Transportation:
Coast Guard
Federal Aviation Administration
Federal Railroad Administration

See footnotes at end of table.

http://fraser.stlouisfed.org/
480-700 O—72
Federal Reserve Bank of St. Louis

299

300

243

144

173

192

100
136
6

54
62
152
7

101
163
7

128

129
287
118

155
319
125

169
322
128
106

181
35

303
58

433
63

58
91
5

70
84
6

86
120
7

THE BUDGET FOR FISCAL YEAR 1973

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Regulation and control—civil—Continued

Department of the Treasury:
Internal Revenue Service
Secret Service
Other 1
Environmental Protection Agency l
Other
Federal Deposit Insurance Corporation (trust fund)
Other agencies 1
Total regulation and control

71
43
24
85
-1
-184
225

88
59
40
171

95
62
46
190

-423
250

-433
262

1,703

1,925

2,248

225
150
39
190
9

249
176
40
196
42

256
191
48
200
48

612

702

742

48
134
70
880
37
9
1,260

62
149
76
1,012
52
4
1,447

62
161
74
1,045
51
4
1,493

281
41

346
57

346
64

158
14

174
14

193
18

28
49
58
103

29
54
64
330
32
137

30
54
71
43
60
128

49
-27
-161
14
*

70
-36
-158
43
*

81
-58
-171
50
*

739

1,157

910

Other operation and administration:

Civil:
International activities:
Department of State:
Administration of foreign affairs *
International organizations and conferences l
Other i
United States Information Agency l
Other agencies
Total international activities
Federal financial activities:
Legislative branch: General Accounting Office and other.__
Department of the Treasury:
Bureau of Accounts *
Bureau of Customs
Bureau of the Public Debt
Internal Revenue Service
Other____
Other agencies
Total Federal financial activities
Other direct Federal programs:
Legislative branch
Executive Office of the President
Department of Commerce:
National Oceanic and Atmospheric Administration l
Other
Department of Defense—Civil:
Corps of Engineers
The Panama Canal
Department of the Interior
Department of the Treasury: Bureau of Accounts and other l .
Environmental Protection Agency
General Services Administration
Civil Service Commission:
Salaries and expenses and other l
Employees health benefits fund
Employees life insurance fund
Other agencies *
Federal interfund and intragovernmental transactions (—) Total other direct Federal programs
See footnotes at end of table.

n2o3

SPECIAL ANALYSES

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Other operation and administration—Continued

Civil—Continued
Retirement, unemployment, and accident compensation for
Federal employees:
Department of Labor:
Federal unemployment benefits and allowances
Federal workmen's compensation benefits
Department of Transportation: Coast Guard: Retired pay_
Civil Service Commission: Special payments and annuities.
Other agencies
Federal interfund transactions (—)
Total retirement, unemployment, and accident compensation for federal employees
Shared revenues and grants-in-aid:
Department of Agriculture: Forest Service
Department of Health, Education, and Welfare: Education
revenue sharing
Department of Housing and Urban Development: Urban
community development revenue sharing
Department of the Interior:
Bureau of Land Management
Territorial affairs
Other
Department of the Treasury:
Bureau of Customs
Internal Revenue Service
General Revenue Sharing
District of Columbia: Federal payment
Other agencies

403
95
65
845
17

643
101
71
1,226
22
—14

395
82
72
1,663
29
—37

1,426

2,047

2,203

87
110
490

85
53
3

91
61
3

98
68
3

58
85
143
28

70
90
2,250
180
34

75
95
5,000
202
39

528

2,837

6,268

4,565

8,189

11,617

22,302
3,386
48
73
60
—219
2
81
11
~~6

22,252
3,928
50
71
67
—624
12
81
8
—6

21,955
4,326
53
70
72
—599
12
80
8
—6

Total other operation and administration, national defense. _

25,738

25,839

25,970

Total other operation and administration

30,303

34,028

37,587

Total, shared revenues and grants-in-aid
Total, other operation and administration, civil
National defense:
Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Family housing
Civil defense
Revolving and management funds
Other i__
Selective Service System
Other agencies!
Intragovernmental transactions (—)

See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR

1973

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(in millions of dollars)—Continued
Description

1971
actual

1972
estimate

1973
estimate

Current Outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Interest:

On the public debt

20,959

21,400

22,700

132
6

158
6

158
5

137

164

163

—1,152
-4,765

—1,068
-5,190

—1,215
-5,697

Total interest

15,179

15,305

15,952

Total other services and current operating expenses

69,702

73,536

78,160

800

2,745
390
290

800

3,425

157,752

175,739

190,527

—2,611
-4,375

250
300
—2,687
-4,908

775
500
—2,893
-8,128

211,425

236,610

246,257

Other interest:
On refunds: Department of the Treasury
On uninvested funds: Department of the Treasury
Total other interest
Intrabudgetary transactions (—) *:
Interest on Government capital in enterprises (—)
Interest received by trust funds (—)

National defense allowances:
Allowances:
Civilian and military pay raises
All-volunteer force
Military retirement systems reform
Total national defense allowances
Total current outlays
UNCLASSIFIED
Payments to other funds
Allowances for:
Pay raises (excluding Department of Defense)
Contingencies
Employer share, employee retirement (—)
Proprietary receipts from the public ( - ) 2
Total budget outlays
1*Less than $500 thousand.
3 Includes both Federal funds

and trust funds.
Excludes loan repayments deposited in miscellaneous receipts and offset in the
penditure account as follows:
1971
Loan repayments offset in the loan account
—249
Repayments offset in the expenditure account
—250

loan and ex1972 1973
—256 —339
—256 —303

SPECIAL ANALYSIS E
FEDERAL CREDIT PROGRAMS
INTRODUCTION

Federal credit aids—direct loans, insurance or guarantees of private
loans, and interest subsidies—play a major role in Government programs to: (a) Improve housing and encourage homeownership; (b)
develop agricultural and other natural resources; (c) develop and redevelop communities and regions; (d) promote commerce, especially
exports, transportation, and small business; (e) aid higher education;
and (f) assist foreign economic development and security. Moreover,
several Government-sponsored credit agencies provide additional
credit assistance, outside the budget, in most of these areas.
Federal and Federally Assisted Credit Outstanding
$ Billions

Loans by
Government
Sponsored
Enterprises

250 -

200 -

150 -

100 -

50 Direct Loans

1962 '63

'64

Fiscal Y e a n

'65

"66

'67

'68

'69

'70

'71

'72

Estimate

THE BUDGET FOR FISCAL YEAR 1973

The combined level of Federal direct loans, guarantees * of private
loans, and loans of federally sponsored enterprises, has risen steadily
during the past decade. This growth reflects both the expansion of existing programs and the initiation of new programs to meet emerging
needs. However, there have been significant shifts in the way that
credit aids have been provided, resulting from increasing reliance upon
private financing facilities, accompanied by restraint of the Government's role as a direct lender. A major benchmark
in this trend was
the conversion to private ownership in 1969 o? three enterprises formerly included in the budget—the Secondary Market Operations
Trust Fund of the Federal National Mortgage Association (FNMA),
the Federal intermediate credit banks, and the banks for cooperatives.
The increased emphasis on private financing (and away from direct
loans with their immediate large budgetary impact) is frequently
being accompanied by agency undertakings to pay a share of the
interest costs, usually under long term subsidy contracts. Examples of
these approaches include: (a) Federally insured loans and interest
subsidies for college students; (b) insured loans combined with supplementary payments to finance housing for low- and moderate-income
families, and (c) payment of a portion of the interest on privately
financed loans for college housing and academic facilities.
SCOPE OF SPECIAL ANALYSIS

This analysis: (a) Summarizes 1971-73 trends in Federal credit
programs; (b) indicates the relationship between the credit programs
and overall budget totals; (c) identifies and estimates loan subsidy
values; (d) provides data on off-budget credit agencies sponsored by
the Government; and (e) aggregates Federal and federally assisted
credit.
In line with the recommendations of the 1967 President's Commission on Budget Concepts, Federal direct loans are classified in either
the loan account, or the expenditure account. Programs not in the
loan account are special cases, and comprise: (a) Foreign loans made
largely on noncommercial terms, and (b) other loans where the terms
of the loan contract make repayment in certain respects contingent
rather than mandatory.
Disbursements, repayments, and net outlays for each budget
account2containing loan transactions are listed in the Appendix to the
Budget. For programs in the loan account, net lending is also separately identified in Part 5 of the budget.
Since most loan disbursements and repayments in foreign currencies
are not included in the budget, the tables in this analysis include only
data on loans that are both disbursed and repayable in dollars.
Current policy requires that loans disbursed in dollars be repaid in
1
Statutory usage of the terms guarantee and insurance follows no consistent pattern that distinguishes between them. The term guarantee is, therefore, used frequently in this text to cover
both
terms.
2
See Appendix, p. 1088.

SPECIAL ANALYSES

dollars; however, loans disbursed in foreign currencies may stipulate
repayment either in dollars or in local currencies.3
This analysis includes coverage of new credit programs and changes
to existing programs enacted during the past year. Such legislation,
summarized in the last section of the analysis, authorizes several
important changes in Federal credit programs.
Proposed legislation.—The analysis also reflects the impact (when
estimated) 4 of proposed legislation: (a) Establishing new direct and
guaranteed loan programs for economic development for American
Indians; (b) providing subsidized insured loans to lower income
students, and establishing a secondary market facility for insured
student loans; (c) authorizing direct and guaranteed loans for construction of facilities and initial operating costs for health maintenance organizations; (d) authorizing direct loans to public housing
agencies to help finance or refinance development, acquisition, or
operation of low-income housing projects; (e) establishing a Federal
financing bank to improve the efficiency of Federal borrowing programs, and authorizing improved Treasury coordination of agency
borrowing and guarantee programs; (f) substituting federally supported borrowing from the public for direct loans to finance capital
programs by the District of Columbia; (g) establishing a District of
Columbia development bank to aid economic development in the
District of Columbia; (h) creating an environmental financing authority to help eligible local communities finance waste treatment projects;
(i) authorizing the Small Business Administration (SBA) to purchase
nonvoting preferred securities from minority enterprise small business
investment companies (MESBIC), and granting interest subsidies on
SBA loans to MESBIC's; (j) authorizing the insurance of interest and
principal of railroad equipment obligations; (k) converting farm
operating loans from a direct to an insured basis; and (1) authorizing
Federal guarantee of taxable revenue bonds for the Washington
Metropolitan Area Transit Authority, and providing for Federal
payment of 25% of interest costs thereon.
NEW COMMITMENTS

New commitments to make direct loans or to guarantee private
loans usually provide some advance indication of trends in the
financial impact of these programs. In a few cases, commitment and
loan disbursement occur simultaneously. But in most others, such as
loans for construction, fairly long leadtimes may elapse between
commitment and disbursement. Not all commitments result in loans,
but most are a key factor in stimulating new economic activity.
3
The level and trends in direct loans of Government agencies disbursed or repayable in foreign
currencies (in millions of dollars) are:
1971
1972
1973
Outstanding, start of year (dollar equivalents)
5,816
5,676
5,644
22
131
12
Disburseme
Repayment: i— dollars
12
10
10
Repayment i—local currencies
140
153
161
Net disburse
ts
__
__
-130
-32
-159
Adjustment:
-10
Outstanding, end of year
5,676
5,644
5,485
4

Estimates are not provided for items (a), (e), (f), and (h).

THE BUDGET FOR FISCAL YEAR 1973

F e d e r a l Credit Programs—New Commitments
SBilli,

70-

50-

40-

30-

20.-.-

10-

1962

'63

Fiscal Y e a n

In this analysis, commitments are defined to include preliminary
administrative reservations of funds as well as final approvals by
Federal agencies of direct loans or guarantees of private loans. They
are shown on a gross basis and include the unguaranteed portions of
loans not fully covered by Federal guarantees.
Direct loans.—New commitments for direct loans will decline from
$10.5 billion in 1971 to $9.3 billion in 1972 and $8.1 billion in 1973.
Unlike the growth of federally guaranteed or federally sponsored
credit, the trends for direct loans are falling. Despite this decline,
however, there will be modest increases for a few programs (see
table E - l ) .
The Export-Import Bank, excluded from budget totals by statute
on August 17, 1971, plans to raise its direct loan commitments by
about $5 billion in 1973 over the 1971 level.
To avoid double counting, the direct loan commitment data do not
reflect the innovative use of direct loan commitments resulting from
the new tandem plan of the Government National Mortgage Association (GNMA). Under this plan, GNMA partly supports the market
for guaranteed housing loans when requirements for market yields
significantly exceed the interest rate ceiling placed on these loans by
the guaranteeing agency. GNMA makes advance commitments to
purchase these loans at a suitable purchase price, with the intention
of reselling them at marketable yields. However, market conditions
have recently improved and few such commitments are now being
exercised; nonetheless, GNMA expects continued need for commitment support despite a low level need for followthrough by direct
loan outlays and resale. Commitment levels under the plan are not
projected at this time, but could reach several billion dollars in both

1972 and 1973.

SPECIAL ANALYSES

Table E l . N E W C O M M I T M E N T S FOR FEDERAL C R E D I T P R O G R A M S
(in millions of dollars)
Agency or program
{expenditure account
programs in italics)

1971 actual
Direct

1972 esti mate

Guarloans

Funds appropriated to the President:
International security assistance
International development assistance
Overseas Private Investment Corporation..
Agriculture:
Rural Electrification Administration
Farmers Home Administration
Commodity Credit Corporation
Commodity loans
Public Law 480—Long-term export credits..
Commerce:
Economic Development Administration
Maritime Administration
Trade adjustment assistance
Health, Education, and Welfare
Expenditure account loans
Housing and Urban Development:
Low-rent public housing
Community development loans
Federal Housing Administration
Government National Mortgage Association i
New communities fund
Other mortgage credit
Interior
Transportation
Veterans Administration:
Housing loans and guarantees
Insurance policy loans
District of Columbia
Emergency Loan Guarantee Board
Export-Import Bank 2
Federal Home Loan Bank Board
Small Business Administration
Other agencies and programs
__
Expenditure account loans
Total, loan account
Total, expenditure account
Grand total

688
718
2

46
56
9

487
463 1,898
421
1,748
558
60
51
278

*
281
1,644

Direc
loan*

350
790
10

Guarloans

200
121
31

662
286 2,426
450
2,580
598
63
1
25
101
339

4
344
50
2,251

1973 estimate
Direct :
loans

493
918
25

Guaranloans

136
105
51

689
11 3,288
450
1,988
705
73
_
25
151
53

6
439
50
2,972

171 1,709
623 1,091
17 22,629

175 1,748
662 2,622
50 25,377

216 2,159
705
800
50 29,247

537

293
28
100
24
57

188
28
100
27
80

75
14
90
239
143
41

50
263
106
4,356
20

2,362 3,507
6
572
863
64
20
24
6,437
4,014
10,451 38,547

285
130
143
319
19
633
84
48

160
200
55
7,409
20
120
4,512
1,318
16

287
123
190
8
375
45
55

4,599
4 JO5

3,845
4,212

9,304 48,983

8,057

300
200
109
7,691
70
30
4,176
1,965
21

53,816

'"Less than $0.5 million.
1
To avoid double counting, excludes GNMA commitments (or guarantees of mortgage backed
securities,
and for direct purchases of FHA and VA mortgages under the tandem plan.
2
Excluded from budget totals by statute on Aug. 17, 1971; direct loan commitments excluded from
this table are $7,033 million in 1972 and $7,400 million in 1973.

THE BUDGET FOR FISCAL YEAR

1973

Guarantees.—New commitments for guarantees of private loans are
expected to rise rapidly from $39 billion in 1971 to $49 billion in 1972
and $54 billion in 1973.
Most of the increase in new commitments is for guaranteed housing
and community development loans by HUD, VA, and the Farmers
Home Administration. In percentage terms, nonhousing related credit
is growing somewhat faster—up 55% for the 2-year period compared to
37% for housing-related credit.
To avoid double counting, GNMA commitments to guarantee
private securities backed by guaranteed housing loans are excluded
from table E - l ; such guarantees outstanding were increased by $3.0
billion in 1971 and are expected to increase by $2.6 billion in 1972 and
$2.7 billion in 1973. The Export-Import Bank plans to raise its 1973
level of commitments for guaranteed loans by about $0.7 billion above
the 1971 level.
DISBURSEMENTS AND REPAYMENTS

Gross disbursements for direct loans have the most immediate impact on the budget. In long-established programs, or in programs
involving short-term loans, the cash outflow required for such disbursements usually is substantially offset by repayments on the outstanding
portfolio of loans.
On the other hand long-term loans, such as those which finance
construction, can have a major net impact on the budget, since repayments in the early years often fall short of new loan outlays.
Gross data on disbursements are adjusted to reflect writeoffs,
forgiveness credits, and other noncash adjustments to loans outstanding, while repayments data are kept on a strictly cash basis.
As a result, the net difference between disbursements and repayments
in any year equals the change in the loans outstanding between the
start and the end of the year—unless accounts are excluded from the
budget.
Net loan disbursements for all credit programs in the loan account
are identical with data for net lending in Part 5 of the budget. Net
loan disbursements for the loan account and the expenditure account are identical to the outlays shown as "loans" in the "additions
to Federal assets" category in Special Analysis D (table D-3).

SPECIAL ANALYSES

Table E-2. DISBURSEMENTS AND REPAYMENTS FOR DIRECT LOANS
(in millions of dollars)
.
Agency or program
{expenditure account
programs in italics)

1971 actual
Disbursements

1972 estimate

Repayments

Disbursements

Funds appropriated to the President:
International security assistance
513
28
425
International development assistance
890
129
660
Overseas Private Investment Corporation. _
6
Agriculture:
Rural Electrification Administration
627
175
576
Farmers Home Administration
2,279 2,498 3,319
Commodity Credit Corporation
400
280
450
Commodity loans
1,716
2,635 2,500
Public Law 480—Long term export credits __
560
66
598
Commerce:
Economic Development Administration
61
10
65
Maritime Administration
10
1
Trade adjustment assistance
10
Health, Education, and Welfare
74
8
112
Expenditure account loans
238
1
301
Housing and Urban Development:
Low-rent public housing
710
710
825
Community development loans
626
573
664
Federal Housing Administration
190
38
271
Government National Mortgage Association
536
293
393
New communities fund
Other mortgage credit
175
56
119
Interior
12
3
26
Transportation
33
*
108
Treasury Department
/
149
54
General Services Administration
13
28
Veterans Administration:
Housing loans and guarantees
234
397
270
Insurance policy loans
143
104
130
District of Columbia
92
34
218
1
127
Export-Import Bank
1,406
1,455
19
Federal Home Loan Bank Board
—14
65
467
Small Business Administration
481
257
30
Other agencies and programs
52
19
42
Expenditure account loans
25
12
Total, loan account

8,131

Total, expenditure account
Grand Total
„
,
j i
n
• i J J L
Repurchases and sales of loans included above

Agriculture:
Farmers Home Administration.
Health, Education, and Welfare _
Housing and Urban Development
Veterans Administration
Export-Import Bank l
General Services Administration. _
Other agencies (SBA)
Total

...

__ . . . .

....

3,943

7,014

8,258

3,021

4,527

1973 estimate

Repayments

Disbursements

98
110

317
510
16

136
142

175

669

3,492

3,585

313

450

201
4,191
392

1,837

1,915

2,112

705

14
8

43
/

13
170
7

13
8
1
111
/

815
582
74

900
708
320

890
630
78

518

313
5
75
25
55

897

63
4
57
152
18

559
107

51
85

30
223
17
14

589
110

8
323
1

20
222
19

8,354

8,560

7,246
2,243

3,490

9,489 11,844

Repur-

Sales

287

Repurchases

2,005

450

244
269

3,001
30
234
427
11

60
4
*
154
74

280
123
218

12,074 10,035 12,785
c n a ses

Repayments

Repurchases

390
.
.
.
.

2,607
11,167
Sales

3,822
90
593
475
50

30 .
291

2,548

450

3,703

390

5,032

•Less than $0.5 million.
1
Excluded from budget totals by statute on Aug. 17, 1971; subsequent net lending for 1972 ($1,329
lillion) and 1973 ($1,187 million) included in table E - 5 .

THE BUDGET FOR FISCAL YEAR 1973

Although repaymeDts on prior loans are customarily offset against
new loan disbursements, the use of loan repayments to make new
loans in most instances is discretionary. Therefore, gross disbursements rather than net are the better measure of loan program levels.
Federal guarantees of private loans, when not accompanied by
interest subsidies, ordinarily have only minor and indirect budget
consequences. Principal disbursements of Federal funds for guaranteed
loans normally occur only when the borrower defaults, or in a few
programs when holders of these loans exercise
their repurchase options.
Gross loan disbursements (adjusted)5 are expected to decline
by only $0.2 billion from 1971 to 1973. Because of the offsets from
repayments and loan sales, net loan disbursements in the same period
will also decline—from $2.0 to $0.7 billion. Offsets from loan sales are
detailed in table E-2. The majority of such sales are a function of
statutory objective and program design.
OUTSTANDING DIRECT AND GUARANTEED LOANS

The outstanding principal amounts of direct and guaranteed loans
provide useful dimensions of the scope of Federal credit assistance and
lend perspective to its year-to-year growth (table E-3). By the end of
1973, direct loans outstanding will total $51.4 billion and guaranteed
loans outstanding will total $189.4 billion—bringing the gross total
to $240.8 billion.
Outstanding direct loans will decrease by $1.7 billion from 1971 to
1973, due mainly to the exclusion of the Export-Import Bank from the
1973 totals.
Outstanding guaranteed loans are estimated to rise by $23 billion
in 1972 and by $26 billion during 1973. The net increase in outstanding loans insured by the Federal Housing Administration ($26 billion)
accounts for 53% of the 1971-73 rise. Other anticipated major increases are for veterans housing guarantees ($6.8 billion), Farmers
Home insured loans ($4.6 billion), and low-rent public housing
guarantees ($3.5 billion).
The amounts shown include both the guaranteed and nonguaranteed
portions of outstanding loans in order to give a complete picture of
the economic impact of these programs. The estimated contingent
liability of the Federal Government by the end of 1973 will be $24
billion less than the $189 billion principal amount of the loans
guaranteed.
5

N o n c a s h adjusting entries reduced gross loan disbursements by nearly $200 million in 1971.

SPECIAL ANALYSES

Table E-3. OUTSTANDING DIRECT AND GUARANTEED LOANS FOR
FEDERAL CREDIT PROGRAMS (in millions of dollars)
.
Agency or program
(expenditure account
loans in italics)

1971 actual
Direct
loans

Guaranteed
loans

1972 estimate
Direct
loans

Guaranteed
loans

Funds appropriated to the President:
International security assistance
617
365
945
302
International development assistance
9,401
178 9,951
266
Overseas Private Investment Corporation.
225
6
315
Agriculture:
Rural Electrification Administration
5, 795
6,196
Farmers Home Administration
2,440 5,361
2,268 7,602
Commodity Credit Corporation
628
766
Commodity loans
1,869
2,530
Public Law 480—Long-term export credits. 2,241
2,810
Commerce:
Economic Development Administration __
394
10
444
II
Maritime Administration
64
886
56
981
Trade adjustment assistance
10
50
Health, Education, and Welfare
536 2,611
605 3,932
Expenditure account loans

Housing and Urban Development:
Low-rent public housing
Community development loans
Federal Housing Administration
Government National Mortgage Association 1
New communities fund
Other mortgage credit
Interior
Transportation
Treasury Department
Veterans' Administration:
Housing loans and guarantees
Insurance policy loans
District of Columbia
Emergency Loan Guarantee Board
Export-Import Bank 2
Federal Home Loan Bank Board
Small Business Administration
Other agencies and programs
Expenditure account loans

1,751

2,052

90 9,463
805 3,042
794 77,214
5,091
3,777
201
40
4,236

108

2,587 37,597
1,012
414
20
5,665
164
1,882
390

100 11,094
887 3,382
991 89,526

1,531
1,038
173

3,833
223
91
4,083

1,126
10,3/8
22
6,664
1,661
824
2,330
3,471
491
48
22
665

Guaranteed
loans

332
322
342
10,004

15
1,100
50
5,892

2,065

4,965
56
240

1973 estimate
Direct
loans

132
540
117

2,298 40,902
1,036
582
20
115
2,150
153
2,125
1,890
439
133

110
965
1,234
4,381
5
3,848
244
146
3,929
1,989
1,049
748
142
2,227
390

271

299

Total, loan account
Total, expenditure account

32,769
20,387

28,074
22,670

GrandTotal

53,156 140,118 50,744 163,460 51,420

13,007
3,498
103,254
282
760
225
44,350
70
115
2,742
2,923
127

320

27,868
23,553
189,410

1
To avoid double counting, excludes G N M A guarantee of mortgage backed s e c u r i t i e s — 1 9 7 1 1973 a m o u n t s are $3,431 million, $6,061 million, $8,740 million.
2 Excluded from budget totals by s t a t u t e on August 17, 1971. See table E - 5 for 1 9 7 2 - 3 .

THE BUDGET FOR FISCAL YEAR 1 9 7 3
INTEREST SUBSIDIES

The primary objective of many Federal credit programs is to provide
access to credit that might not otherwise be available for certain
desirable purposes. More favorable terms than otherwise available to
unassisted borrowers—such as lower interest rates, longer maturities,
and higher loan-to-value ratios—are a usual result of providing this
access to credit, whether by direct or guaranteed lending.
Additional assistance in meeting the costs of credit is often a
further feature of these programs. Such assistance includes concessionary interest rates, waiver of service fees or insurance premiums,
and periodic payments of interest or other debt service subsidies for
guaranteed loans.
This discussion focuses on interest subsidies and selected approaches
to measuring both the immediate and long-run value of these subsidies.
Additional subsidy elements—such as costs of administration and
losses, forgiveness of part or all of loan principal, or the subsidies
resulting from tax-exempt interest—are not fully covered or reflected.
Direct loan subsidies.—Unlike most other Federal outlays, direct
loans are largely or wholly repayable, generally with interest. Therefore,
the long-run net costs of direct loan programs usually are substantially
less than the initial gross outlays. Few direct loan programs are fully
self-supporting, however. Even where statutory interest rate formulas
are designed to reflect Treasury borrowing costs, there is often no
additional fee assessed to reimburse the Government for administrative
costs and provision for losses, or for other cost factors not now
considered.
The net budget impact of interest charged borrowers on direct
loans in any single year includes the subsidy costs arising from both
new loans and outstanding loans made in previous years. By the
same token, all new loan commitments at submarket interest rates
will add to the net budget outlays for all future years during which
the loan remains outstanding. Once newly subsidized loans are committed, the future costs are largely predetermined and the net subsidy
costs become relatively uncontrollable.
Guaranteed loan subsidies.—In recent years, an increasing number
of guaranteed loan programs have provided significant subsidies in
order to help meet the needs of their borrowers. In some cases, guarantee fees cover part or all of administrative expenses and probable
losses; for others, there are no such charges. In some programs, a
Government agency makes a direct loan at interest rates below
the market and resells the loan with its guarantee, either at a discount which provides a marketable yield or with a commitment to
pay additional interest in periodic installments to the private purchaser of the loan.

SPECIAL ANALYSES

Long-term contracts to provide debt service payments are the
most frequently used subsidy device. These commitments may cover
both interest and principal amounts as they do for low-rent public
housing loans, but more often cover some designated share of interest
costs. This approach is being used for a growing variety of loan
programs, including those for low- and moderate-income housing,
student expenses for higher education, academic facilities, and
medical facilities.
Just as for direct loan,s, the net value of subsidies for guaranteed
loans includes those arising from both new and outstanding loans.
New subsidies add to net budget outlays in future years; and some
meaningful measure of their ultimate net cost is needed to lend
perspective to budget decisions.
Subsidy measurement.—One way that the impact of future subsidies could be viewed would be simply to total all future payments.
However, because of interest, a dollar payable at some future date
is not worth as much as a dollar paid out today. Therefore such a
simple total would substantially overstate the true value; and a
better way to measure the ultimate value of the successive annual
loan subsidies would be in "present value" terms, in accordance
with the recommendations of the President's Commission on Budget
Concepts. This is accomplished by capitalizing (or discounting)
future subsidies at an appropriate interest rate.
The selection of an appropriate rate might vary with analytical
objectives. The choice for discounting both direct and guaranteed
loans in this analysis is 8%—a rate approximately equivalent to the
private market rate on guaranteed loans, if an allowance for guarantee costs is added. This selection (over the Treasury borrowing rate
for instance) has the advantage of valuing direct loan assets near the
price which they should bring if sold to private investors, and also
more nearly measures the benefits provided to borrowers. The rate,
however, may overstate costs for direct loans retained in Government
accounts.
Although variations in the characteristics of individual loans or
loan programs are usually translated into variations in market
interest rates, the assumption of a uniform discount rate facilitates
analysis.
Table E-4 provides estimates of subsidy values that will result from
loan commitments made or to be made in the years 1971 through
1973. Both the annual subsidy rates and the discounted present value
of all future subsidies are provided. However, estimates of the subsidy
elements in the portfolio of loans already outstanding—direct or
guaranteed—are not attempted in this analysis. While the estimates
are primarily illustrative rather than exact or comprehensive they do
facilitate year-to-year comparisons of new subsidy commitments.
Loans subsidies, annual basis.—The annual subsidy values attributable to commitments foi subsidized direct loans would grow from
$270 million for 1971 commitments to $345 million for 1973 commitments, while the corresponding annual costs for subsidies on guaranteed loan commitments will grow from $350 million to $516 million
during the same years.

Table E-4. ESTIMATED INTEREST SUBSIDY VALUE FOR MAJOR DIRECT AND GUARANTEED LOAN COMMITMENTS
(in millions of dollars)
Rate*
(percent)

Term*
(years)

Annual
subsidy per
$100 million 2
commitments

Commitments
1971
actual

1972
est.

subsidies committed in—
1973
est.

1971

1972

1973

DIRECT LOANS
Funds appropriated to the President:
International security assistance
I nternational development assistance
Agriculture:
Price support
CCC: Public Law 480_____
Farmers Home Administration
Rural Electrification Administration
Health, Education, and Welfare:
Capital for student loans
Higher education facilities
Housing and Urban Development:
Urban renewal
Low-rent public housing
College housing
FHAfund
.
VA: Insurance policy loans
Export-Import Bank 6
Small Business Administration:
Business and investment fund
Disaster loan fund
Total, major subsidized direct loan commitments
See footnotes at end of table.

5.3
2.5

13.6
40.0

1.8
4.4

688
696

350
773

493
900

101.2
368.5

51.5
409.3

72.5
476.6

3.5
2.0
4.0
2.0

0.8
25.0
31.3
35.0

5.0
4.2
3.1
4.5

1,748
558
463
487

2,579
598
325
572

1,983
705
310
563

65.8
251.4
166.6
259.7

97.1
269.4
116.9
305.1

74.9
317.6
111.5
300.3

H.9
3.0

14.0
40.0

3.8
4.0

278
14

339
22

53
3

87.7
6.8

106.9
10.7

16.7
1.5

6.0
0.0
3.0
5.6
4.0
6.0

0.8
1.5
40.0
20.0
10.0
7.0

2.3
4.3
4.0
1.7
2.4
1.2

534
171
75
167
144
2,362

572
175
100
265
130
7,352

615
216
100
316
122
7,400

8.7
10.4
36.4
28.3
23.8
148.0

9.3
10.6
48.5
44.9
21.5
460.7

10.0
13.1
48.5
53.5
20.2
463.7

5.6
4.1

11.7
7.2

1.5
2.3

273
299

243
390

275
100

31.8
36.8

28.3
48.0

32.1
12.3

1,631.9

2,038.8

2,024.9

Table E-4. ESTIMATED INTEREST SUBSIDY VALUE FOR MAJOR DIRECT AND GUARANTEED LOAN COMMITMENTS—Con.
(in millions of dollars)
Rate l
{percent)

Agency and program

Term l
(years)

Annual
subsidy per
$100 million
commitments 2

Commitments
1971
actual

Present value at 8%—future
subsidies committed in—

1972
est.

1973
est.

1971

1972

1973

GUARANTEED LOANS

Agriculture:
Rural housing insurance
Agricultural credit insurance
Health, Education, and Welfare:
Student loan insurance
Higher education facilities....
Housing and urban development:
Urban renewal
Low-rent public housing
College housing
Mortgage insurance (subsidized)
Export-Import Bank:• Portfolio sales

7.2
5.0

33.0
40.0

0.6
2.6

1,384
514

1,605
821

2,144
1,144

102.0
157.5

118.3
251.6

158.1
350.6

«4.4
7.0

10.0
30.0

2.2
0.8

1,044
600

1,160
620

1,351
400

157.8
56.0

175.3
57.8

204.2
37.3

3.4
0.0
3.0
2.0
6.0

0.8
41.5
31.0
34.0
4.0

5.3
5.9
3.8
4.5
1.1

1,091
1,709
262
2,840
269

2,622
1,748
200
6,350
150

800
2,159
200
5,799
50

40.8
1,213.1
113.3
1,495.1
10.2

98.2
1,240.7
86.5
3,343.0
5.7

30.0
1,532.5
86.5
3,052.9
1.9

3,345.9

5,377.2

5,454.0

4,977.8

7,416.0

7,478.8

._
_
„
_
_

Total, major subsidized and guaranteed loan commitments
Grand total
1
2

If terms vary these are estimated averages. Interest rates include insurance premiums where these are charged.
Based on 8% value of funds.
3
Weighted average: actual rate is 2%, first 10 years; 3% for last 30 years.
4
Zero interest rate applies only while student is in school plus 9 months (average period 3 years); thereafter rate is 3 % on direct loans, 7% for insured loans.
5
Various interest rates and maturities.
* Excluded from budget totals by statute on Aug. 17, 1971.

THE BUDGET FOR FISCAL YEAR 1973

Loans subsidies, present value basis.—The annua1 subsidy payments
for 1971 commitments imply future budget outlays of $14 billion over
the life of the loans. However, after discounting for interest, the present
value of these continuing annual subsidies on direct and guaranteed
loans committed in 1971 is estimated at $5 billion. For 1972 commitments this present value will be $7.5 bil ion and for 1973 commitments
will be $7.5 billion, a 2-year growth of $2.5 billion over the 1971 level.
CREDIT AGENCIES OUTSIDE THE BUDGET

The transactions of several major federally sponsored credit agencies,
created to facilitate financing of important programs of national interest, are excluded from Federal budget totals. The majority of these
agencies are privately owned and managed. All, however, are subject
to some form of Federal supervision, and all consult the Treasury
Department, either by law or by custom, in planning the marketing
of their obligations.
These agencies are essentially financial intermediaries, channeling
funds from one sector of the capital markets to another. They borrow, under Federal auspices, in the "agency sector" of the bond
markets, and lend these funds—for specifically authorized purposes—either directly or by purchasing loans originated by their
special clientele.
Some of these agencies began as secondary market operations, or as
facilities providing advances of reserves to financial institutions.
They had a basic function of providing liquidity to primary lenders
in times of tight money conditions, either by buying their loans or
by making advances. These loans were then sold or repaid when capital market conditions improved. However, recent policy has converted these institutions to more permanent institutional sources of
new capital funds. Pending legislative proposals would add a new
student loan marketing association and a District of Columbia
development bank.
Four of the enterprises identified in table E-5 are actually systems
of regional institutions which pool their borrowings to gain increased
efficiency.
Funds loaned by these agencies are not obtained entirely from
borrowings in the capital markets. Sale of capital stock and retained
earnings also provide some resources for lending. Moreover, the timing
of borrowing versus lending will vary from year to year. Table E-5
shows only the lending side of these credit activities; but table C-8
in Special Analysis C (Borrowing, Debt, and Investment) provides
complimentary data on their borrowing.

SPECIAL ANALYSES

Table E-5. NET CHANGES IN OUTSTANDING LOANS FOR MAJOR GOVERNMENT-SPONSORED CREDIT PROGRAMS (in millions of dollars)

Agency

Housing and Urban Development:
Federal National Mortgage Assoc.1
Export-Import Bank 2
Farm Credit Administration:
Bank for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank Board:
Federal home loan banks
Federal Home Loan Mortgage Corp
Total3

1971
actual

1972
estimate

1973
estimate

standing
end of
1973
estimate

2,168

4,987
1,329

4,702
1,187

25,263
8,223

287
812
585

196
886
625

223
1,019
630

2,455
7,815
8,834

-2,995
469

1,159
876

1,900
1,600

10,300
2,945

1,326

10,058

11,261

65,835

1
2

Loans purchased at discount are recorded at acquisition cost.
Excluded from budget totals by statute on Aug. 17, 1971, with loans outstanding of $5,707
million.
3
Federal Reserve banks, excluded from these totals, loaned $56 million to their member banks in
1971, increasing outstanding loans to $508 million; estimates not available for other years.

Federal agencies.—In addition to this year's removal of the ExportImport Bank from the budget totals, pending legislation would
establish a Federal financing bank to consolidate and improve the
efficiency of numerous Federal agency borrowing and loan guarantee
activities, but the bank would not change the budget treatment of
these activities. Legislation is also proposed to establish an environmental financing authority which would be a conduit for certain local
Government borrowings which would not be included in the Federal
budget.
The agencies currently in existence expect a 1971-73 lending
increase of1 $21 billion to be supported by a $19 billion increase in
borrowing. Of the increase in lending, $10 billion will be invested in
federally guaranteed loans.
SUMMARY OF FEDERAL AND FEDERALLY ASSISTED CREDIT

The Federal role in the credit markets affects both the supply of and
the demand for credit. Both of these credit impacts can be aggregated,
provided adjustments are made to exclude double counting where
guaranteed loans as well as Federal and agency debt instruments are
in fact held directly in Government accounts or by off-budget credit
enterprises.
Table E-6 shows the net new loan funds advanced to the public,
either directly from Federal budget accounts or through the Federal
assistance provided by Federal guarantees of private lending or
through the lending of federally sponsored agencies. Total lending
under Federal auspices is expected to reach $276 billion in 1973, a
2-year increase of $65 billion and 3 1 % over the 1971 level of $211
billion.
1
Includes borrowing of Export-Import Bank, not shown in table C-8 because it is added to
Federal debt.

THE BUDGET FOR FISCAL YEAR

1973

Table E-6. NET CHANGES IN OUTSTANDING FEDERAL AND FEDERALLY
ASSISTED CREDIT (in billions of dollars)

Type of credit assistance

Increase or decrease in credit
1971
actual

Directloans
Guaranteed loans
Less guaranteed loans held in direct loan portfolio by
GNMA
In portfolios of sponsored agencies:
ByFNMA
ByFHLMC
By Export-Import Bank»
Net, guaranteed loans
Loans by sponsored agencies

Total, Federal and federally assisted lending...
1
2

1972
estimate

1973
estimate

Outstanding
end of
1973
estimate

2.0

3.3

0.7

51.4

16.1

23.3

25.9

189.4

-.1

-.6

4.4

2.2
.5
-.1

4.9
.5
-.1

4.4
.3
-.1

24.9
1.5
.1

13.2

18.1

21.8

158.6

1.3

10.1

11.3

65.8

16.5

31.5

33.8

275.9

Excluded from budget totals by s t a t u t e on Aug. 17, 1971.
Excludes Federal Reserve banks.

A complimentary aggregate of Federal and federally assisted borrowing is presented in Special Analysis C, Borrowing, Debt, and
Investment (table C-9), showing the Federal impact on the credit
markets in terms of funds raised in the markets.
SUMMARY

OF LEGISLATION AUTHORIZING NEW
FEDERAL CREDIT PROGRAMS

AND BROADENED

This summary lists legislation enacted during the last session of
Congress which authorizes new Federal credit programs or revises
existing programs in major respects. It excludes simple extensions in
expiring laws and increases in funds for continuing programs.
DEPARTMENT OF AGRICULTURE

The Rural Electrification Act Amendments of 1971—Public Law 92-12
Establishes a rural telephone bank to meet capital needs of the
rural telephone system. Federally owned stock is to be retired as
soon as possible after 1985. Authorizes the public and private sale of
unguaranteed debt instruments. Authorizes loans to corporations and
public-bodies for the purpose of financing improvements to the telephone lines, facilities, or systems.
1971 Amendments to the Consolidated Farmers Home Administration
Act—Public Law 92-173
Authorizes the Secretary of Agriculture to insure emergency loans
under the Consolidated Farmers Home Administration Act of 1961
whenever funds are advanced or a loan is purchased by a non-Government lender.

SPECIAL ANALYSES

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Public Health Service Act—Public Law 92-157
Authorizes a 90% Federal guarantee and a 3 % interest subsidy for
private construction loans for medical, dental, and other health professions personnel teaching facilities.
The Nurse Training Act of 1971—Public Law 92-158
Authorizes a 90% Federal guarantee and a 3 % interest subsidy for
private construction loans for nonprofit private nursing schools.
VETERANS ADMINISTRATION

Authorization to sell direct veterans loans—Public Law 92-66
Authorizes Veterans Administration to sell, at reasonable prices
under prevailing mortgage market conditions, direct loans made to
veterans for the purchase of a home, farm, or business.
FARM CREDIT ADMINISTRATION

Farm Credit Act of 1971—Public Law 92-181
Modifies the authority of the Farm Credit System as follows: (a)
Authorizes Federal land banks and production credit associations
(PCA) to make nonfarm housing loans in rural areas; (b) Raises
limitation on land bank loans to 85% of appraised property value;
(c) Authorizes the issuance of a ioint security, making each of the
three branches of the system obligated for the liabilities of the other;
(d) Reduces to 80% the farmer voting media percentage requirement
for cooperatives to be eligible to borrow from the banks for cooperatives; (e) Provides new authority for financial-related services necessary for on-farm operations; (f) Provides the authority for land
bank and PCA loans to nonfarmers for other than housing when
directly related to on-farm operating needs; and (g) Subjects obligations issued by the system to restrictions similar to those provided
for by Regulation Q of the Federal Reserve Board.
EMERGENCY LOAN GUARANTEE BOARD

Emergency Loan Guarantee Act—Public Law 92-70
Authorizes the Emergency Loan Guarantee Board chaired by the
Secretary of the Treasury to guarantee loans up to $250 million when
it is deemed necessary in order to prevent adverse and serious effects
on the economy, credit is not otherwise available on reasonable terms,
and there is reasonable assurance that the loan will be repaid.
EXPORT-IMPORT BANK

Export Expansion Act of 1971—Public Law 92-126
Excludes the receipts and disbursements of the Export-Import
Bank from the totals of the budget, and exempts the Bank's operations from any annual expenditures and net lending limitations

THE BUDGET FOR FISCAL YEAR 19 73

imposed on the budget. Increases the limitations on the aggregate
amount of outstanding loans, guarantees, and insurance to $20
billion.
SMALL BUSINESS ADMINISTRATION

Amendments to the Small Business Investment Act of 1958—Public Law
92-213
Authorizes Small Business Administration to guarantee principal
and interest on debentures issued by small business investment
companies.

SPECIAL ANALYSIS F
PRINCIPAL FEDERAL STATISTICAL PROGRAMS

There is growing recognition of the need for better statistical
information on which to base decisions required to conduct modern
government and business activities. The increasing magnitude and
complexity of government and of society clearly require more accurate,
more prompt, and more relevant data for economic and social policy
formulation, for government program guidance and for internal
government management.
Many of the deficiencies in Government statistics can be traced
to outmoded and underfunded statistical programs overburdened by
pressing new demands. For example, after the wage-price freeze
was announced on August 15, a major deficiency in the consumer price
series was brought to public attention. Less than half of the series is
based on monthly information; more than half is collected quarterly
or semiannually. The fact that there is no current index specifically
measuring changes in wage rates also became evident. Early retail
trade estimates are often subject to considerable revision. Since retail
sales data are used to estimate about 30% of GNP, these revisions
seriously affect the early GNP figures. Late and deficient inventory
data also hamper the compilation of the GNP data. Weak data on
construction, especially for State and local governments, add to these
difficulties. The absence of data on costs, insurance, and freight limit
flexibility in presenting data on foreign trade. It is clear that the
statistical system is not adequate for Government informational
needs for economic policy decisions.
Although much emphasis is being given to economic statistics in
1973 because of their policy implications, it is to be noted that by far
the largest expenditures of the Government are for the vast and
rapidly growing social programs
in the fields of health, education,
public safety, housing, ands income maintenance. Improved statistics
are urgently needed in many of these fields for program planning and
evaluation as well as for overall policymaking and establishing of
priorities in the Federal budget. After some years of careful development, it will now be possible to move ahead with a greatly improved
program of crime statistics, a critical field much neglected in the past.
New approaches are emerging in educational statistics which promise
to measure the output or achievement of our educational system
in a reliable and consistent manner. New information is being sought
on the adequacy of our health service delivery systems, which is the
main new focus of federally supported health programs. A long
endorsed continuing survey on the adequacy of our housing supply
and on turnover in occupancy will be initiated.
The top priority programs in evaluating specific proposals for the
budget are: (1) To extend and improve the basic data required for
the system of national accounts (defined broadly to include national
income and product, input-output, balance of payments, flow of funds,

THE BUDGET FOR FISCAL YEAR 1973

and national sector balance sheets); (2) to improve the accuracy and
timeliness of current economic indicators; (3) to organize a set of
social indicators within a framework for developing a system of social
and demographic accounts; and (4) to develop a more systematic and
comprehensive program of State and local area data.
Accordingly, the President's budget for 1973 provides for a substantial increase for statistics. Funds requested for the principal
current statistical programs total about $281 million for 1973, an
increase of more than 18% over estimated obligations of $238 million
in 1972, which in turn is about 16% above actual obligations of
$205 million in 1971. The increases for economic statistics are 15%
for 1972 and 17% for 1973, with most of the funds going to
data to improve the GNP accounts, especially to obtain more accurate and timely data for retail sales and services, inventories,
wages and prices. Increases for social statistics are more than 20%
for 1973 and 18% for 1972, with a large part of these funds going to
statistics on health and crime.
In addition to these continuing activities, the Federal Government
conducts a number of periodic programs, such as the census of population and housing every 10 years, the economic censuses every 5
years, and the periodic revision of the Consumer Price Index. Amounts
required for these programs fluctuate widely from year to year depending upon the nature and periodicity of the activities. Recommendations for the periodic programs aggregate $35.7 million for 1973,
a third of which represents costs of completing the processing and
publishing of the 19th decennial census from funds appropriated in
prior j^ears.
To indicate the relative magnitudes of the statistical programs
carried out by different agencies and to aid in evaluating the Government's overall statistical system, budget data are presented in two
tables. Significant components of current Federal statistical activity
classified by broad subjects and the amounts involved for them are
summarized in table F - l . Information by agencies, for both current
and periodic programs, is shown in table F-2. When adjustments are
made because of reorganization of statistical units or activities, or
new fields are covered, figures are carried back to both the current and
previous years so that all 3 years covered by the special analysis are
on a comparable basis.
ECONOMIC STATISTICS

Labor statistics.—Major emphasis in labor statistics will be placed
on extending and improving wage statistics to provide information
needed to guide economic stabilization policies and to evaluate better
the effects of programs. In addition, several major undertakings by
the Bureau of Labor Statistics (BLS) to maintain or improve employment and unemployment statistics are recommended.
A key proposal for BLS is the development, as part of an integrated
system of wage statistics, of an index of wage rate changes which will
be unaffected by changes in the amount of overtime or part-time
work or changes in industrial and occupational mix ($600 thousand).
A start on the development of this index will be made during 1972.
In addition, work will be initiated on the best method of extending
the monthly series on average weekly hours and earnings to cover
nonproduction and supervisory workers in all branches of nonagri

SPECIAL ANALYSES
Table

F-1. OBLIGATIONS FOR PRINCIPAL CURRENT STATISTICAL
PROGRAMS, BY BROAD SUBJECT AREAS (in million* of dollars)

Program
rrogram

Economic statistics

Labor statistics..
Prices and price indexes
Production and distribution statistics
Construction and housing statistics
National income and business financial accounts
Demographic and social statistics
Health related statistics
Population statistics
Educational statistics
Crime statistics
Social security and welfare statistics.
Total principal current programs

_
_

1971

1972

actual

estimate

1973

130.0

148.9

173.7

43.7
9.3
55.9
5.5
15.6

54.0
11.6
58.2
7.6
17.6

63.1
12.4
65.5
9.4
23.3

74.8

88.7

107.1

36.3
3.6
15.1
5.9
13.9

43.7
3.5
16.4
10.7
14.4

52.6
5.1
19.1
16.0
14.3

204.8

237.6

280.8

cultural employment ($150 thousand). The program of industrywage surveys will be strengthened to achieve a better balance between
manufacturing and the faster-growing nonmanufacturing segments
and to permit more frequent surveys in selected important industries
($400 thousand). Studies of productivity will be increased ($100
thousand) to provide additional insight into factors contributing to
inflation and their interrelationships.
A start will be made looking toward the long-term improvement of
the monthly unemployment statistics, collected by the Bureau of the
Census for the BLS as part of the current population survey. A test
will be made of the effect of collecting labor force data for all weeks
in a month and averaging the results, instead of using a single week to
represent a month as is presently done. For this purpose, a separate
sample will be developed, which, if the test proves successful in
reducing irregularities in the statistics, will provide information needed
for appropriate seasonal adjustment of the series ($1.15 million).
Funds are requested for two projects to maintain the quality of labor
statistics series. One is the revision of employment and payroll records
and statistics to conform to the revised Standard Industrial Classification system which will be issued by the Office of Management and
Budget (OMB) during 1972 ($500 thousand for BLS and $2.3 million
for Manpower Administration in Grants to States). The second provides funds to continue the conversion of BLS computer systems to the
new Department of Labor computer which should eventually permit
taking over statistical functions now performed manually or on outmoded equipment ($450 thousand).
Other major changes in labor statistics are related to extension and
improvement of statistics needed to support particular programs.
Notable is the expansion of information for the use of the Occupational Safety and Health Administration (OSHA) and affiliated State
agencies. States receive grants to develop and operate statistical systems to collect and analyze data on occupational injuries and illnesses.
This program, initiated on a small scale in 1971, will more than double

THE BUDGET FOR FISCAL YEAR 1973

between 1972 and 1973 ($1.75 million). In addition, OSHA transfers
funds to BLS to develop the statistics needed nationally and to work
with the States in implementing a coordinated program. Funds requested in 1973 will expand the sample survey started in 1972 and provide the basis for an historical series of national data on occupational
injuries and illnesses by detailed industry. Concurrently, more detailed
impact and causal surveys will be conducted in selected industries,
building on the findings of the methodological work undertaken during
1972 ($800 thousand).
Prices and price indexes.—The major project in the price statistics
program in 1973 continues to be taking the consumer expenditure
survey and other work necessary for the revision of the Consumer
Price Index, described below under periodic programs. The Bureau
of Labor Statistics will continue in 1973 a program, started in the
current year by reallocation of resources from other projects, of collecting for the Consumer Price Index (CPI) monthly prices of some
commodity and service items which have been collected quarterly or
less frequently.
The Bureau of Labor Statistics will continue development of a
monthly General Price Index, covering a spectrum of prices broader,
more accurately measured, and more detailed than those presently
available in either the CPI or the Wholesale Price Index, and will also
provide data showing changes in prices for goods and services at various
stages of the production process ($225 thousand). BLS will also extend
($200 thousand) its ongoing program of statistical measures of the price
competitiveness of U.S. products in world trade by developing annual
indexes of export prices covering all durable goods. The construction
price index program of the Census Bureau, now covering residential
construction, will be extended to initiate work on the development of
indexes for educational, hospital and other institutional structures
($259 thousand).
Production and distribution statistics.—A major improvement in
retail trade statistics compiled monthly by the Census Bureau will
result from an expansion of the sample of reporting stores to reduce the
variance in national totals and increase the reliability of estimates
by kind-of-business, thus permitting publication for more business
categories and geographic detail; and from better maintenance of
operating procedures necessary to minimize nonsampling error in the
current reports ($800 thousand). The monthly service trade statistics
program will be extended to provide data for certain trades—employment agencies, real estate and insurance agencies, and various types
of repair services—not now covered ($175 thousand).
Improvement of wholesale and retail inventory statistics will entail
a substantial effort by Census ($400 thousand) to gather data from
nonmerchant wholesalers—bulk petroleum distributors, assemblers of
farm products, and agent brokers and manufacturers sales branches—
to provide some additional kind-of-business detail and to conduct
research and experiment designed to achieve better reporting of inventory data. More intensive work with the monthly survey of manufacturers' shipments, inventories, and orders, will improve data on
manufacturers' inventories. It will enhance usefulness of the survey
results by providing additional information on sales to the Federal

SPECIAL ANALYSES

Government and the impact of keeping Government accounts on the
accrual basis, reporting of defense industries in total and by stage of
fabrication, and expanding the reporting panel and generally improving
the survey operation to increase reliability and accuracy of the data
($300 thousand).
A second increment in funds ($700 thousand) for the Census Bureau
is required for development of a computerized directory of all U.S.
business firms and their establishments. By providing Federal agencies
with a frame for sample survey panels and standardized size and industry classification codes, the directory will make it possible to improve the comparability among Government statistics. In addition,
this program, scheduled to be completed in 1975, will provide a core
of annual economic data and permit reductions in the program of
periodic economic censuses.
Other projects to be undertaken by the Census Bureau are the expansion of the textile import program which will provide the Secretary
of Commerce information required to determine quotas for some goods
for which adequate data are not now available, particularly those of
manmade fibers and wool ($142 thousand), and the initiation of work
to provide estimates of costs incurred by business firms to improve
the quality of the environment ($100 thousand).
A major program is to be initiated in 1973 to collect (Customs
Bureau—$2 million) and tabulate and publish (Census—$525
thousand) data on imports valued inclusive of insurance and freight
expenses necessary to bring them to the United States. These data will
enhance our ability to study trade patterns by commodity and country
of origin, and the relationship of imports to domestic production, as
well as provide more accurate data for the balance of payments
accounts.
Significant program changes in other agencies include: in the
Statistical Reporting Service, Department of Agriculture, the expansion to 13 additional States of the multiple-frame sampling program to
provide improved livestock estimates ($662 thousand), and the
modernization of data handling and communications to improve the
collection, processing, and dissemination of statistics ($300 thousand);
in the Economic Research Service, Department of Agriculture, expansion of statistical data on foreign trade, production, and consumption
of agricultural products ($100 thousand), and development of information to support rural development projects ($100 thousand); and in
the National Marine Fisheries Service, Department of Commerce, an
expanded program of collection, analysis, and dissemination of data
on production, processing, and distribution of commercial fishery
products and related economic aspects of the industry ($850 thousand).
Construction and housing statistics.—Substantial improvements will
be made in the accuracy and timeliness of the Census Bureau's estimates of State and local government construction and for the value
put in place of new multiunit dwellings and farm construction ($510
thousand). Data will also be collected on the number, location,
physical characteristics, and prices of mobile home placements ($233
thousand).
Authorization was received by HUD in 1972 for planning and preparatory work for an annual housing survey. Additional funds ($1
million) are included in the 1973 budget to institute collection of data

THE BUDGET FOR FISCAL YEAR 1973

both on a national level annually and for 60 Standard Metropolitan
Statistical Areas which will rotate on a 3-year cycle (20 different
areas each year).
National income and business financial accounts.—In recognition
of the central position of the national economic and balance of payments accounts in economic policy, a major expansion in the program
of the Bureau of Economic Analysis of the Social and Economic
Statistics Administration, Department of Commerce, is planned to
strengthen the accuracy and usefulness of these accounts. The total
program increase will serve to: Increase the accuracy of the current
monthly and quarterly estimates ($235 thousand); permit more
comprehensive and accurate benchmarking of these estimates, principally through improvements of the input-output tables and time series
on real product by industry ($400 thousand); improve the details
of the national accounts, chiefly in providing new measures for evaluating the impact of Federal Government activity on the economy
($225 thousand); extend the estimates of the distribution of personal
income by size ($120 thousand); provide new measures of the economic impact of changes in the environment ($260 thousand); and
provide in-depth analysis in the balance of payments presentations
of the impact of international U.S. investment by developing new
comprehensive measures of the economic activity of multinational
corporations ($575 thousand).
Necessary research will also be conducted to improve the lists and
classifications of the leading, coincident, and lagging indicators
published in the "Business Conditions Digest" ($120 thousand).
A study of business use of the new asset depreciation range system to
be conducted by the Internal Revenue Service ($1 million) will provide
information on the extent of capital depreciation in the economy.
Measurement of depreciation for the national income accounts will be
improved by this study. A significant increase in the information
gathered on corporation finance is proposed in the Federal Trade
Commission budget ($400 thousand). The "Quarterly Financial
Report'' is to be expanded to cover mining and trade industries. A
line of business survey will be instituted to provide more detailed
annual data on sales and net income by product for large conglomerate
firms. A monthly profits survey will be initiated to generate more
timely and frequent data on this important economic indicator.
The Bureau of the Census will undertake a major expansion ($658
thousand) in its State and local government financial statistics program. Revenue data now collected quarterly, but relating principally
to tax revenue, will be expanded to include nontax revenues such as
user charges, fines, and transfer payments. State and local government
finance data will be tabulated so that data collected on a fiscal year
basis, regardless of when fiscal years end, can be compiled on a calendar
year basis, thus providing an important component for national income
accounts which must now be roughly estimated. Research will be conducted on ways to obtain information on expenditures with suitable
breakdowns, such as for purchases, transfers, and interest. To meet
the requirements for General Revenue Sharing programs, procedures
will be designed for collection of data on "general revenue from own
sources" for the 38,000 State and local general government units.
An amount of $500 thousand which was included in the 1972

SPECIAL ANALYSES

budget of the Council of Economic Advisers has been shifted to the
National Commission on Productivity for statistical work connected
with the analysis of relations between output, production, productivity, prices and wages. The major part of this amount is transferred
to the Bureau of Labor Statistics for this work.
With substantial improvements in primary economic data sources
underlying the national economic accounts, this comprehensive
program will provide a considerably improved basis for analyzing
the problems of inflation and economic growth within the context
of the accounts.
DEMOGRAPHIC AND SOCIAL STATISTICS

Important expansions will continue in 1973 in the fields of demographic and social statistics, especially in sectors in which extensive
developmental work has been underway in recent years.
HecUth-related statistics.—Most of the expansion proposed for this
field is concentrated in four areas. First, the National Center for
Health Statistics (NCHS) will develop information on the effectiveness
and cost of health services delivery systems, such as "ambulatory"
care received in doctors' offices and out-patient clinics ($1 million).
Second, NCHS and the National Center for Health Services Research
and Development will jointly carry out demonstration projects in
developing a Federal-State cooperative statistical system to measure
health status and needs and usage of health services below the
national level ($3 million). To facilitate more effective State participation in the system, NCHS will also expand its professional and
technical assistance and training activities ($250 thousand). Third,
the National Cancer Institute will expand its data gathering programs
in conjunction with the stepped-up war against cancer, continue the
national cancer survey now in its concluding stages, and conduct
epidemiological studies with regard to high-risk and migrant populations ($1 million). Finally, the Food and Drug Administration will
accelerate its various surveillance activities, with the largest part of a
$3 million increase reflecting informational needs connected with new
responsibilities of FDA in the product safety field.
Educational statistics.—The National Center for Educational
Statistics (NCES) will expand activities in two principal sectors
(with a total agency increase of some $2.7 million). First, there will
be a continuation and expansion of the program of longitudinal studies
begun last year in which specific groups of students will be followed
over time in order to provide new insights on the impact of education
on the recipients and on their attitudes and motivations. The plans
for 1973 include the first followup of a cohort of high school seniors
initially canvassed the previous year and the start of a cohort of
children in the early grades. Second, there will be an expansion
in data analysis, research, and technical assistance to users in conjunction with the national assessment of educational progress, the
first comprehensive and consistent national program for measuring
and evaluating the learning process of students through specialized
testing in a variety of fields. (This program is officially under NCES
jurisdiction for the first time in 1973 but budget figures for previous
years have been adjusted to include earlier costs.)

THE BUDGET FOR FISCAL YEAR 1 9 7 3

Social security arid welfare statistics.—No major program increases
are proposed for this field in 1973 but program content will be adjusted
as needed within existing budgetary limits to meet current data
requirements.
Crime statistics.—A continued expansion is proposed in the statistical
program for the Law Enforcement Assistance Administration primarily for two key activities (with a total increase of around $5
million). First, after some years of experimentation and testing, a
national survey of crime victimization—that is, measurement of the
incidence, impact, and cost of crime from the standpoint of the victim—will be initiated together with a number of metropolitan area
studies. The group to be surveyed represents both the population
in general, by means of household interviews, and entrepreneurs of
small businesses who are among the principal targets for robbery,
burglary, and larcenies. Second, in cooperation with State agencies, a
"crime transaction" statistics system will be initiated to provide a
coherent picture of the criminal justice process. When fully developed
and in operation, this system will replace the many unrelated and
generally inadequate and inconsistent record systems—such as separate
data on arrests, court actions, paroles, etc.—and will bring together in
a single record all of the actions starting with a given arrest, such as
the charge made, whether indicted, whether bail was allowed, what
the court verdict was, the length of sentence if convicted, the length of
time served, and whether or not paroled.
Population statistics.—Several projects are proposed for the Bureau
of the Census to improve various aspects of population statistics.
Methodological research in the Current Population Survey will be
expanded ($250 thousand), and a separate panel for more comprehensive annual data on income and related subjects will be developed
($550 thousand). Current population estimates will be improved
($350 thousand), and research will be conducted in the use of administrative records together with sample survey data to provide periodic
population data for local areas ($500 thousand).
PERIODIC PROGRAMS

1972 Census of Governments.—Information for this quinquennial
census is obtained from State and local governments. The requested
funds will be used to complete a census of governmental organization,
finish field data collection and process the results of the survey of
taxable property values, and collect data on State and local government finances and employment. The 1973 request represents the fourth
of a five-stage request for funds to conduct the census.
1972 economic censuses.—The 1973 request represents the third of a
five-stage request for the census which will provide economic data for
calendar year 1972. This census covers establishments classified in
retail, wholesale, and service trades, construction, transportation,
manufactures, and mineral industries. These statistics provide information on product shipments, sales by merchandise or commodity
line, inventories, number of employees, man-hours worked, payroll
costs, capital expenditures, and cost of materials, fuels and electric

SPECIAL ANALYSES

Table F-2. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY
AGENCY (in millions of dollars)
Agency

1972

1971

1973

CURRENT PROGRAMS

•
•
•

•
•
•
•
•
•
•
•
•
•

Department of Agriculture:
• Agricultural Research Service
• Economic Research Service
Statistical Reporting Service
Department of Commerce:
• Bureau of Domestic Commerce
• Bureau of International Commerce
• Economic Development Administration
• National Marine Fisheries Service. - - - - - Social and Economic Statistics Administration x
Department of Defense:
• Corps of Engineers
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration:
National Center for Health Statistics
• Other HSMHA
National Center for Educational Statistics
• National Institutes of Health
• Food and Drug Administration
• Social and Rehabilitation Service
• Social Security Administration
Department of Housing and Urban Development
Department of the Interior:
• Bureau of Mines
• Bureau of Sport Fisheries and Wildlife
Department of Justice
Department of Labor:
Bureau of Ubor Statistics
• Manpower Administration
• Workplace Standards Administration
• Occupational Safety and Health
Department of Transportation:
• Office of the Secretary
• Federal Highway Administration
• National Highway Safety Bureau
Department of the Treasury:
• Internal Revenue Service
• Bureau of Customs
Civil Aeronautics Board
Environmental Protection Agency
Federal Home Loan Bank Board
Federal Power Commission
Federal Trade Commission
Interstate Commerce Commission
National Commission on Productivity
National Science Foundation
Office of Economic Opportunity.._
Securities and Exchange Commission
Total, current programs

0.5
5.0
19.0

4.0
.5
1.8
2.8

27.3

0.5
4.8
20.5
4.1
.5
1.7

0.5
5.0
22.0

4.2
.5

3.0

.2
3.9

28.1

37.1

1.2

1.3

10.3

15.8

18.7

9.1

7.8

9.9

15.1

19.1

10.9

16.4
9.1
4.4
3.4
12.4

1.1

2.5

3.6

3.7

7.8
2.9
3.5

10.3
7.3
3.4
12.6

3.4
5.9

3.8
3.2

3.8
3.0

10.7

16.0

26.9
12.8

30.1
18.0

.5
1.2

34.9
20.4
.5

3.7

6.2

1.0
3.5
1.0

.9
3.6
2.1

1.4
3.6
2.6

8.7
.9
.9

10.2

12.1

.8
1.2
.5
1.9
1.1
.6
.9

2.9
1.3
.5
2.0
1.1
1.0
.9

1.5
1.0

.5
.8
3.1
3.9

.4
204.8

.5
2.7
3.7
.5
237.6

.5
2.3

3.7
.5
280.8

1
Includes the Bureau of the Census and the Bureau of Economic Analysis (formerly the Office
of Business Economics).

• = Statistical activities only.

THE BUDGET FOR FISCAL YEAR

1973

Table F-2. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY
AGENCY (in million, of dollars)—Continued
Agency

1971
actual

1972
estimate

1973
estimate

PERIODIC PROGRAMS

Department of Commerce: Social and Economic Statistics Administration:
19th Decennial Census
_.._
1972 Census of Governments,__
___
1972 economic censuses
1974 Census of Agriculture
1967 Census of Governments
___
1
Modernization of computer equipment
J
Department of Labor: Bureau of Labor Statistics:
Revision of Consumer Price Index.
_
___
Total, periodic programs
Total, principal statistical programs

52.1
.4
1.0

26.3
1.5
4.0

11.8
1.4
11.4
1.3

5.9

9.8

58.0

37.7

35.7

262.8

275.3

316.5

3.9

energy. Work planned for 1973 includes completing the design
and printing of report forms, a precanvass of multiestablishment
firms, mail out of report forms, check in and clerical edit of census
schedules, and followup on nonrespondents. Punching and computer
edit of the data will also begin. The 1973 request includes funds
for conducting a survey of minority-owned businesses.
1974 Census of Agriculture.—This is the first of a five-stage request
to take a census of agriculture for calendar 1974. The census provides
measures of the agricultural economy of each State and county. Data
obtained from the census will include the number of farms, acres in
farms, land value, crop land harvested, acreage and production on all
major and most other crops, production, number and kinds of livestock, equipment, expenditures, farm practices, and the use of fertilizer and pesticides.
19th Decennial Census.—No appropriation is requested in 1973 for
the 1970 censuses of population, housing, and agriculture. Funds
available from previous appropriations will permit completion of the
work on the censuses by the end of 1973.
Revision of the Consumer Price Index.—The 1973 program, for
which $9.7 million is budgeted, will continue the decennial revision
of this major price index to bring it in line with the purchasing patterns of consumers in the 1970's. Work in 1973, the fourth year of
this revision program, will include the first half of the basic consumer
expenditure survey, the collection of other data necessary for the
selection of outlets from which price data are to be obtained for the
revised index, and initial work on the selection and specification of
items of goods and services to be priced. Research on refining index
concepts and sampling procedures, and development of data processing systems will be conducted.

SPECIAL ANALYSIS G
BALANCES OF BUDGET AUTHORITY

This analysis presents information on balances of budget authority
carried forward at the end of each of the 3 fiscal years shown in the
1973 budget. These balances may be obligated or unobligated; the
latter occur only when the source of authority permits their use in
subsequent years.
Such balances of budget authority are a natural outgrowth of the
Federal budget system, in which outlays can occur only subsequent to
the enactment of appropriations or other forms of budget authority.
In the case of most Government accounts, the timelag between appropriations of budget authority, obligations of funds, and related outlays is relatively short, and appropriations not obligated by the end
of the fiscal year expire. However, in other cases, such as major procurement and construction programs, obligations and outlays may
occur over a period of years after the budget authority is granted, and
balances are carried forward until the authority is obligated and
spent. In still others, authority is provided for standby emergency
purposes (such as backup for insurance of bank deposits); if such
authority is not needed or used, it is carried forward as a balance
year after year.
Amounts that have been obligated are carried forward as obligated
balances until the subsequent payment of the obligations. The sum
of the unobligated and obligated balances constitutes the unexpended
balances.
SUMMARY OF BALANCES BY FUND GROUPS

Table G-l provides a breakdown of unexpended balances of
budget authority under Federal funds and trust funds, and shows the
unobligated and obligated amounts in each of the fund groups.
Federal funds are those collected and used by the Federal Government, as owner. Of the estimated $155.2 billion of Federal fund
unexpended balances at the end of 1973, the major portion—$92.4
billion (60%)—will have been obligated. Correspondingly, unobligated Federal fund balances are estimated at $62.8 billion (40%
of the Federal fund unexpended balances).
Trust funds are those administered in a fiduciary or trustee capacity
by the Federal Government for specified purposes, such as social
security programs. Of the $134.6 billion trust fund unexpended balances at the end of 1973, unobligated balances are estimated to be
$118.9 billion (88%). Trust fund obligated balances are estimated to
be only $15.7 billion (12% of trust fund unexpended balances).
97

http://fraser.stlouisfed.org/
480-700
O—72
Federal Reserve
Bank of
St. Louis

THE BUDGET FOR FISCAL YEAR 19 73
Table G-l. SUMMARY OF BALANCES (in millions of dollars)
Description

Federal funds:
Unobligated balances
Obligated balances
Total Federal fund unexpended balances
Trust funds:
Unobligated balances
Obligated balances
Total trust fund unexpended balances
Total Federal and trust funds:
Unobligated balances
Obligated balances
Total unexpended balances

Balances end of year
1971
actual

1972
estimate

1973
estimate

71,963
72,280

64,313
78,480

62,844
92,372

144,244

142,793

155,216

102,880
13,798

108,371
15,530

118,938
15,674

116,678

123,902

134,612

174,843
86,078

172,684
94,010

181,782
108,046

260,922

266,695

289,828

FEDERAL FUND UNOBLIGATED BALANCES

There are a variety of reasons for the unobligated balances in Federal funds. These are reflected in the categories used in table G-2. In
some cases, individual items may appear appropriate for more than
one category. However, for purposes of this table, each item is placed
in the one category which best serves to illustrate the predominant
characteristics of the balances involved. Also, the categories cover
only those accounts with balances of $20 million or more. Accounts
with unobligated balances of less than $20 million are shown in the
aggregate at the end of the table.
Guarantee and insurance programs.—The Federal Government
provides guarantees and insurance in certain areas, notably in housing
and banking activities. In these kinds of programs, appropriations and
other budget authority are provided for contingency backup, reserves,
and debt redemption. To the extent such authority is not used, the
amounts are carried forward as unobligated balances. Of the $62.8
billion Federal fund balances estimated to remain unobligated at the
end of 1973, $28.1 billion (45%) fall into this category.
The major portion ($21.2 billion) of this category is basically standby
and backup authority that, it is hoped, will not be used in the foreseeable
future. For example:
• $7,814 million is available for investment in the Internationa*
Bank for Reconstruction and Development and other international financial institutions, if these institutions make a "call"
upon member nations for more paid-in capital;
• $4,750 million is available for the Federal home loan banks and
for the Federal Savings and Loan Insurance Corporation;
• $3,000 million is available for the Federal Deposit Insurance
Corporation;
• $2,250 million is available for loans to the Federal National
Mortgage Association; and
• $1,000 million is available for the Securities Investor Protection
Corporation fund under the supervision of the Securities and
Exchange Commission.

SPECIAL ANALYSES

Table G-2. ANALYSIS OF FEDERAL FUND UNOBLIGATED BALANCES
(in millions of dollars)
Category and agency

Unobligated balances end of year
1971
actual

1972
estimate

1973
estimate

Guarantee and insurance programs: 1

Standby and backup authority:
International financial institutions
Federal Home Loan Bank Board:
Investment in Federal home loan banks
Federal Savings and Loan Insurance Corporation
Interest adjustment payments
Federal Deposit Insurance Corporation
Department of Housing and Urban Development:
Loans to Federal National Mortgage Association
Low-rent public housing
Flood and civil disorder insurance
Urban renewal loans and planning advances
Federal Housing Administration fund
Securities and Exchange Commission: Securities Investor
Protection Corporation fund
Veterans Administration: Loan guaranty fund
Farm Credit Administration: Banks for cooperatives investment fund, and short term credit investment fund__
National Credit Union Administration: Credit union share
insurance fund
Total standby and backup authority
Reserves for losses and debt redemption:
Federal Home Loan Bank Board: Federal Savings and Loan
Insurance Corporation
Department of Housing and Urban Development:
Federal Housing Administration fund
Participation sales fund
Department of Agriculture: Rural housing, Federal crop, and
agricultural credit insurance funds
Veterans Administration: Veterans insurance funds
International development assistance:
Overseas Private Investment Corporation
Housing guaranty fund
Other agencies
Total reserves for losses and debt redemption
Total guarantee and insurance programs
Loan programs:

7,114

7,397

7,814

4,000
750

3,000

4,000
750
50
3,000

2,250
972
569
257
156

2,250
894
572
20

2,250
863
570
26

1,000
524

1,000
556

1,000
471

260

106

113

124

20,958

20,812

21,177

2,615

2,831

3,051

1,314
678

1,454
393

1,631
571

146
470

417
527

646
588

204
49
42
5,519

238
49
39
5,948

323
48
39
6,897

26,477

26,760

28,074

Department of Housing and Urban Development:
Government National Mortgage Association: Special assistance
functions
College housing loans
Public facilities loans
Housing for the elderly or handicapped
Rehabilitation loans
Veterans Administration: Direct loan revolving fund
Department of Agriculture: Farmers home, rural electrification
and telephone loans
Department of Labor: Advances to the unemployment trust
fund
International development assistance: Development loans
Small Business Administration
Export-Import Bank
Other agencies
Total loan programs
See footnotes at end of table, p. 100.

3,767
1,320
225
64
4
680

4,632
955
187
76
53
843

4,605
925
149
93
14
925

377

433

559

347
463
418

349
330
194

351
330
151

1,458
253

358

321

9,375

8,409

8,424

100

THE BUDGET FOR FISCAL YEAR 19 73

Table G-2. ANALYSIS OF FEDERAL FUND UNOBLIGATED BALANCES
(in millions of dollars)—Continued
Category and agency

Procurement programs:1
Department of Defense—Military
Departmental of Agriculture: Removal of surplus agricultural
commodities
Other agencies
Total procurement programs
Construction and land programs:12
Postal Service
Department of Defense—Military
Tennessee Valley Authority.
Department of Transportation:
Urban mass transportation program
Grants for public lands and forest highways
Department of Agriculture: Forest roads and trails and rural
environmental assistance
Department of Housing and Urban Development: Grants for
urban renewal, water and sewer, and neighborhood facilities__
Funds Appropriated to the President: Appalachian regional
development program
Department of Interior: Land and water conservation fund and
road construction
Environmental Protection Agency: Construction grants
Other agencies
Total construction and land programs
Research and development programs:
Department of Defense—Military
Other agencies

Unobligated balances end of year
1971
actual

1972
estimate

1973
estimate

8,529

7,357

8,099

300
230

134
45

200
35

9,060

7,536

8,334

10,000
1,732
2,881

9,420
1,503
2,451

8,358
1,762
1,658

2,941
65

2,394
34

1,395

431

407

372

1,694

882

322

252

220

340
212
863

300
131
568

197
131
268

21,410

18,310

14,683

1,081
293

556
100

556
10

1,374

656

565

1,458
117

1,421
212

1,421
160

575
551

105

811

524

687

3,512

2,262

2,269

756

379

494

71,963

64,313

62,844

Total, research and development programs
1

Other balances:
Department of Defense—Military
Department of Transportation
Department of Housing and Urban Development: Model cities
programs
Postal Service
Other agencies
Total other balances
Balances of less than $20 million
Total Federal fund unobligated balances
1
2

Covers accounts with balances of $20 million or more.
Excludes loans for construction.

Most of the remaining balances of standby- and backup authority
are in the Department of Housing and Urban Development, principally for guaranteed private loans in the low-rent public housing
program ($863 million), and for prompt payment to insurance companies of insurance and reinsurance claims in flood and civil disorder
damage cases ($570 million).

SPECIAL ANALYSES

101

This category also includes balances held as reserves for losses, which
are primarily derived from fees, premiums, and other types of collections obtained from the protected groups themselves. Most of these
balances are akin to funds held in trust. Significant items in this group
include $3,051 million in fees and premiums collected from insured
savings and loan institutions, $1,631 million for Federal housing insurance, $646 million held in reserves for rural housing, Federal crop,
and agricultural credit insurance programs of the Department of
Agriculture, and $588 million held in reserves for Veterans Administration insurance programs. The Department of Housing and Urban
Development also has $571 million for payment to holders of participation certificates as they mature, which is in the nature of debt redemption
Loan programs.—Another sizable category of unobligated balances results from the financing of loan programs. Approximately
14% ($8.4 billion) of the total Federal fund unobligated balances
estimated to be carried over into 1974 is in loan programs.
These programs generally are financed through revolving or business-type funds, which are established to carry on a cycle of operations,
mainly with the public. Most of these funds are expected to be selfsustaining over a period of years. Their capital requirements are
supplied through appropriations or other forms of budget authority.
As they generate receipts from their own operations, the funds pay
interest on their borrowings and repay unneeded capital. Balances
relating to revolving funds usually consist of amounts on deposit with
the Treasury or of undrawn authorizations to borrow either from the
Treasury or directly from the public.
Approximately 69% ($5.8 billion) of the unobligated balances in this
category is in the Department of Housing and Urban Development,
largely for the special assistance functions of the Government National
Mortgage Association ($4,605 million) and for loans for college housing
($925 million).
Many of the programs in the Department of Housing and Urban
Development require budget authority on a long-leadtime basis in
order to provide assurance to the potential borrower or contractor
that adequate financing will be available when needed. The requirements for these programs are complex, and considerable time and
money are required on the part of the applicant to develop a project
to the stage where the Government can enter into a firm legal obligation. To deal with this problem, a reservation system has been worked
out under which the Government—on its books—sets aside sufficient
financing at the time it is convinced the applicant can develop a
project that will meet requirements. These reservations are converted
into legal obligations when an acceptable application is submitted
and approved. The amounts so reserved are counted as unobligated
until the final agreement or legally binding contract is actually
consummated.
The Veterans Administration carries unobligated balances estimated to total $925 million at the end of 1973 for housing loan programs for veterans. The Department of Agriculture is estimated to
have balances of $559 million at the end of 1973 for rural housing,
electrification, and telephone loan programs.
The Export-Import Bank has had sizable unobligated balances of
borrowing authority in past years. However, the Export Expansion

102

THE BUDGET FOR FISCAL YEAR 1 9 7 3

Finance Act of 1971 (Public Law 92-126) removed the Bank's receipts,
disbursements, and balances of budget authority from the budget
totals of the Federal Government, as of August 17, 1971. This change
in practice is reflected in the amounts shown for the Bank in this
table.
Procurement programs.—Of the $62.8 billion Federal fund balances estimated to remain unobligated at the end of 1973, $8.3
billion (13%) is attributable to the Government's major procurement programs. Approximately $8.1 billion (98%) of the balances
available for procurement is for the acquisition by the Department of
Defense of capital equipment, such as aircraft, missiles, ships, combat
vehicles, and other weapons. These sizable balances are due to the
relatively long leadtime required for such procurement and the application of a full-funding policy.
Full funding has the effect of setting a limit on the size of the specific
program or project. This approach discloses to Congress the estimated
full cost involved before the work actually begins, and requires that
the Congress provide budget authority for the estimated full cost
before the project is undertaken.
Under the full-funding concept, it should be recognized that funds
may be "committed" to a given purpose, even though legally unobligated. For example, in the Department of Defense, funds are committed wiien the contracting organizations are directed to proceed
with procurement—that is, before invitations to bid are issued. Thus,
funds are clearly earmarked for specific projects when contractors
are asked to bid. This avoids having bidders go to the expense of responding to an invitation to bid, only to find that no contract can be
awarded due to unavailability of funds.
Construction and land programs.—Programs in this category—
involving land acquisition and improvement, and construction of
facilities—account for $14.7 billion (23%) of the $62.8 billion Federal
fund balances estimated to remain unobligated at the end of 1973.
Most of these balances are in the Postal Service ($8,358 million),
in the form of borrowing authority provided by the Postal Reorganization Act (Public Law 91-375) of August 1970. Other major balances
include $1,762 for military construction of the Department of Defense,
$1,658 in the Tennessee Valley Authority, primarily for that agency's
power program, and $1,395 million in the Department of Transportation for the urban mass transportation program.
The full-funding policy discussed above under procurement also
applies to these major construction programs. However, there are a few
that are funded on an incremental basis, principally for reclamation,
rivers and harbors, and flood control projects. In these programs only
small unobligated balances are sometimes carried forward.
Unobligated balances of loans for construction are excluded here.
Such balances are included under loan programs.
Research and development programs.—Balances relating to
research and development programs amount to $565 million, or
approximately 1% of the unobligated Federal fund balances estimated at the end of 1973.

SPECIAL ANALYSES

103

Most of the unobligated balances in this category estimated for the
end of 1973 are in the Department of Defense—principally for the
development, testing, evaluation, and improvement of weapons
systems and related equipment. The "Other agencies" balance in this
category at the end of 1973 is held by the National Science Foundation. As indicated by the declining trend in this entry, balances held
by agencies other than the National Science Foundation—e.g., the
Environmental Protection Agency, the Atomic Energy Commission,
and the National Aeronautics and Space Administration—are estimated to be fully utilized by the end of 1973.
Other balances.—Of the remaining $2.3 billion (4%) of Federal
fund unobligated balances (in accounts with balances of $20 million
or more) to be carried forward into 1974, $1,421 million is in the
Department of Defense, mainly for industrial fund operations. These
balances are characteristic of industrial fund activity—they are
attributable to the timelag that occurs between receipt of a work order
by the fund, and completion of the work required under the order.
The Department of Transportation will have unobligated balances
of $160 million in this category by the end of 1973, representing highway beautification, State and community highway safety, and related
programs.
FEDERAL FUND OBLIGATED BALANCES

Table G-3 presents the major Federal fund obligated balances.
Such balances are composed of the unpaid portion of obligations
incurred by the Government in the form of orders placed, contracts
awarded, and services received.
Of the $92.4 billion Federal fund obligated balances estimated at
the end of 1973, $29.5 billion (32%) are attributable to the military
programs of the Department of Defense. The remaining obligated
balances of $62.8 billion (68%) are scattered among the various
civilian agencies and programs.
The major cause of obligated balances is the long leadtime required
in the procurement, construction, and research and development
activities of the Federal agencies.
There is also a considerable timelag involved in grants for capital
outlays, where the State or local government must be assured of the
availability of Federal funds before it lets a construction contract,
but the related Federal payments are phased out over several years
as work is performed. This applies to urban renewal in the Department of Housing and Urban Development; urban mass transportation
in the Department of Transportation; hospital, health, and higher
education in the Department of Health, Education, and Welfare;
and similar construction grant programs.
Loan programs also account for sizable obligated balances due to
the lag between the signing of the loan contract that creates the
obligation, and the payments over a period of time as cash is needed
by the borrower. This applies to loans to foreign borrowers, such as
those made by financial institutions under International development
assistance, and to domestic loans for programs such as rural electrification in the Department of Agriculture.

104

THE BUDGET FOR FISCAL YEAR 19 73

Table G-3. FEDERAL FUND OBLIGATED BALANCES (in millions of dollars)
Obligated balances end of year
Description

Department of Defense—Military:
Procurement
Research and development
Operation and maintenance
Construction and family housing
Military personnel
Other 1

1971
actual

1972
estimate

1973
estimate

14,920
3,390
2,388
1,086
550
679

16,121
3,795
2,591
1,328
709
586

18,760
4,370
2,704
2,081
823
809

23,013

25,130

29,547

3,865
2,199
479
923
608

4,224
2,100
566
569
674

4,922
2,484
576
492
199

3,069
1,064
779
241
601

3,772
1,149
719
277
601

4,032
1,166
935
221
646

1,185
318

1,399
371

1,558
510

2,677
3,431
1,670

3, 735
2,928
2,121

4,497
4,275
2,324

1,457
8
63
816

1, 740
183
186
1,011

1,981
213
425
1,137

491
1,138
1,008
1,631

920
1,722
1,404
2,850

1,205
1,995
1,565
3,838

1,082

1,173

2,022

5,735

7,616

8,038

2,366
274
138

1,307
326
201

1,243
428
226

1,463
913
964
3,848
2,763

1,723
1,519
982

1,923
2,595
1,069

3,282

4,085

Total civilian agencies

49,267

53,350

62,825

Total Federal fund obligated balances

72,280

78,480

92,372

Total Department of Defense—Military
Civilian agencies:
Funds Appropriated to the President:
International development assistance
International security assistance
Appalachian regional development programs
Office of Economic Opportunity
Other
Department of Agriculture:
Commodity Credit Corporation
Rural Electrification Administration
Farmers Home Administration
Agricultural Stabilization and Conservation Service
Other
Department of Commerce (mostly economic development and
maritime programs)
Department of Defense—CiviL
Department of Health, Education, and Welfare:
Office of Education (mainly grants to colleges, universities,
local school districts, and other educational institutions) ___
Social and Rehabilitation Service (mainly grants to States)__
National Institutes of Health
Health Service and Mental Health Administration (mostly
community mental health and hospital construction)
Office of Child Development
Other
Department of the Interior
Department of Justice (mostly Law Enforcement Assistance
Administration)
Department of Labor (manpower development and training)
Atomic Energy Commission (mostly research and development) _
Environmental Protection Agency (mostly construction grants) _
Department of Transportation (mostly urban mass transportation, highways and Coast Guard)
Department of Housing and Urban Development:
Community Development (mainly urban renewal fund)
Housing Production and Mortgage Credit: Federal Housing
Administration
Housing Management
Other
National Aeronautics and Space Administration (mostly research
and development)
Postal Service
Veterans Administration
Export-Import Bank
Other civilian agencies 2

Includes obligated balances of allowances for civilian and military pay raises of
the
D e p a r t m e n t of Defense (1972, $30 million; 1973, $135 million).
2
Includes obligated balances of allowances for pay raises, excluding D O D (1972, $10 million;
1973. $35 million; and contingencies 1972. $233 million; 1973. $430 million).

SPECIAL ANALYSES

105

The Export Expansion Finance Act of 1971 (Public Law 92-126)
removed the Export-Import Bank's receipts, disbursements, and balances of budget authority from the budget totals of the Federal Government, as of August 17, 1971. This change in practice is reflected in
the amounts shown for the Bank in this table.
TRUST FUND BALANCES

The balances of trust funds are shown in table G-4. The amounts
include both unobligated and obligated balances of trust fund authorizations. The unobligated balances include both the open book balances and investments in U.S. securities. The investments in such
securities are held until funds are needed to meet statutory requirements in subsequent years.
Table G-4. TRUST FUND BALANCES (in millions of dollars)
Balances end of year
Description

1971 actual
Unobligated

Federal old-age and survivors insurance
trustfund
Federal disability insurance trust fund.
Federal hospital insurance trust fund..
Federal supplementary medical insurance trust fund
Unemployment trust fund
Railroad retirement account..-.______
Civil service retirement and disability
fund
Federal employees health benefits fund.
Federal employees life insurance fund. _
Highway trust funds
Airport and airway trust fund
National service life insurance fund. _.
U.S. Government life insurance fund._
Foreign military sales trust fund
Federal Deposit Insurance Corporation
funds
__ .
Other trust funds
Total trust funds

1972 estimate

Obligated

Unobligated

Obligated

1973 estiimate
Unobligated

Obligated

31,502
6,073
3,044

2,843
337
59

32,035
6,657
4,460

3,214
389
81

32,341
6,879
9,095

3,395
407
94

245
11,282
4,694

45
23
157

461
9,528
4,637

45
49
168

717
9,145
4,739

50
69
171

24,755
108
1
6,210
829
6,051
740
2,345

279
48
975
7,496
460
372
21
320

27,575
135
1
6,962
564
6,043
694
3,225

300
57
1,133
7,834
941
385
21
520

30,617
181
1
8,336
284
6,305
668
3,825

344
69
1,304
7,364
965
404
22
620

4,351
650

322
41

4,748
646

348
45

5,173
632

356
40

15,530 118,938

15,674

102,880

13,798 108,371

SPECIAL ANALYSIS H
CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH

The trend of civilian employment in the executive branch reflects
generally rising workloads and strong efforts to achieve effective manpower utilization. Absorption of essential workload increases through
gains in employee productivity is central to these efforts.
As an integral part of the administration's new economic policy, the
President ordered, on August 15, 1971, a reduction in Federal employment. Decreases in defense activities will be accompanied by
decreases in a number of the civilian agencies. Reductions are being
made on a selective basis and are applied in a manner that provides
sufficient flexibility to permit new or expanding programs to move
ahead.
From January 1969 through June 1971 the level of Federal civilian
employment was reduced by 125,500. Further reductions of 29,800
are estimated by June 30, 1973. Reductions in the Department of
Defense, reflecting withdrawal of ground combat forces from Vietnam,
are slowing. The continued overall downward trend is indicative of
persistent administration efforts to keep the number of Federal
civilian employees to the minimum.
FULL-TIME PERMANENT CIVILIAN EMPLOYMENT

The flexible administrative controls on Federal employment in
effect since July 1969 continued to function satisfactorily, and succeeded in reducing the number of full-time permanent Federal civilian
employees as of June 30, 1971, by about 54,000 below the number
estimated 6 months earlier in the 1972 budget document.
For June 30, 1972, full-time permanent civilian employment
(excluding the Postal Service) is estimated to be 1,918,100, a decrease
of 37,400 from June 30, 1971. Compared to the estimate in the 1972
budget document, this represents a reduction of 80,700 or slightly
over 4.0%. Including the Postal Service, full-time permanent employment is estimated to be 2,531,500. This includes a conversion
of 3^,000 former temporary employees to full-time permanent status
as a result of a labor-management agreement between the Postal
Service and the postal employees' unions.
The number of full-time permanent civilian employees in the
executive branch at the end of 1973 is estimated to be 2,551,800.
Of this number 4 1 % will be employed in the Department of Defense,
while 7% will work for the Veterans Administration and 24% will be
employees of the Postal Service. Thus, these three agencies will account
for about 72% of all full-time permanent employment in the executive
branch.
Table H - l displays the projected changes in yearend full-time
permanent employment estimates.
106

107

SPECIAL ANALYSES

Table H-1. SUMMARY OF FULL-TIME PERMANENT CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH
As of June l
Agency

1971
actual

1972 estimate
In 1972
budget

Current

1973
estimate

Agriculture
84,252
87,300
83,000
83,400
Commerce-...
28,435
29,600
28,500
29,700
Defense—military functions
1,062,741 1,061,600 1,011,000 1,005,800
Defense—civil functions
_-..i.._
30,063
31,300
30,600
31,300
2
Health, Education, and Welfare
104,283
102,100
102,000
99,500
Housing and Urban Development
16,030
16,700
15,200
16,000
Interior
57,570
59,100
56,900
56,900
Justice
_
42,662
46,800
45,100
46,300
Labor
_„
11,352
12,100
11,800
12,600
State
23,398
23,700
22,700
22,800
Transportation
68,489
71,900
66,400
69,200
Treasury....
90,135
100,400
98,500
99,200
Atomic Energy Commission
6,920
7,000
6,700
6,900
Environmental Protection Agency
5,959
8,900
8,000
8,500
General Services Administration
38,076
41,600
39,400
39,400
National Aeronautics and Space Administration.
29,478
28,400
27,500
26,800
Veterans Administration
158,635
160.800
162,700
174,100
Other agencies:
Agency for International Development
13,477
11,100
12,400
11,800
Civil Service Commission
5,324
5,900
5,600
6,000
Selective Service System
5,569
6,500
6,200
6,100
Small Business Administration
4,004
4,200
4,000
4,000
Tennessee Valley Authority
13,612
13,300
14,000
14,000
Panama Canal
_
13,967
14,900
14,200
14,000
United States Information Agency __
9,773
9,900
9,400
9,400
Miscellaneous agencies
31,332
33,700
34,300
34,600

Change
1972-73

400
1,200
-5,200
700
-2,500
800
1,200
800
100
2,800
700
200
500
-700
11,400
-600
400
-100
_
-200
300

Subtotal
Allowance for contingencies 3

1,955,536 1,988,800 1,916,100 1,928,300
10,000
2,000
5,000

12,200
3,000

Subtotal
Postal Service

1,955,536 1,998,800 1,918,100 1,933,300
4
603,782
629,500
613,400
618,500

15,200
5,100

*2,559,318 2,628,300 2,531,500 2,551,800

20,300

Total

1
Excludes disadvantaged worker-trainees in the Public Service Careers
3
Reflects transfer of federally operated hospitals to local communities.
3
Subject
to later distribution.
4

program.

Adjusted to include approximately 39,000 employees previously erroneously classified and,
under a labor-management agreement, to be reclassified as full-time permanents in 1972.

Most of the 1973 employment increases occur in:
(1) The Veterans Administration, up by 11,400, for better quality
medical care to a greater number of veterans in its hospitals, extended
care facilities, and outpatient clinics and other improved services
to veterans.
(2) The Postal Service, up by 5,100 or 0.8%, to service a 2.1%
increase in mail volume.

108

THE BUDGET FOR FISCAL YEAR 1973

(3) The Department of Transportation, increased by 2,800, primarily for air traffic controllers, maintenance, and logistics personnel
required for increased air traffic, and other increases for expanded
urban and safety programs.
(4) The Department of Commerce, up by 1,200, primarily for
the newly organized Social and Economic Statistics Administration,
National Oceanic and Atmospheric Administration and the Patent
Office.
(5) The Department of Justice, up by about 1,200. Nearly half the
increases are in the Bureau of Prisons. The remaining increases
are provided for legal staff support for organized crime strike forces,
the economic stabilization program, civil rights, and a major emphasis
on street and mid-level drug enforcement efforts.
(6) The Department of Housing and Urban Development, up by
800, to provide more effective administration of subsidized housing
programs and to deal with current and projected growth in workload
related to all housing programs.
(7) The Department of Labor, up by 800, primarily for the new
occupational safety and health program.
(8) The Treasury Department, a net increase of 700 in the Bureau of Accounts, the Bureau of Printing and Engraving, the Bureau
of Public Debt, the Office of the Treasurer, and the Comptroller of
the Currency.
(9) The Environmental Protection Agency, up 500, reflecting
increased emphasis on enforcement of air and water quality standards.
Significant decreases occur in four agencies. These are:
(1) The Department of Defense, down by 4,500, reflecting workload
reductions resulting from withdrawals from Vietnam.
(2) The Department of Health, Education, and Welfare, a net
decrease of 2,500, representing the proposed transfer of federally
operated hospitals to local communities. The decrease is partially
offset by increased emphasis on consumer safety activities in the Food
and Drug Administration.
(3) The National Aeronautics and Space Administration, down
by 700, due to a rephasing of space program activity.
(4) The Agency for International Development will decline by
600; virtually all of these reductions are in overseas employment,
reflecting further consolidation and centralization of the agency's
activities.
TOTAL FEDERAL PERSONNEL

Within the category of total Federal civilian employment, full-time
permanent employees will account for slightly more than 9 1 % in
1973. The balance is made up of part-time employees, intermittent
employees (those employed on an irregular basis), and full-time
temporary employees (those in positions occupied for less than a
year). The term "total Federal personnel'' as used here encompasses
Armed Services personnel and civilian employees in the legislative
and judicial branches as well as the executive branch civilian employment previously described. The various categories are shown in
table H-2.

SPECIAL ANALYSES

109

Table H-2. TOTAL FEDERAL GOVERNMENT EMPLOYMENT
Descripti on

Civilian employment in the executive branch:
Full-time permanent *
Other than full-time permanent3
Armed services personnel on active duty:
Department of Defense4
Department of Transportation (Coast Guard)
Subtotal
Legislative and Judicial personnel
Total

As of June
1971
actual

1972
estimate

1973
estimate

2 2,559,318
2
263,566

2,531,500
253,400

2,551,800
241,300

2,713,981
38,049

2,391,800
38,400

2,358,000
38,800

5,215,100

5,189,900

5,574,914
40,010

5,614,924

1
2

Excludes disadvantaged worker-trainees in the Public Service Careers program.
Adjusted to reflect approximately 39,000 Postal employees erroneously classified and,
under
a labor-management agreement, to be reclassified as full-time permanents in 1972.
3
Excludes disadvantaged summer and part-time workers under the President's Youth Opportunity
Campaign.
4
Excludes Reserve components.

PERSONNEL COMPENSATION AND BENEFITS

Table H-3 presents selected data on the Federal payroll and related
costs.
Table H-3. PERSONNEL COMPENSATION AND BENEFITS (in millions of dollars)

Description

Civilian personnel costs: 2
Direct compensation
Personnel benefits
Total
Armed Forces personnel costs: 3
Direct compensation
Personnel benefits
Total

1971
actual

1972
estimate

1973
estimate

29,277
2,591

31,200
3,000

31,700
3,000

31,868

34,200

34,700

16,567
3,959

16,800
4,100

16,600
4,200

20,526

20,900

20,800

1
Excludes budget allowances of $1.1 billion for 1972 and $3.2 billion for 1973 for military and
civilian
pay raises effective in January 1972 and during 1973.
2
Excludes Members and officers of Congress.
3 Excludes Reserve components.

Direct compensation of the Federal work force includes: basic pay,
premium pay for overtime, holidays, Sundays, night work and
hazardous duty, and differentials for overseas duty. Additional
related compensation in the form of personnel benefits encompasses
such items as: the Government's share of Federal retirement and oldage survivors' and disability insurance, health insurance and benefits,
and similar disbursements. Other items included are: Cost-of-living
and quarters allowances, uniform allowances (when paid in cash),

110

THE BUDGET FOR FISCAL YEAR 1973

and, in the case of military personnel, allowances for subsistence,
reenlistment bonuses, and certain other cash payments.
Obligations for civilian personnel compensation and benefits in 1973
are projected to be $34.7 billion.
A portion of the personnel compensation is offset by receipts from
rents, royalties, and the sale of property and products, while compensation of others is paid from public enterprise funds such as the Postal
Service. The cost of these employees, included in table H-3, but not
chargeable to general taxation or borrowing, amounts to $8.4 billion
in 1973. After allowing for the offsets, the remaining cost of Federal
civilian employee compensation is 10.7% of the budget totals.
Salary rates for Federal employees under statutory pay systems are
adjusted, based on appropriate annual surveys conducted by the
Bureau of Labor Statistics, so as to achieve comparability with rates
paid for the same work levels in private enterprise. In the Economic
Stabilization Act Amendments of 1971, Congress directed that pay
adjustments based on the 1971 survey be made in January 1972, but
provided that these adjustments couid not be greater than the wage
and salary guidelines authorized for the private sector under the
economic stabilization program. The maximum annual aggregate
average increase specified by Pay Board standards is 5.5%. An
average pay adjustment of that amount was made in January 1972,
and a related increase, as required by law, was made in military
basic pay. Total allowances for civilian and military pay increases of
$3.2 billion are carried in the 1973 budget to cover the cost of the
January 1972 increase and further adjustments in 1973.
Under the Coordinated Federal Wage System, adjustments of pay
scales for Federal "blue collar" workers are made, in accordance with
the law, so as to set the pay for such employees at levels corresponding with prevailing local private industry rates. In order to treat
these employees in the same manner as those under the statutory pay
systems, as well as workers in the private sector, the President has
ordered that adjustments in their wages be similarly limited to
the 5.5% annual aggregate increases allowable under Pay Board
standards.
GEOGRAPHICAL DISTRIBUTION OF EMPLOYMENT

Table H-4 depicts the geographical distribution of Federal civilian
employment. The vast majority of Federal employees—83%—work
in the various States. Some 6% are employed in foreign countries
and in U.S. territories and possessions, with the employees in foreign
countries being, for the most part, nationals of the countries in which
they work. The remaining employees, 11%, are accounted for in the
Washington metropolitan area (which includes bordering areas of
Maryland and Virginia).

111

SPECIAL ANALYSES

Table H-4. FEDERAL CIVILIAN EMPLOYMENT BY GEOGRAPHICAL
LOCATION (as of June 1971)
Location

Washington, D.C., metropolitan
area 2
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland3
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
_
North Carolina
North Dakota
Ohio
Oklahoma
1
2
3

Total employment *

334,250
56,250
14,580
29,236
17,367
308,655
43,857
20,355
4,914
71,432
76,376
26,920
8,477
109,601
45,028
18,435
22,990
35,398
28,815
14,413
63,732
64,144
53,395
29,802
21,432
67,076
10,717
15,498
8,543
5,638
65,704
26,629
179,200
38,390
8,373
99,994
54,064

Total employment i

Location

Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia3
Washington
West Virginia
Wisconsin
Wyoming

24,898
139,682
14,790
29,971
9,663
46,364
149,526
39,998
3,251
77,040
53,908
13,621
26,420
5,390

Total United States

2,734,202

Outside United States:
Territories and possessions
Foreign countries

56, 360
132,279

Total outside United States
U.S. citizens
Foreign nationals 4

188,639
(53,914)
(134, 725)

Total employment
Disadvantaged youth
Public Service Careers employees.

2,922,841
—58,055
—1,892

Total employment,
justed
Legislative and judicial

2,862,894
—40,010

ad-

Total executive branch
2, 822, 884
Distribution as follows:
5
Full-time permanent
(2, 559, 318)
Temporary, part-time, and intermittent s
(263,566)

Distribution by State is partially estimated.
Includes employees of the executive branch and of the legislative and judicial branches.
Excludes employment within the Washington, D.C., metropolitan area, which includes the
District
of Columbia and the adjacent counties and cities in Maryland and Virginia4
Excludes 96,219 foreign nationals provided to the Department of Defense under contract agreements, or other arrangements with foreign governments which provide for the furnishing of personal
services.
5
Adjusted to reflect approximately 39 000 Postal employees erroneously classified and, under
a labor-management agreement, to be reclassified in 1972.

112

THE BUDGET FOR FISCAL YEAR 1-973
TRENDS IN WORKLOAD

Although civilian employment is being reduced in some agencies and
activities, expanding programs, population growth and demands for
more and better services combine to exert pressures for workload
increases. Examples of some of these workload increases are:
• Patent applications are expected to increase by about 3 % in 1973.
• Criminal cases in process of completion by the Department of
Justice are expected to rise by 16%.
• The number of civil rights cases filed by the Justice Department
is expected to increase 15%.
• The Bureau of Narcotics and Dangerous Drugs expects to make
1,100 more narcotics arrests, seize 19% more clandestine drug
labs, and double the planned amount of heroin seized in the previous year.
• Inspections of food processors will increase by 56%; product
safety inspections and injury investigations by 300%.
• Inspection of worksites under the Occupational Safety and
Health Act of 1970 will increase by almost 60%.
• Mail volume is expected to rise by 2.1% to a level of 91.7 billion
pieces.
• The number of persons receiving monthly benefits under Federal
old age and survivors' insurance will increase from 24.4 million
to 25.1 million.
• The growth in unit applications for FHA mortgage insurance will
approach 11.2%.
• The number of home loans guaranteed by the Veterans Administration will increase by 5.6%.
• Under the Emergency Employment Act of 1971, transitional
employment opportunities will increase by almost 25%.
• Persons arriving from foreign countries and requiring processing
through customs will increase by 5% and formal entries of
cargo will increase by 8.1%.
• Tax returns filed with the Internal Revenue Service will increase
by 2.1% to 113.6 million.
• Air traffic is expected to increase at an annual rate of 8%.
A requirement for improved employee productivity has become
even more stringent in view of the 1972 employment reduction effort.
This has made it possible to hold the anticipated growth in Federal
manpower to an acceptable minimum level.
POPULATION AND GOVERNMENT EMPLOYMENT COMPARISONS

The ratio of Federal employment to total employment in all
governmental units—Federal, State, and local—has declined steadily
since 1969. As table H-5 and the accompanying chart illustrate,
this proportion is estimated to be about 20% in 1973.

113

SPECIAL ANALYSES

Government Civilian Employment
Millions of Employees

12-

'43 1945
End of Fiscal Year

1950

1955

i960

1965

1970

"73
Estimate

The ratio of Federal civilian employment to population (see table
H-5) has exhibited a nearly continuous decline for over 20 years, and
has decreased steadily since 1969. The ratio is expected to be 13.1 per
thousand in 1973.
Table H-5, covering the period 1943-73, presents a comparison of
total Federal civilian employment in the executive branch with State
and local government, and the U.S. population. The Federal employment data includes temporary and part-time personnel.

http://fraser.stlouisfed.org/
480-700 O—72
Federal Reserve Bank of St. Louis

114

THE BUDGET FOR FISCAL YEAR 1-973

Table H-5. GOVERNMENT EMPLOYMENT AND POPULATION, 1943-73
Popuhition

Government employment

1943...
1944.__
1945. _
1946.
1947_
1948..
1949. .
1950. _
1951
1952
1953_
1954
1955___
1956
1957
1958
1959
1960 2___
19621963 3
1964 3
1965
1966.._
1967.__
1968.__
1969 <__
19702
1971 2 _
1972
1973.

Federal

State and

All govem-

Federal as

branch1
(thousands)

ments
(thousands)

units
(thousands)

all governmental
units

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
2,496
2,664
2,877
2,951
2,980
2,884
2,823
2,785
2,793

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
6,834
7,236
7,683
8,259
8,730
9,141
9,496
9,869
10,259
(5)

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
9,324
9,705
10,179
10,923
11,607
12,092
12,476
12,753
13,082

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
30.9
29.5
28.9
28.1
27.7
27.6
26.7
25.4
24.5
24.4
24.8
24.4
23.9
22.6
21.6
20.7
20.2

Total
United
States
<(thousands)

137,250
138,916
140,468
141,936
144,698
147,208
149,767
152,271
154,878
157,533
160,184
163,026
165,931
168,903
171,984
174,882
177,830
180,667
183,672
186,504
189,197
191,833
194,237
196,485
198,629
200,619
202,599
204,800
207,036
209,484
212,155

Federal
ment per
1.000
population

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
13.2
12.9
12.8
13.6
14.5
14.7
14.7
14.1
13.6
13.2
13.1

students
employed part time.
2
Includes temporary employees for the decennial census.
3
Excludes 7,411 project employees in 1963 and 406 project employees in 1964 for the public
works acceleration program.
^ On Jan. 1, 1969, 42,000 civilian technicians of the Am
--

PART 2

FEDERAL SOCIAL PROGRAMS

115

INTRODUCTION
Part 2 furnishes Government-wide program and financial information in seven social program areas—education, manpower, health,
income security, housing, civil rights, and crime reduction. I t includes
the special analyses designated 1 through O.
The figures used in these analyses differ from the data shown under
somewhat similarly titled categories of the functional classification
used in Part 4 of the Budget and elsewhere. I n the functional classification, each activity is categorized according to its major purpose;
thus all the military spending of the Department of Defense falls into
the functional category, National defense. I n these special analyses,
however, all spending for education, health, etc., is included, even if
the activity has a different primary purpose. Thus the tabulations here
are more comprehensive with regard to these particular types of social
programs.
The Government's commitment of resources for these purposes is
evidenced in the tabulation below. This is not a complete representation, however, since some resources also go into other social programs
t h a t are not explicitly covered by a special analysis in this volume.
FEDERAL OUTLAYS FOR SELECTED SOCIAL PROGRAMS. 1973
[In millions of dollars]
Outlays
Description

Special analysis:
I. Education
J. Manpower
K. Health
.
L. I ncome security
M. Housing
N. Civil rights
0. Reduction of crime.

14.351
5.114
22.947
90,179
1.261
2.522
2.321

Subtotal

138,695

Deduction for duplications included above
Total

Civilian
agencies

Department of
Defense

1.344

2.580
5.102

795
38
9,886

All
agencies

15,695
5.141
25,527
95,281
2,056
2,560
2,321
148,581
—26,893
121,688

Some activities of the Government serve more than one social
purpose; for example, the Medicare and Medicaid programs may be
considered as a part of both the Federal health and income security
programs. An estimate of $14,480 million for 1973 is included in both
the health and income security categories. Thus, in adding the seven
categories to a total, a deduction must be made to avoid double
counting.
116

SPECIAL ANALYSIS I
FEDERAL EDUCATION PROGRAMS
PART I—OVERVIEW

The 1973 Federal budget provides outlays of $15.7 billion for aid to
education an increase of $1.1 billion over 1972. This amount comprises 6.4% of total Federal spending in 1973. Federal outlays for education have risen over $12 billion since 1963. Of this amount, $6 3
billion has been allocated to elementary and secondary education
resulting in over a fivefold increase during this period. Federal support
of higher education has risen $5.8 billion and is now over four times the
1963 level.
Federal Education Outlays, 1963-1973
$ Billions

16-

Federal education programs may be viewed as serving two major
purposes. First, a number of programs give direct aid to educational
institutions and individuals attending them. These programs constitute 60% of total Federal spending for education and consist principally of the programs administered by the Office of Education, assistance for former servicemen under the GI bill, and payments to
students who are children of deceased or disabled social security
beneficiaries.

117

118

THE BUDGET FOR FISCAL YEAR 1973

Table 1-1. MAJOR FEDERAL EDUCATION ACTIVITIES (in billions of dollars)
Outlays

Program
1971

Direct support to education:
Office of Education programs (HEW)
GI education benefits (VA)
Social security benefits for children in school (HEW)
Education of American Indians (Interior) and overseas dependents (DOD)
Head Start (HEW)
NSF science education and HEW special institutions
College housing loans and Model Cities (HUD)
National Foundation for Higher Education and National
Institute of Education (HEW)
Subtotal direct support
Indirect support of education:
Research at academic institutions * (20 agencies)
Child nutrition (Agriculture)
Health and other scientific professional training 1 (7 agencies) __
Training of Federal and other public employees at educational
institutions (12 agencies)
Military service academies and ROTC (DOD)
Agricultural extension (Agriculture)
Education aid to foreign countries (AID)
All other (23 agencies)
Subtotal indirect support
Total
1

1972

1973

4.6
1.5
.6

4.9
2.0
.7

5.2
2.2
.7

.3
.4
.2
.2

.4
.4
.2
.2

.4
.4
.2
.2
.1

7.8

8.8

9.4

1.6
.9
.8

1.7
1.3
1.0

1.9
1.4
1.1

.4
.3
.2
.1
.6

.4
.4
.2
.1
.7

.4
.4
.2
.1
.8

4.9

5.8

6.3

12.7

14.6

15.7

Excludes portion included in Office of Education.

Second, a number of other Federal programs purchase or support
educational services as a means of meeting other national objectives.
Examples of programs providing such indirect support are university
research to extend medical knowledge, training of professional manpower to improve delivery of health services, school lunches to provide
better child nutrition, and agricultural extension of services to improve
farm production and rural life. Such activities account for 40% of total
education outlays.
Another way to classify Federal funds for education is on the basis
of who receives the assistance. About two-thirds of Federal outlays
will be paid to educational institutions. The Office of Education
estimates that total spending of U.S. educational institutions will
reach $86 billion in 1971-72. Of this amount, an estimated $9.7 billion
or 11% will come directly from Federal sources. The remaining onethird of Federal education funds in fiscal 1972—$4.9 billion—will be
spent through other means, for example, by students who directly
receive Federal grants and loans for tuition and room and board, by
noneducational institutions for services such as Head Start and Model
Cities projects, and by educational institutions overseas which receive
Federal support through our foreign aid program.

SPECIAL ANALYSES

119

The remainder of part I of this analysis highlights Federal education policies and the major legislative proposals for 1973. Part II
discusses the principal Federal programs by level of education. Part
III indicates the degree to which different Federal agencies are
supporting education and contains technical notes on coverage and
scope of the analysis.
EDUCATION POLICIES AND THE 1973 BUDGET

In education, as in other domestic fields, the Federal Government
is emphasizing reform and renewal to improve performance and
concentrate resources on meeting urgent national problems. The
1973 budget proposes legislation that would establish a number of
new Federal education programs to meet high priority needs. The
proposals and their cost are shown in table 1-2. The budget authority
figures are the amount of funds Congress will be asked to appropriate
once the authorizing legislation has been enacted. The outlay figures
represent estimates of the cash requirements or checks issued to
grant recipients during each fiscal year.
Table 1-2. LEGISLATIVE PROPOSALS FOR NEW EDUCATION PROGRAMS
(in millions of dollars)
1972
Proposal

Emergency school assistance
Education revenue sharing
National Institute of Education
National Foundation for Higher Education
Total.

Budget
authority

1973

Outlays

500

3
3
506

Budget
authority

Outlays

2
1

1,000
224
125
100

381
110
50
30

1,449

571

Elementary and secondary education.—The Federal role in elementary
and secondary education is threefold: (1) the allocation of financial
resources on a broad and continuing basis to help States and local
school districts meet their responsibilities; (2) the provision of national
leadership to help reform and renew our schools to improve performance; and (3) the concentration of resources to meet urgent national
problems during the period when they are most intense.
The administration's proposal for education revenue sharing would
strengthen the first role by providing a new and expanded system of
Federal aid to our schools. This proposal would pull together more
than 30 separate existing Federal aid programs to provide States and
local school districts greater flexibility to coordinate and concentrate
Federal funds to more effectively meet their educational needs. Funds
would flow automatically to States under a formula established by law
with no State matching required and with no State receiving less than
it does now under the present grant system.

120

THE BUDGET FOR FISCAL YEAR

1973

Table 1-3. SPECIAL REVENUE SHARING FOR ELEMENTARY AND
SECONDARY EDUCATION (in millions of dollars)
Programs included in the 1973 budget

Department of Agriculture:
School lunch and related programs (excluding assistance for needy children) _
Department of Health, Education, and Welfare (Office of Education):
Educationally deprived children
Aid to federally affected areas
Education for the handicapped
Vocational education
Library resources, strengthening State education agencies, supplementary
centers, and other supporting services
Subtotal
.
Additional amounts for special revenue sharing
Total

1973 estimate
Budget
authority

Outlays

224

219

1,598
370
38
475

1,521
413
37
468

308

329

3,013
224

2,987
110

3,237

3,097

To strengthen the Federal leadership role in reforming and renewing
our Nation's schools, the administration has proposed the creation
of a National Institute of Education to bring to education the intensity
and quality of research and experimentation which the Federal
Government has devoted to agricultural and medical research. The
National Institute would serve as a focal point for identifying educational problems, for the systematic study of such problems, and for
development of new ways to alleviate them. Education R. & D.
activities now administered by the Office of Education totaling $87
million in 1972 will be transferred to the Institute in 1973.
To fulfull the third Federal role, the administration has proposed an
Emergency School Aid Act to provide $1.5 billion over a 2-year period
to help meet the special problems of desegregating the Nation's
schools. Progress in school desegregation has accelerated. Since 1968
there has been a 71% reduction in the number of students attending all black schools. The emergency school assistance program
would help local communities expedite and adjust to this change,
while maintaining and improving the quality of education in affected
schools. Funds made available in 1972 and 1973 will be spent in
succeeding years allowing careful development of programs to achieve
these objectives.
Higher education.—Two major objectives for direct Federal Governmend aid to higher education are:
• To help insure that no qualified student who wants to go to
college will be barred by lack of financial resources; and
• To help colleges and universities meet the educational needs
of the next decade through renewal, reform, and innovation in
higher education.
To meet the first objective, the administration has proposed to
reform the present Office of Education programs of financial aid to
college students. The proposal would assure that Federal funds go
first, and in the largest amounts, to the neediest students, in order

SPECIAL ANALYSES

121

to place them on an equal footing with students from higher income
families. The proposal also provides for an expansion of loans for all
students through greater reliance on private capital resources.
The administration has also proposed to provide improvements in
veterans education programs under the GI bill which are administered
by the Veterans Administration. Under this proposal the benefit
rate would be increased from $175 to $190 per month.
To spur innovation in institutions of higher education, the administration has also proposed legislation to create a National Foundation
for Higher Education. As a new Federal agency, the Foundation will
assist colleges to experiment with new educational forms and
techniques.
PART II—FEDERAL OUTLAYS FOR EDUCATION BY LEVEL
ELEMENTARY AND SECONDARY EDUCATION

In 1973, outlays for elementary and secondary education will
amount to $6.3 billion, an increase of $583 million over 1972. Federal
funds supply about 7% of national expenditures for elementary
and secondary education in public and nonpublic schools. Table 1-4
displays Federal outlays by agency and major program. Nearly half
of the total is for grants to States and local school districts under
various programs administered by the Office of Education. Another
13% is for Head Start and other demonstration projects which are
developing new approaches to education. About one-fifth is for
grants to States for school lunches and child nutrition by the Department of Agriculture.
Table 1-4. FEDERAL OUTLAYS FOR ELEMENTARY AND SECONDARY
EDUCATION BY AGENCY AND PROGRAM (in millions of dollars)
Agency and program

Agriculture: Child nutrition
Defense: Education of overseas dependents
Health, Education, and Welfare:
Office of Education:
Emergency school assistance
Grants to States and school districts
Demonstration projects
National Institute of Education
Office of Child Development: Head Start
Social Security Administration: Student benefits
Interior: Indian education
Labor: Neighborhood Youth Corps in-school
Housing and Urban Development: Model Cities
National Science Foundation: Science education
Other Federal agencies
Total

1971
actual

1972
estimate

1973
estimate

928
156

1,309
172

1,374
197

51
2,551
361

103
2,660
433
2
376
177
182
75
71
31
171

381
2,737
428
50
387
189
206
75
99
35
187

5,762

6,345

366
160
180
64
52
36
154
5,059

Table 1-5 presents Federal outlays by sublevel and type of support.
The following paragraphs describe current Federal activities by sublevel.

122

THE BUDGET FOR FISCAL YEAR

1973

Table 1-5. FEDERAL OUTLAYS FOR ELEMENTARY AND SECONDARY
EDUCATION BY SUBLEVEL AND TYPE OF SUPPORT (in millions of dollars)
Sublevel and type of support

1971
actual

1972
estimate

1973
estimate

5,059

5, 762

6,345

Early childhood
Elementary and secondary
Supporting services

489
3,992
578

527
4,557
678

538
5,064
743

Current operations
Facilities and equipment
Student support
Education personnel training
Educational research

4,084
187
240
164
384

4,649
195
273
165
480

5,147
194
285
165
552

Total, elementary and secondary

Early childhood education.—Research findings strongly support
the contention that a child's potential is determined to a significant
extent by the nature of his environment during the first 5 years of life.
In order to break the chain of inherited disadvantage from poverty, it
is necessary to reach children before they enter school. Many questions
remain unanswered as to what action should be taken by persons
outside the family and what objectives are to be accomplished.
Federal preschool programs support research and experimentation
in child development as well as direct services for young children.
Federal early childhood research and demonstration programs included
in this special analysis are:
• The Office of Child Development (OCD), located in the Department of Health, Education, and Welfare, which provides leadership and coordination for all Federal programs for preschool
children, and carries on a program of basic research in early
childhood. Studies on the impact of television on the family,
father absence, and preparation for parenthood will be conducted
in 1973.
• The Head Start experimental program which supports a variety
of preschool models including: Home Start, designed to reach
children in their own homes; Health Start, focused on improving
medical services for low-income preschoolers; and an infant care
program which is exploring services for children up to 3 years of
age.
• Preschool programs for handicapped children which are operated
by the Office of Education to demonstrate successful models for
overcoming handicapping conditions which local school systems
can adopt.
Federal funds which support direct services to preschool children
focus care on the disadvantaged. Federal programs included in this
analysis are:
• Head Start, operated by OCD, which demonstrates and provides
a variety of services—educational, medical, and social—for
300,000 3- to 5-year old children.
• Kindergarten and prekindergarten programs which are supported
under grants to schools for the education of the disadvantaged
at the option of local school districts.

SPECIAL ANALYSES

123

Table 1-6. FEDERAL FUNDS FOR EARLY CHILDHOOD EDUCATION
(in millions of dollars)
Outlays

Budget
authority
1973

Type of support, agency, and program
1971

Research and demonstration:
Office of Child Development (OCD) :
Early childhood R. & D
Head Start experimental program
Office of Education:
Early childhood demonstrations for the handicapped..
Sesame Street

1972

1973

3
2

4
7

12
10

6
3

7
5

11
5

363
92
21
8

364
98
39
11
1

369
93
37
15
1

376
96
37
12
1

Subtotal

484

513

515

522

Total

489

527

538

560

Subtotal
Basic support:
Office of Child Development: Head Start
Office of Education: Education of the disadvantaged. _
Department of Agriculture: Child nutrition programs..
HUD: Model Cities
Interior: Grants to territories

Additional Federal support amounting to $410 million is provided
for day care as a support to employment and is discussed in Special
Analysis J, "Federal Manpower Programs."
Elementary and secondary education.—The 1973 budget is designed
to provide financial resources on a broad and flexible basis to help
States and localities meet their responsibilities as well as urgent
national problems.
An important element of the administration's reform of Federal aid
programs is the legislative proposal for special revenue sharing which
pulls together a large number of narrow-purpose categorical grants for
elementary and secondary education. This proposal would retain the
essential framework of national policy but would give States and localities a wider degree of discretion as to how they would meet their own
local problems. The proposal would also permit a large margin of
flexibility to move funds from one broad purpose to another to enable
States to respond to their own priorities. A total of $3.2 billion would
be provided in 1973. This includes $3.0 billion for existing categorical
grants and $224 million to insure that no State will receive less in 1973
than it did in 1972 under present programs.
The administration's legislative proposals for general Federal
revenue sharing and welfare reform will also have a significant impact
on the financing of elementary and secondary education. Under general
revenue sharing, the Federal Government would share a portion of the
growing Federal taxes with States and local governments to use as they
determine (see Special Analysis P). Education is certain to be a major

124

THE BUDGET FOR FISCAL YEAR 19 73

beneficiary of this measure. Also, the proposed welfare reform will
free States of a significant portion of fast-growing welfare costs and
lead to a more stable home environment for thousands of children (see
Special Analyses J and L).
Two areas where the Federal Government is proposing to launch
major new initiatives are aid to desegregating schools and the promotion of career education. Since 1968, progress in school desegregation
has resulted in a reduction from 40% to 12% in the number of
children attending all-black schools. In the South, the progress has
been even more dramatic. The number of children attending allblack schools in 11 Southern States has decreased from 68% in 1968 to
9% in 1971. The administration's $1.5 billion legislative proposal for
emergency school assistance will help achieve the early completion of
school desegregation.
Table 1-7. FEDERAL OUTLAYS FOR VOCATIONAL AND CAREER
EDUCATION (in millions of dollars)
Level, agency, and program

Elementary and secondary:
Appalachian regional development programs: Vocational education programs
Health, Education, and Welfare:
Office of Education:
Basic support of State vocational education programs
Cooperative education and work study
Grants to States for research and innovation
Career education model development and demonstration... _

1971
actual

1972
estimate

1973
estimate

207
14
15
5

236
18
31
14

253
19
36
23

260

321

354

119
6
4
4

134
8
13
5

144
9
15

Subtotal

133

160

176

Total

393

481

Subtotal
Postsecondary and adult:
Health, Education, and Welfare:
Office of Education:
Basic support of State vocational programs
Student assistance: Cooperative education
National Technical Institute for the Deaf
Housing and Urban Development:
Model Cities grants for vocational education

The objective of career education is to create an educational system
which would assure that all students have an opportunity to acquire
productive occupational skills. Our present education system fails to
prepare large numbers of students to perform effectively in the labor
market. The Office of Education and the National Institute of Education will work closely with the States on the creation of a new style of
education structured around the theme of career development. The
initial focus is to develop a series of new models of career education
which can later be disseminated to all levels of education. Efforts will

SPECIAL ANALYSES

125

also be made to strengthen the postsecondary opportunities for disadvantaged students in career education and to involve employers
more directly in their educational experiences. Table 1-7 presents
the budget outlays for vocational and career education programs.
Supporting services.—Outlays in this category support education
research and demonstration projects, development and dissemination
of exemplary education programs, and education personnel training.
The Federal Government is a major source of funds for support of
education research and development. In 1973, outlays for research and
demonstration projects are estimated to increase by $69 million to
$712 million. A key element of the administration's efforts to promote innovation and reform through the development of new educational techniques and services is the legislative proposal to establish
a National Institute of Education. With a budget of $125 million
in 1973, the new Institute would conduct internal research and manage
external projects concentrated on three problem areas—improving the
education of the disadvantaged, quality of education, and resource
use in education.
Ongoing research and development efforts will continue in 1973.
The experimental schools program supports a limited number of comprehensive educational projects, and will provide evaluation and documentation on results of the new practices and techniques which are
developed. The Follow Through program is a large-scale research and
demonstration effort designed to develop and evaluate a number of
approaches to education of disadvantaged children. In 1973 initial
results will be available on the first group to complete three primary
years in Follow Through.
Another effort to foster educational reform and change is the
Office of Education's new educational renewal initiative. Several
existing OE elementary and secondary project grant programs with
outlays of $239 million will be administratively coordinated in a
single office. Local school districts will be able to submit a single
application for a comprehensive grant under these programs in 1973.
A portion of these funds will be concentrated on a limited number of
low-income school districts to encourage comprehensive planning
and integrated programs at the local level. Federal funds of $16
million will support a new experimental system of information dissemination to help install promising new educational techniques.
The Office of Education will continue to support a number of
successful personnel development programs which will benefit over
165,000 individuals who will upgrade or acquire new skills in the
education field. Funds will be increased for major educational technology demonstrations, a new television reading program, and the
national right-to-read program. The 1973 budget also continues support for the national assessment of educational achievement being
conducted by the Education Commission of the States. Table 1-8
summarizes the Federal outlays for education research and innovation.

126

THE BUDGET FOR FISCAL YEAR 1973

Table I-& FEDERAL OUTLAYS FOR ELEMENTARY AND SECONDARY
EDUCATION RESEARCH AND INNOVATION (in millions of dollars)
Agency and program

1971
actual

1972
estimate

1973
estimate

Research and development:
Health, Education, and Welfare:
National Institute of Education
Office of Education research and development

2
90

50
54

Subtotal, research and development

104

82
11
48
34
5

91
34
69
41
6

90
45
60
41
10

3
5
112
54
29
41

20
15
132
60
43
40

37
21
142
65
52
45

Subtotal, innovation and demonstration

440

551

608

Total....

525

643

712

Innovation and demonstration:
Health, Education, and Welfare: Office of Education:
Educational renewal:
Renewal site development and dissemination
Bilingual education and drop out prevention
Follow Through
Teacher Corps and other personnel development
Career education model development and training
National priority programs (including right to read, drug
abuse education, educational technology)
Statistics and evaluation
Supplementary services
Education for the handicapped
Other, Office of Education...
National Science Foundation and other

HIGHER EDUCATION

Federal outlays for higher education will total $7.4 billion in 1973.
This is 47% of total Federal outlays for education. About 20% of the
estimated total expenditures of U.S. colleges and universities in 1973
will come directly from Federal sources.
Table 1-9 indicates the major Federal agencies and programs
contributing to higher education. The Department of Health, Education, and Welfare provides the largest amount of support with 54%
of total Federal expenditures. Major Federal programs include: (a)
grants and loans to college students by the Office of Education; (b)
grants, loans, and interest subsidies for construction of facilities by
OE, NIH, and the Department of Housing and Urban Development;
(c) grants and loans to students and direct support to institutions
in medical and allied health fields by HEW; (d) fellowship and
traineeship programs by several agencies; (e) project grants for
academic research by several agencies; and (f) payments to college
students from the Veterans Administration and the Social Security
Administration.

SPECIAL ANALYSES

127

Table 1-9. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY AGENCY
AND PROGRAM (in millions of dollars)
Agency and program

1971
actual

Defense:
Academic research
Military service academies and Reserve officers training corps __

1972
estimate

1973
estimate

198
318

192
343

197
346

516

535

543

745
340
303

913
216
340

918
140
336

1,388

1,469

1,394

702
380
150
271
455
97

780
397
142
376
505
1
138

889
410
111
491
537
30
156

Subtotal, Other Health, Education, and Welfare

2,055

2,339

2, 624

Housing and Urban Development (primarily college housing)
Atomic Energy Commission
National Aeronautics and Space Administration
National Science Foundation
Veterans Administration: Readjustment benefits
Other

118
101
128
353
1,252
243

69
93
133
413
1, 706
293

64
94
136
432
1,828
330

6,153

7,050

7,445

Subtotal, Department of Defense

Health, Education, and Welfare:
Office of Education:
Student assistance
Construction of facilities
Institutional and personnel development
Subtotal, Office of Education
Other Health, Edu:ation, and Welfare:
Academic research-health and social service agencies
Fellowships and traineeships-health professions
NIH facilities construction
Other health training institutional support
Social security (student benefits)
National Foundation for Higher Education
Other

Total, higher education

Table 1-10 indicates how Federal funds are distributed by type of
institution. In 1973, 2-year institutions are estimated to receive 16%
of Federal outlays, 4-year institutions, 40% and graduate and professional schools, 44%, including funds for academic research.
Table 1-10. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY TYPE OF
INSTITUTION (in millions of dollars)
Types of institution

2-year institutions
Other undergraduate
Graduate, professional, and postdoctoral
Academic research and other
Total

1971
actual

1972
estimate

1973
estimate

1,052
2,449
1,043
1,609

1,072
2,985
1,200
1,793

1,158
2,967
1,324
1,996

6,153

7,050

7,445

128

THE BUDGET FOR FISCAL YEAR

19 73

Table I—11 shows Federal expenditures for higher education by
type of support. Approximately 52% of the Federal funds are used
for student aid, 20% for institutional aid, and 28% for research and
training. The following paragraphs discuss current Federal activities
by type of support.
Table 1-11. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY TYPE OF
SUPPORT (in millions of dollars)
Type of support

1971
actual

Student support
Institutional support:
Current operations
Facilities and equipment
Research and training:
Academic research
.
Educational research and innovation
Personnel training
Total

1972
estimate

1973
estimate

2,997

3,696

3,873

864
622

1,034
453

1,174
347

1,571
43
56

1,741
57
69

1,898
101
52

6,153

7,050

7,445

Student aid.—Funds for student aid programs will total an estimated
$3.9 billion in 1973. The administration has proposed that no
qualified student who wants to go to college should be barred by lack
of funds and that student aid from the Office of Education should be
targeted on lower-income undergraduate students. In academic year
1972-73, an estimated 1,280,000 grant and work study awards will
be made under the Office of Education program. A secondary financial market and warehousing mechanism for student loans also
has been recommended to increase the capital available for loans to
students at all income levels.
Table 1-12. UNDERGRADUATE STUDENT S U P P O R T 1
(Outlays in millions of dollars; number of students in thousands)
Total outlays
gCnCy

•Health, Education, and Welfare

1971
actual

1972
estimate

Number of students
1973
estimate

1971
actual

1972
estimate

1973
estimate

1,215

1,440

1,491

2,662

3,065

3,666

2,585

3,165

Office of Education
Social Security Administration
Health Agencies and other. _

721

889

908

2,221

455
39

505
46

537
46

397
44

427
53

448
53

Veterans Administration._____
Defense____
National Science Foundation. _
Justice and other

1,068
85
4
17

1,459
97
4
24

1,560
100
4
32

917
44
4
60

1,107
40
4
66

1,195
36
4
78

2,389

3,024

3,187

3,687

4,282

4,979

Total
1

Involves some duplication because students may be assisted under more than 1 program.

SPECIAL ANALYSES

129

Tables 1-12 and 1-13 indicate funds expended and awards to undergraduate and graduate students by major agency.
The Veterans Administration will provide grants to 1,389,000
veterans who are enrolled at institutions of higher education. Outlays
of $537 million will be paid in 1973 under provisions of the Social
Security Act to students under age 22 who are the children of retired,
deceased, or disabled beneficiaries. Scholarships and loans to 134,000
medical, dental, and other health professional students will be made by
HEW in 1973. Finally, several Federal agencies offer fellowships and
traineeships to support graduate, professional and postdoctoral
students in a variety of fields. A total of 42,000 such students will
be aided in 1973.
Table 1-13. GRADUATE S T U D E N T S U P P O R T 1
(Outlays in millions; number of students in thousands)
Total outlays
1971

Health, Education, and Welfare
Veterans Administration
Justice.
National Science Foundation. _
Other
Total
1

1972

N u m ber of students

1973

1971

1972

1973
timate

380
183
4
34
7

393
246
6
20
7

392
267
8
14
5

219
148
15
5
2

236
177
16
3
2

255
194
19
2
2

608

672

686

389

434

472

Involves some duplication because students may be assisted under more than 1 program.

Institutional support.—Federal outlays for institutional support
will total $1.5 billion in 1973 with over $1 billion for current operations and $453 million for facilities and equipment.
The primary elements of aid under current operations in table I—11
are:
• Cost-of-education allowances paid to institutions of higher
education as part of fellowship and traineeship grants, largely
in the natural and health sciences, by the National Science
Foundation and HEW;
• Grants to institutions made by HEW for training students in
health professions and rehabilitation services;
• Grants made by the OflBice of Education to developing colleges
and to college libraries; and
• Department of Defense funds for college ROTC activities.
Federal funds for black colleges will exceed $200 million in 1973,
more than double the 1969 level. Approximately 45% of this assistance
consists of grants and loans to students attending the predominately
black colleges. Most of the remaining aid is in the form of institutional
support of which the largest share is granted by the Office of Education
under the developing institutions program. The Office of Education
funds will be doubled in 1973 to increase educational quality and
expand professional education opportunities in a limited number of
these institutions. In addition, black colleges will be the target beneficiaries of increased construction support through the interest subsidy

480-700 O—72

130

THE BUDGET FOR FISCAL YEAR 1973

program of the Office of Education in 1973. The Department of Agriculture will continue its support for agricultural research and extension
programs at black land-grant colleges. The National Science Foundation will also continue to support improvement of science programs
at colleges and universities primarily serving minorities.
The administration continues to support legislation which would
authorize aid to institutions in the form of cost of education allowances
related to the amount of Federal student aid administered by the
Office of Education. This measure would encourage schools to enroll
disadvantaged students.
The Department of Housing and Urban Development and the Office
of Education support construction of college and university classrooms, laboratories, libraries, and dormitories. The method of support
has been shifting from direct Federal grants and loans to Federal
interest subsidy payments on loans made to institutions of higher
education by private lenders. Approximately $400 million in loans for
new construction will be supported by Office of Education interest
subsidy payments. About $300 million of new construction will be
supported by the HUD college housing program. Grants are also
made by the National Institute of Health for construction of health
facilities at medical, dental, nursing, and other health professions
schools.
Research and training.—Federal outlays of $2.1 billion for research
and training in 1972 include $1.9 billion for academic research, $101
million for educational research and demonstration projects, and $52
million for teacher training.
The proposed National Foundation for Higher Education plays a
central role in the administration's strategy for institutional reform.
With a budget of $100 million in 1973, the Foundation will encourage
innovation and reform by sponsoring experimental projects to develop
new educational techniques. National Science Foundation programs
will upgrade science curricula and facilitate incorporation of computers
in college instruction.
Several Federal agencies have programs for training college and
university personnel. The National Science Foundation supports programs to improve the competence of college teachers. Under the Education Professions Development Act, the Office of Education continues
to give special attention to personnel development in junior colleges
and technical institutes.
Federal outlays for academic research represent about two-thirds of
the total expenditures for sponsored research performed by universities. The major agencies supporting research are HEW (medical,
health, and welfare research), DOD (research related to military requirements), and the National Science Foundation (research in all
fields of science). Federal programs for academic research are also discussed in Special Analysis R, "Federal Research and Development,
Programs."
ADULT EDUCATION AND OTHER ACTIVITIES

A significant portion of Federal outlays for education is devoted to
adult and various community education programs. In 1973, the estimated Federal outlays for these programs will total $1.9 billion, or
12% of all Federal education expenditures. These outlays are summarized in table 1-14.

SPECIAL ANALYSES

131

Table 1-14. FEDERAL OUTLAYS FOR ADULT EDUCATION AND OTHER
ACTIVITIES (in millions of dollars)
Sublevel and program

Adult and continuing education:
Adult basic
Extension, continuing, and occupational education
Public library services
Public Broadcasting
National Foundation on the Arts and the Humanities
Subtotal
Training of public employees:
Federal, State, local civilian
Federal military
Subtotal
Foreign educational activities
Other
Total

1971
actual

1972
estimate

1973
estimate

78
452
58
29
21

86
535
68
44
33

91
580
51
59
54

638

766

835

33
488

35
535

42
553

521

570

595

180
186

212
232

224
256

1,525

1,780

1,910

Adult and continuing education.—This category includes Federal programs which provide educational opportunities for adults or young
persons who either have not completed full-time school or college programs or who wish to continue their acquisition of knowledge and skills
outside the formal educational process.
Adult basic education classes enrolling over 700,000 men and women
who have had less than 12 years of formal schooling will be supported
by outlays of $91 million in 1973, mostly by the Office of Education,
the Office of Economic Opportunity, and the Model Cities program
in the Department of Housing and Urban Development. These programs, largely in low-income areas, will enable adults to acquire
communication, computational, and social living skills, as well as
preparing for occupational training leading to more profitable employment. In addition, support is provided for experimental projects,
including educational television programing and training for teachers
of adults, to meet the special educational needs of disadvantaged
adults. The national right to read effort is focusing on substantially
decreasing the adult illiteracy rate during the 1970's.
The Department of Agriculture will spend $181 million in 1973 to
support instruction in agriculture, home economics, and related
subjects through land-grant college extension activities. Outlays of
$319 million for the Veterans Administration readjustment benefits
program for veterans and children, widows, and wives of deceased or
seriously disabled veterans will benefit 485,000 individuals in 1973.
A number of occupational training programs with outlays of $85
million by various agencies of the Department of Health, Education,
and Welfare, including vocational education programs in the Office
of Education will provide new or improved work skills to 4.4 million
adults. The Department of Defense will support off-duty education
programs for 637,000 servicemen in 1973.

132

THE BUDGET FOR FISCAL YEAR 1973

Other continuing education programs totaling $150 million in 1973
include:
• The Federal grant to the Corporation for Public Broadcasting, a
publicly supported, private nonprofit institution providing funds
and operating assistance to public television and radio programs.
• Office of Education grants to States for public library services and
educational broadcasting facilities.
• The National Foundation on the Arts and the Humanities which
aids various cultural activities, supports State arts councils, and
funds programs in colleges and universities to improve the quality
of instruction in the humanities. The Foundation's total budget
in 1973 will be $90 million, almost six times the amount in 1969.
Training of public employees.—This analysis includes Federal programs providing professional and technical training at educational
institutions to public employees for the purpose of improving the
quality of public service. Those programs not conducted at educational
institutions, such as inservice or on-the-job training, are not included.
The military services account for 95% or $564 million in 1973 for
this continuing education effort, utilizing both institutions of higher
education and their own educational facilities. Training of civilian
public employees is supported by the various branches of the Armed
Forces, the Foreign Service Institute in the Department of State, the
FBI National Academy and Field Law Enforcement school in the
Department of Justice, public health and rehabilitation manpower
activities of HEW, and community development personnel training
in HUD.
Table 1-15. NUMBER OF INDIVIDUALS BENEFITING FROM FEDERAL
PROGRAMS FOR ADULT EDUCATION AND OTHER ACTIVITIES
(in thousands)
Sublevel and program

Adult and continuing education:
Adult basic
Vocational education
Extension and continuing education
Training of public employees:
Federal, State, and local employees
Federal military
_

1971
actual

1972
estimate

1973
estimate

686

788

771

2,781
3,513

2,966
3,737

3,303
3,748

1,335

1,324

1,334

671

685

687

In 1973, an estimated 1,334,000 Federal civilian, State and local,
and 687,000 military personnel will receive graduate, professional or
other education.

SPECIAL ANALYSES

133

Foreign education.—The Federal Government supports foreign
students attending colleges and universities in the United States and
provides assistance to educational institutions in foreign countries.
The principal Federal agencies involved are the Department of State,
the Agency for International Development, and the Action agency
which administers the Peace Corps program.
Other Federal support for education.—This category covers a number
of Federal activities that are not conveniently classified in any other
grouping. Included are the Library of Congress, the National Library
of Medicine and the National Agricultural Library, the National
Commission on Libraries and Information Science, the educational
activities of the Smithsonian Institution, the National Archives, and
three presidential libraries.
PART III—COVERAGE OF THE EDUCATION SPECIAL ANALYSIS

This analysis includes all Federal programs which have the direct
support of educational activities as a major purpose or which involve
the use of educational resources to achieve other purposes. For this
analysis, education is defined as (1) a student-teacher relationship
primarily for the transmission of organized knowledge, as distinguished
from occupational skill, or (2) the provision of
services to the community at large aimed at expanding individuals7 opportunities for professional or career advancement, for civic involvement, or for a more
meaningful and satisfying leisure. Any Federal program with outlays of
$500,000 or more which supports any educational activity meeting this
definition is included in this analysis.
This analysis does not include scientific research conducted outside
of academic institutions (other than that in laboratories and other
science projects of the Smithsonian Institution). Also, it does not include scientific research conducted in university-managed centers
under Federal contracts. Finally, it excludes university service contracts—for example, to operate mental health centers—and many inservice training programs for Federal civilian employees.
Federal support of education by agency.—Table 1-16 provides a
summary of total Federal outlays for education by administering
agency. It shows that only 33% of these outlays are for programs
administered by the U.S. Office of Education, the Federal Government's principal agency for education programs. Other parts of the
Department of Health, Education, and Welfare account for 21%
of all Federal outlays for education, primarily for medical education
and research programs conducted at colleges and universities.
The remaining 46% of total Federal education outlays are distributed among 28 Federal departments and agencies, of which the largest
shares are accounted for by the Department of Defense, the Veterans
Administration, the Department of Agriculture, and the National
Science Foundation.

134

THE BUDGET FOR FISCAL YEAR

1973

Table 1-16. FEDERAL FUNDS FOR EDUCATION BY AGENCY
(in millions of dollars)
Outlays

Federal agency
1971
actual

Legislative Branch:
Library of Congress
Government Printing Office
Funds appropriated to the President:
Appalachian Regional Development programs
International Development Assistance
Office of Economic Opportunity
Agriculture.
Commerce
Defense—Military
Defense—Civil
Health, Education, and Welfare:
Office of Education...
Other HEW
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Atomic Energy Commission
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other Independent Agencies:
Action
Corporation for Public Broadcasting
National Foundation on the Arts and the Humanities. _ _
National Science Foundation
Smithsonian Institution
United States Information Agency
Total

1972
estimate

1973
estimate

Budget
authority
1973

47
3

74
3

80
4

81
4

38
117
437
1,196
25
1,191
8

42
152
254
1.596
31
1,277
8

43
153
57
1,689
34
1,336
8

35
187
24
1,673
39
1,363
20

4,543
2.273
185
210
37
67
44
24
1
107
24
9
129
1,506

4,867
2,790
160
225
48
79
45
31
2
96
24
9
134
2,018

5,187
3,304
190
256
67
79
55
31

5,921
3,582
149
257
57
79
61
35

97
26
11
137
2,166

97
27
11
131
2,171

26
23
29
392
43
2

25
35
51
450
64
2

27
45
79
472
67
2

27
45
90
526
54
2

12,736

14,592

15,702

16,748

Relationship to other special budget analyses and budget functions.—
All programs classified in the budget functional category for education
(see part 5 of the Budget Document) are included in this special
analysis except Bureau of Indian Affairs welfare and training programs. These include the programs of the Office of Education and the
science education and academic research programs of the National
Science Foundation. Also included are Office of Economic Opportunity education activities, college housing loans and education of American
Indians. For 1973, outlays for programs classified under the budget
functional category of education total $6.3 billion.
In addition this analysis includes outlays of $9.4 billion for 1973
for programs classified under such other budget functional categories
as "national defense" and "health." These activities use education—
most often graduate training or research at academic institutions—as
a means of accomplishing their primary objectives.

SPECIAL ANALYSES

135

The amounts tabulated in this analysis include some programs also
covered in other special analyses. For example, outlays of about $2.0
billion in 1973 are included in both this analysis and Special Analysis
K, "Federal Health Programs," for university and other postsecondary
programs which help train medical personnel. In addition, approximately $1.9 billion in outlays for 1973 for research in academic
institutions are reflected in both this special analysis and Special
Analysis R, "Federal Research, and Development Programs."
Table 1-17 summarizes the outlays included in this analysis which
are also included in other special analyses and by major budget
functional categories.
Table 1-17. FEDERAL EDUCATION OUTLAYS BY MAJOR BUDGET FUNCTIONAL CATEGORIES AND RELATIONSHIP TO OTHER
SPECIAL BUDGET ANALYSES (in millions of dollars)
Major functional category and special budget analysis

Functional categories:
Education
Other categories:
National defense
International affairs and finance
Space research and technology
Agriculture
Natural resources
Commerce and transportation
Community development and housing
General science and manpower
Health
.
Income security
Veterans benefits and services
General government
Special analyses:
Federal civil rights activities
Federal health programs
Federal manpower programs
Federal income security programs
Federal research and development programs

1971
actual

1972
estimate

1973
estimate

5,438

5.844

6,283

1,295
188
129
337
81
87
109
459
1,523
1,512
1,506
71

1,373
223
134
570
78
104
141
529
1,725
1,763
2,018
88

1,433
236
137
715
99
107
181
551
1,940
1,735
2,166
122

89
1,571
67
1,543
1,624

152
1,798
79
1,992
1,791

442
2,018
79
2,101
1,964

SPECIAL ANALYSIS J
FEDERAL MANPOWER PROGRAMS
OVERVIEW

Federal manpower programs generally serve persons who would
otherwise be unable to obtain self-sustaining employment. The programs fill a gap between the educational system which initially prepares persons for their careers, and income security programs which
provide income for persons who are unable to work because of age,
incapacity, or economic conditions. The expanding capability of
manpower programs to reach and serve the disadvantaged makes them
an important tool in attacking the Nation's social problems.
Manpower programs also complement national economic policy.
Effective job placement and training programs train and place enrollees in skill-shortage occupations. In a tight labor market, such
activities reduce inflationary pressures by increasing the productivity
of marginal workers and by enabling employers to obtain skilled
workers who would otherwise be unavailable. During periods of high
unemployment, work and training programs can be used to increase
the skills of the work force and serve as a source of income support
for unemployed workers.
The first part of this analysis presents the highlights of the 1973
budget for Federal manpower programs and the major legislative
proposals which will affect them. Later sections describe the different
types of programs, giving details on the numbers of persons served
and the types of services provided. The last portion explains the
coverage of the analysis and provides a detailed listing of manpower
funds by Federal agency.
1973 BUDGET HIGHLIGHTS

The 1973 budget provides outlays of $5.1 billion for manpower
programs, an increase of $849 million or 20% over 1972. Federal
outlays for manpower programs have risen over $4.8 billion since
1963. Outlays for principal Federal manpower programs are displayed
in table J - l .
A major new manpower program provides support for public
service jobs as a means to reduce unemployment. Under the Emergency Employment Act, a total of $2.25 billion in budget authority
will be made available to State and local governments during 1972
and 1973 to create transitional public employment opportunities.
In 1973, outlays for this program are expected to reach $1.1 billion,
an increase of $440 million over 1972.
136

SPECIAL ANALYSES

137

Table J-1. 1973 BUDGET HIGHLIGHTS * (in millions of dollars)
Program

Manpower revenue sharing programs
Emergency employment assistance
Work incentive training
Veterans programs
Vocational rehabilitation
Employment service
Other
Total

Outlays
1970
actual

1971
actual

1,056

1,342

82
141
441
325
474
2,519

1972
estimate

1973
estimate

123
196
523
347
615

1,454
653
187
254
551
374
837

1,477
1,088
262
320
620
405
969

3,145

4,310

5,141

1
Due to differences in appropriation patterns, outlay adjustments have been made to show
programs in a corresponding manner. For example, WIN and EEA totals are reduced because
Federal administrative costs and research funds are included in its budget unlike most manpower
programs. Vocational rehabilitation is increased to reflect funds received from social security trust
funds.

Manpower training programs authorized under the Manpower
Development and Training A°t and the Economic Opportunity Act
will remain essentially level in 1973. These programs comprise 29%
of total Federal expenditures for manpower services. During 1973,
the Department of Labor will give States and local governments a
greater role in the allocation of funds between the more than a dozen
programs supported under these two acts.
Under its veterans readjustment programs, the Federal Government supports the training of veterans for civilian occupations. In
1973, outlays by the Veterans Administration will increase $66 million
for a total of $320 million to serve an increasing number of returning
servicemen.
Substantial improvements will be made in the work incentive
(WIN) program in 1973 to better serve the training and employment
needs of welfare recipients. These changes include a mandatory
work registration requirement for employable welfare recipients, a
public service employment component, and reduced requirements for
State matching funds. Outlays by the Departments of Labor and
Health, Education, and Welfare for this program will increase by
$75 million from 1972 to $270 million in 1973.
1973 LEGISLATIVE PROGRAM

The administration has proposed two legislative measures which
will make major changes in the design and effectiveness of manpower
programs.
Manpower revenue sharing is an essential element in the overall
strategy for reform of the Federal grant-in-aid system. The manpower
revenue sharing proposal is aimed at improving the effectiveness of
many of the present manpower programs by proposing basic changes
in the system for delivering services:
• Categorical programs under the Manpower Development and
Training Act and the Economic Opportunity Act will be consolidated to give more flexibility in designing and operating programs
tailored to meet the needs of individual participants and local
labor market conditions.

138

THE BUDGET FOR FISCAL YEAR 1973

• Primary responsibility for planning and administering manpower
programs will be decentralized to State and local governments.
This decentralization will permit local communities to develop
comprehensive strategies for meeting manpower needs.
• Eighty-five percent of the funds will be allocated to States and
local areas by a formula based on size of labor force and the
numbers of unemployed and disadvantaged. The remaining 15%
will be used by the Secretary of Labor for research and development, training and technical assistance, and evaluation
activities.
Additional funds will be requested in the first year of manpower
revenue sharing to reach a total of $2 billion in budget authority.
The proposed effective date for manpower revenue sharing is July 1,
1973.
Another major manpower proposal is an integral part of the
administration's welfare reform legislation. The bill would establish
an opportunities for families program (OFP), a comprehensive program of income support, training, transitional public employment,
child care, and support services in the Department of Labor. This new
program will replace the present work incentive (WIN) program and
will build upon the recently enacted improvements. A total of $2.2
billion in new budget authority would be provided in the first full
3^ear of OFP, exclusive of income support. Major incentives to foster
the goal of self-support under welfare reform will be provided by:
• Including coverage of the "working poor," thus encouraging
families to stay together rather than to separate.
• Reducing benefits by $800 if an adult family member refuses
work or training.
• Insuring that individuals will always gain financially by going to
work.
• Expanding greatly the supply of quality child care services for
mothers who are at work or training.
• Adding a new upgrading program to help lift the "working poor"
out of poverty.
• Replacing the joint administration in the present WIN program
at the Federal, State, and local level with a single system of
accountable program managers.
• Permitting the purchase of child care and supportive services from
any qualified deliverer instead of the current mandatory use of
State or local welfare agencies regardless of performance.
The administration has also proposed major legislation to strengthen
the process for eliminating barriers to equal employment for minority
groups. Under this legislation the Equal Employment Opportunity
Commission could file civil suits in the U.S. district courts when it is
unable to obtain voluntary compliance with title VII of the Civil
Rights Act of 1964.

SPECIAL ANALYSES

139

MAJOR MANPOWER PROGRAMS

This section of the analysis summarizes the different manpower
programs by type of program—either skill training; work support;
labor market services; or program direction, research, and support.
Skill training programs.—In addition to skill training, these
programs generally offer remedial education, counseling, and other
supportive services. Most of the current programs concentrate on
one of the following approaches to training:
• Institutional training programs provide vocational skill instruction in a classroom setting away from the jobsite. Enrollees
receive monetary allowances while in training.
• On-the-job training programs target on existing job vacancies,
usually by reimbursing employers for the added costs of hiring
and training unskilled workers. This reimbursement may include a payment for the employee's lower initial productivity.
• Rehabilitation programs focus on the training of physically or
mentally disabled persons. They are separately classified since
health services account for 18% of total costs in these programs,
significantly higher than in other manpower programs.
Use of these different approaches to training often reflects employer
preferences or traditional methods of entry into a particular occupation or industry. For example, production line workers such as assemblers in the automobile industry are generally trained on the job.
On the other hand, most secretaries learn their basic job skills in the
classroom.
Individual trainee needs are also an important factor in the selection
of the service approach. In on-the-job training programs the trainee is
hired for a specific job, and then trained. This guarantee of employment may be an essential start to successful training of many of the
hard-core unemployed. However, institutional training can provide a
broader training base not limited to one particular job, giving the
trainee more job mobility and security.
In recent years, two comprehensive programs—the work incentive
program (WIN) and the concentrated employment program (CEP)—
have been initiated to provide a complete range of training services.
WIN serves recipients of public assistance, and CEP serves disadvantaged persons in limited geographical areas of high unemployment.
Both provide institutional and on-the-job training as well as work
support programs. Thus, they are valuable models for the operation
of comprehensive community manpower programs under manpower
revenue sharing.

140

THE BUDGET FOR FISCAL YEAR 19 73
Table J-2. SKILL TRAINING PROGRAMS
(outlays in millions of dollars, individuals in thousands)
New enrollees J

Outlays
1970
1971
actual actual

Job opportunities in the business
sector
Public service careers
_.
Manpower development and training institutional training
Job Corps
CEP training
WIN training
On-the-job training for veterans. ___
Veterans vocational rehabilitation__
Vocational rehabilitation
Social services training
Other programs
Total
1

1972
est.

1973
est.

1970
actual

1971
actual

1972
est.

1973
est.

136
18

177
39

194
79

176
46

177
4

184
19

136
30

131
25

260
144
94
66
87
53
441
50
38

338
174
99
91
117
77
523
42
52

353
185
94
126
161
91
551
55
72

358
190
88
161
209
108
620
57
94

130
43
75
87
70
13
411
147
45

164
50
55
84
72
14
468
154
63

166
53
49
94
68
15
517
162
78

166
55
49
106
68
15
558
170
75

1,388 1,730 1,960 2,107 1,202 1,327 1,368 1,418

Estimated new enrollees during a year, less overlap due to persons served more than once.

Table J-2 presents the outlays and numbers of individuals served by
various Federal training programs. The remainder of this section includes a brief description of these programs as they currently exist.
However, under manpower revenue sharing it is expected that States
and localities will develop new programs and adapt old ones to meet
their specific needs.
Institutional training.—The largest institutional training program,
serving 166,000 persons in 1973, is operated jointly by the Departments of Labor and Health, Education, and Welfare under the authority of the Manpower Development and Training Act (MDTA).
The MDTA institutional program provides training through skill
centers—which provide a range of training and services—special
training courses, and individual referral to public and private training.
In 1969, the Job Corps was reorganized and redirected to emphasize
smaller centers in major cities. This change will help to personalize
the centers and relate their activities to the needs of local labor markets. Eleven of these new centers were opened during 1971. Early
retention rates for these first centers appear to be quite favorable.
New enrollments in the Job Corps during 1973 will total 55,000 persons, a 28% increase over the 1970 level.
Institutional training is the largest component of the work incentive (WIN) program and the concentrated employment program
(CEP). Outlays for these two components will rise from $160 million
in 1970 to $249 million in 1973. Generally, WIN and CEP purchase
training services from other community-based sources and, in this way,
help to strengthen the capability of communities to undertake the
program envisioned by the manpower revenue sharing proposal.
Other major institutional training programs are included in the
model cities and community action programs, which are proposed for
consolidation into the broad revenue sharing grant for urban community development. Special training programs for Indians, criminal
offenders, and welfare recipients are operated by the Departments of
the Interior, Justice, and Health, Education, and Welfare, respectively.

SPECIAL ANALYSES

141

On-the-job training (OJT).—Outlays for on-the-job training have
grown less rapidly during the past several years, primarily due to the
ready availability of skilled workers. The job opportunities in the
business sector (JOBS) program is the largest OJT program. This
program, operated in conjunction with the National Alliance of
Businessmen, provides job opportunities in private industry and supportive services such as minor medical services and remedial education.
A recently redesigned JOBS optional component is utilized in cases
where the full-range of supportive services is not required. JOBS
optional, administered by State agencies, is proving to be very popular, and outlays will increase to $60 million in 1973 as additional
opportunities are provided.
Veterans OJT is provided by the Veterans Administration to former
servicemen pursuing an approved course of full-time apprenticeship or
other on-the-job training. The program is growing substantially to
serve the rising number of eligible veterans.
Using the "hire first, then train" principle, the public service careers
(PSC) program brings disadvantaged persons into regular positions
in Federal, State, and local government. PSC training funds can be
linked with wages provided under the emergency employment assistance program to provide a total manpower package for State and
local governmental agencies.
Rehabilitation.—Both the Federal-State vocational rehabilitation
program administered by the Department of Health, Education, and
Welfare, and the vocational rehabilitation program for disabled
veterans administered by the Veterans Administration focus on the
rehabilitation of physically or mentally handicapped persons. These
programs are not included in the manpower revenue sharing legislation.
Outlays for the Federal-State vocational rehabilitation (VR) program, currently the largest single manpower program, have increased
by 40% since 1970. Under the VR program, clients are prepared for
competitive employment, homemaking, or sheltered employment.
State rehabilitation agencies determine client needs and purchase
services on a case-by-case basis. It is estimated that 326,000 individuals will be rehabilitated under this program in 1973. Heavy emphasis will be given to assisting public assistance recipients, criminal
offenders, narcotic addicts, and alcoholics. A special 2-year effort will
be initiated to serve all trainable public assistance recipients by 1974.
The veterans vocational rehabilitation program provides similar
services to persons with a service-connected disability. In addition to
counseling and training, veterans receive subsistence allowances,
disability compensation, tuition, books, and fees.
Work support.—These programs provide transitional employment
opportunities and necessary remedial services for individuals who are
temporarily unable to find regular employment. In past years, they
have focused principally on individuals who were handicapped in
obtaining a job by their youth or old age. During 1972 and 1973, with
the implementation of the 2-year Emergency Employment Act,
Federal outlays for work support programs have significantly expanded. Total outlays for work support programs will rise from 19%
of the manpower total in 1970 to 36% in 1973.

142

THE BUDGET FOR FISCAL YEAR 1973
Table J-3. WORK SUPPORT PROGRAMS
(outlays in millions of dollars, individuals in thousands)
Outlays
Program

Emergency employment assistance. _
Neighborhood Youth Corps in-school
and summer
Neighborhood Youth Corps out-ofschool
Operation mainstream
CEP work support
Other
Total

1970
1971
actual actual

New enrollees

1972
est.

1973 1970 1971
est. actual actual

653 1,088

1972 1973
est. est.

160

194

269

272

357

436

562

583

567

98
42
70
80

95
69
59
124

112
78
56
150

110
80
52
159

48
12
37
96

53
22
22
130

49
22
20
116

49
22
20
125

483

616 1,322 1,846

630

790

950

874

The emergency employment assistance program will provide $2.25
billion in new funds during 1972 and 1973 to State and local governments for the creation of transitional public employment opportunities. The act provides funds for public employment opportunities when the national unemployment rate exceeds 4.5%, or in local
areas where the rate exceeds 6.0%. Funds are allocated to States and
local governments under a formula that gives equal weight to the
number of unemployed and the severity of unemployment.
Under this new program, State and local governments select the
highest priority employment needs and hire unemployed persons
from all segments of the community with the eventual goal of permanent, unsubsidized employment. In the first months of the program,
over 30% of the persons employed were veterans, and about 35%
were disadvantaged. A wide variety of job opportunities were made
available, with 23% of the initial jobs in public works and transportation, 18% in education, and 12% in law enforcement.
Through its in-school and summer projects, the neighborhood
youth corps (NYC) provides part time and summer employment for
needy high school students. During the summer of 1971, about
600,000 students participated in the NYC summer program, considerably more than in any previous year. This single program enrolled
nearly one-third of the Nation's disadvantaged high school students.
Outlays for NYC in-school will also be increased during 1972 and 1973.
NYC out-of-school now includes two different kinds of projects.
The first is for youth 16 through 21, and emphasizes work experience
and general employ ability training. The second and newer type,
primarily for 16 and 17 year olds, includes education and skill training
activities.
Operation mainstream was significantly expanded during 1971, and
again in 1972 to provide additional job opportunities for older workers.
During 1973, 22,000 chronically unemployed adults and disadvantaged
senior citizens will enter this program, a 83% increase over the 1970
level. Special projects for older persons have been doubled to enable
more of the aged to engage in useful community work.
Beginning in 1973, the WIN program will include a significant
amount of work support when the existing special work projects
authority is replaced by a less complicated public employment component. In addition, CEP provides substantial amounts of work
support as a part of its comprehensive array of services.

SPECIAL ANALYSES

143

Labor market services.—These programs promote a smoothly
operating labor market by matching job vacancies with qualified
workers, by overcoming barriers created by job discrimination, and
by providing needed child care services to permit parents to engage
in training or employment. They develop and disseminate information
on employer and employee needs, and counsel and test jobseekers.
Other services include outreach to unemployed people, and job
development and job restructuring efforts with employers.
Table J-4. LABOR MARKET SERVICES PROGRAMS
(in million of dollars)
Outlays

Program
1970

Employment service
Computerized job placement
Project transition
Other
Subtotal, placement services
Equal employment opportunity activities. _
Total

_
_

1971

1972

1973

325
6
14
27

347
23
15
31

374
27
16
47

405
31
27
48

372
19

416
34

464
49

511
65

391

449

513

576

Job placement assistance.—The Federal-State Employment Service
(ES), with its network of 2,300 local offices and more than 30,000
employees, will provide services for about 10.4 million persons in 1973.
While placement services are provided for the general labor force,
special efforts are given to placement of the disadvantaged, including
graduates of manpower programs.
Computerized job banks were installed in nearly 100 major labor
markets by 1971 to assist in job placement efforts. The job banks
provide comprehensive listings, updated daily, of available jobs.
During 1971 and 1972 most of the job banks will be expanded into
statewide systems. Job banks have also been used to assist unemployed
scientists, engineers, and technicians through the technology mobilization and reemployment program and returning veterans enrolled in
Project Transition.
As a part of the administration's six-point program to place unemployed veterans in jobs or training, Federal contractors must list
their job openings with the Employment Service. In 1973 this requirement is expected to increase the number of employment opportunities listed by 20%.
During 1972 and 1973, Employment Service agencies will expand
their services to food stamp recipients through the registration requirement recently enacted by the Congress. Like other job applicants, they
will be referred to appropriate job openings or training programs. It is
estimated that nearly 1.5 million persons will be registered annually.
Project Transition provides counseling, testing, and job placement
assistance to servicemen prior to discharge. Limited skill training is
provided by the Department of Labor. The Defense Department will
spend about $27 million on this program in 1973, twice the amount
allocated in 1970.

144

THE BUDGET FOR FISCAL YEAR 1-973

Equal employment opportunities.—These programs attempt to reduce
barriers to the employment of minorities, women, and older workers.
By opening up needed job opportunities, they are critical to the success of other manpower programs.
The Equal Employment Opportunity Commission (EEOC) identifies and eliminates discriminatory employment practices through
voluntary conciliation ar\d referral of cases to the Department of
Justice when a pattern or practice of discrimination appears to exist.
Major expansion of the EEOC has been effected with outlays rising
to $30 million in 1973, a 150% increase over 1970. In 1973, the EEOC
expects to increase the si^e of field office staff and double its payments to State and local equal employment opportunity agencies
from $1.5 million to $3.0 million.
The Office of Federal Contract Compliance (OFCC) in the Department of Labor, in cooperation with the 15 major Federal contracting
agencies, insures that affirmative action plans are undertaken by
Federal contractors to provide equal employment opportunities for
minorities and women. The Labor Department's Bureau of Apprenticeship and Training promotes affirmative action in apprenticeship
programs. Contractors practicing affirmative action have initiated or
expanded active recruiting of minority applicants, revised tests to
make them more directly job related, provided transportation from
areas of minority housing, and started or expanded training programs
to prepare unskilled workers for skilled jobs.
To increase minority employment in the construction trades, the
OFCC devised the "Philadelphia plan" and voluntary "hometown"
programs which set employment goals for Federal construction contractors. Labor Department training funds have been utilized to
foster the success of these efforts in 14 out of the 25 "hometown"
and imposed citywide construction plans. In the 25 cities, goals have
been established which would result in the employment of 28,000
additional minorities in construction trades.
Table J-5. F E D E R A L S U P P O R T F O R DAY C A R E
(outlays in millions of dollars, children supported in thousands)
Program

Children supported

Outlays
1972

1971

1973

1971

1972

1973

Aid to Families with Dependent
Children (AFDC):
WIN program
Social services
Income disregard
Model cities

26
91
68
9

47
184
80
14

82
226
85
17

98
90
342
21

138
191
385
26

170
226
392
26

Subtotal, employment related day care

194

325

410

551

740

814

105

332

509

612

668

903

993

Head Start, full day
AFDC nonemployment related
day care
Total

SPECIAL ANALYSES

145

Child care services.—Expanded day care services are being provided
to permit parents to participate in employment or training activities
and to assist low income families in caring for their children. Day
care expenditures in 1973 will total $410 million, a 26% increase over
1972. Additional funds to expand and improve day care programs are
contained in the welfare reform proposal. In 1973, funds are included
for initial resource development activities under welfare reform.
Employment-related day care is provided through three programs—
the WIN and social services programs for recipients of aid to families
with dependent children (AFDC), and the model cities program.
The AFDC social services program, along with Head Start, also provides day care as a support service to low income families and is
discussed in Special Analysis I, "Federal Education Programs."
Additional support for day care will be provided to middle income
families beginning in January 1972 as a result of greatly increased tax
deduction provisions contained in the Revenue Act of 1971. Preliminary estimates indicate that revenue loss for child care deductions may
exceed $300 million in the first year.
Manpower research, development, and evaluation.—Under the
proposed manpower legislation, Federal efforts will be strengthened to
provide information and technical assistance to States and local
communities on methods to improve program performance. One
important device for obtaining such information is research and
development (R. & D.) and evaluation activities.
Table J-6 summarizes Federal resources for manpower R. & D. and
evaluation efforts, primarily funded by the Department of Labor and
the Office of Economic Opportunity. In addition, other agencies carry
out R. & D. activities affecting manpower, especially the Departments
of Defense, and Health, Education, and Welfare, and the Veterans
Administration.
Table J-6. PROGRAM DIRECTION, RESEARCH, AND SUPPORT
(in millions of dollars)
Program

Research and development.
Evaluation

Outlays
1970
actual

1971
actual

1972
estimate

1973
estimate

26
2

24
3

30
3

29
3

73
32
11

84
30
14

98
34
23

106
38
26

Subtotal

116

128

155

170

Total

143

155

188

202

Subtotal
Program direction
Labor market information
Planning and technical assistance.

480-700 O—72
10

146

THE BUDGET FOR FISCAL YEAR 1973

Research and development programs seek to understand and affect the
operation of labor market mechanisms. Research is conducted in a
nonoperating environment while developmental activities (often
termed experiments or demonstrations) seek to develop or demonstrate
new service techniques in an operational setting.
The Department of Labor has initiated two major demonstration
projects in 25 areas which involve the creation of large numbers of
transitional public employment opportunities. In one, public employment will be expanded to absorb at least 10% of the unemployed in
order to assess its economic impact. In the other, about 10,000 public
jobs will be created for welfare recipients to test the potential of a
public employment program for moving welfare clients into jobs and
reducing welfare costs.
Experimentation will continue to develop improved methods for
service to clients by the Federal-State Employment Service. These
efforts include further refinement of the three-track comprehensive
manpower service model—self-service, job development and assistance, and intensive services to the disadvantaged—and Operation
Hitchhike which "piggybacks" manpower services onto existing rural
institutions such as the Agricultural Extension Service.
Evaluation activities seek to determine which programs work, to
what extent, and under what conditions. Evaluation efforts generally
focus on recently initiated programs or major program changes. A
major longitudinal evaluation of four manpower programs is nearing
completion. It examines the effects of the Job Corps, JOBS, MDTA
institutional and NYC out-of-school programs on employment and
earnings of participants and compares them with similar groups of
nonparticipants. A similar study is being conducted on the WIN
program. The impact of job banks on ES operations and their effect
on service to clients will be examined during 1972.
Program direction and support.—The effectiveness of individual
programs depends both on national program administration and on the
delivery of services at the local level. As a part of the overall administration effort to decentralize the management of Federal programs,
several steps have been taken during recent years. Greater authority
was delegated to the regional manpower administrators, uniform
regional boundaries were established to improve interdepartmental
coordination of social programs, and regional offices were reorganized
from a categorical program basis to a geographic area basis to provide
closer contacts with individual States and communities.
At the State and local level the interagency cooperative area
manpower planning system (CAMPS) has been strongly emphasized
as a vehicle for coordination of planning efforts by various manpower
agencies. In addition, staffing grants were awarded to mayors and
Governors to enable them to develop their own manpower planning
capability.
Major steps are now underway to build upon this framework for
manpower revenue sharing. CAMPS committees have been restructured as advisory councils, appointed by State and local elected
officials and responsible to them. The councils will advise the Governors and mayors on manpower needs and programs and assist in the

SPECIAL ANALYSES

147

development of comprehensive manpower plans for their areas. Every
effort will be made to fund manpower projects in each area in accordance with the Governors and mayors recommendations. Outlays for
CAMPS councils are being significantly increased in 1973 to support
about 1,000 positions, compared to 650 in 1971.
As a prelude to manpower revenue sharing, several pilot comprehensive manpower programs will be undertaken in 1973. In this
limited demonstration effort, State and local government prime sponsors will be selected to plan, develop, administer, and evaluate manpower programs in their areas. This program will provide greater
experience in decentralized management of a comprehensive manpower
program.
PERSONS SERVED

Enrollment and training levels.—Man-years of training and new
enrollments are the output measures used in this analysis. Man-years
is the average enrollment during the year and new enrollments are the
number of different people served during each fiscal year. In a few
programs, e.g., NYC in-school and summer, a significant number of
people enroll in more than one program within a single year, or in the
same program several years in succession. In these cases, this analysis
uses a net figure which deducts the overlap. In some programs there
are periods when no significant amounts of services are provided, e.g.,
persons awaiting services in the concentrated employment program.
The analysis uses a man-years of service estimate to exclude such
periods. Table J-7 shows the various measures by service approach.
Table J-7. TOTAL ENROLLMENT AND TRAINING LEVELS IN 1971 *
(in thousands)
Approach

On-the-job training
Institutional training
Rehabilitation
Postschool work support
Subtotal, postschool
In-school work support
Total
1

Man-years

Man-years
of service

Enrollees

New
enrollecs

193
310
590
88

192
295
590
85

308
579
488
154

290
555
482
144

1,181
225

1,162
225

1,530
770

1,470
646

1,407

1,387

2,300

2,116

Excludes job placement assistance programs in which the enrollment concept does not apply.

Characteristics.—The 11.1 million adults who were poor in 1970,
of whom about half were in the labor force but earning less than
the low-income standard, is a rough representation of the universe
of need for manpower programs. The universe actually may be considerably larger, since many persons earn slightly more than the lowincome level and are vulnerable to skill obsolescence and unemployment. However, many poor adults are not good candidates for manpower services because of ill health, old age, or conflicting family
responsibilities. For these individuals income maintenance programs
are more appropriate.

148

THE BUDGET FOR FISCAL YEAR 1973

The focus of most Federal manpower programs on the low income
universe reflects the judgment that persons with severe employment
handicaps are least likely to be able to improve their employment
experience without assistance. For example, the manpower programs
administered by the Department of Labor emphasize services to poor
persons who are not suitably employed, and are either (1) school dropouts, (2) under 22 years of age, (3) 45 years of age or over, (4) handicapped, or (5) subject to special employment obstacles such as racial
discrimination. This focus on the disadvantaged avoids displacement
of private training efforts which are generally targeted on different
groups.
Table J-8 indicates that manpower programs are meeting their intended targets: the poor, the less educated, members of minorities,
youth, and welfare recipients. Older persons are a small part of the
population served since employment is often less appropriate than
income support.
Table J-8. CHARACTERISTICS OF CIVILIAN LABOR FORCE, ADULT LOW
INCOME POPULATION, AND MANPOWER PROGRAM PARTICIPANTS

Characteristics

Average number (millions)
Percent:
Aged 21 or less
Aged 45 or more
Male
.
Less than high school education
8th grade education or less
Poor
Public assistance recipients
Disabled
Minority races

Total U.S.
work force
1970
(age 16-64)
civilian, noninstitutional
79.5

Low income
Manpower
population
program
1970
participants
(age 16-64)
1971
civilian, non- estimate (age l
institutional 14 and above)
11.1

14
28
62
34
15
7
1

23
34
39
68
40
100
35

1.8

36
13

57
20
76
30
36
39

1
All entries are estimates. Excludes job placement assistance and in-school programs.
2 Not available.

The number of individuals served by manpower programs is a
growing proportion of the poverty population. In 1971 manpower
programs served about 13% of the 11.1 million poor adults compared
to 8% in 1969.
As indicated in table J-9 below, the characteristics of enrollees
served by different approaches vary considerably. In 1971, OJT
enrollees were still among the least disadvantaged because on-the-job
training programs tend to enroll those most job-ready. Institutional
programs now serve high proportions of welfare clients and educationally disadvantaged primarily due to the growth of the WIN
program. Most disabled persons are served by rehabilitation programs
targeted to their special needs. The postschool work support programs
tended to focus on the most disadvantaged groups and provide a
source of short-term employment and income for individuals who
have no immediate prospects for regular jobs. With the implementation of the large-scale emergency employment assistance program in
1972, the characteristics of enrollees in work support programs should
more closely resemble those in manpower programs generally.

SPECIAL ANALYSES

149

Table J-9. CHARACTERISTICS OF ENROLLEES BY APPROACH IN 1971
(in percent)

Approach

On-the-job training
Institutional training
Rehabilitation
__
Postschool work support
Subtotal, postschool_
In-school work support
Total

Poor

Less
than
Minority
high
races
school
education

Aged
21 or
less

Male

Public
assistance
recipients

Disabled

61
86
67
98

46
46
52
78

40
51
21
52

31
38
30
55

76
39
56
59

10
53
13
35

4
5
100
7

76
100

57
98

39
57

36
100

54
53

30
32

36
0

SERVICES PROVIDED

Each major program approach provides a substantially different
mix of services, as shown in table J-10.
Table J-10. DISTRIBUTION OF COSTS BY APPROACH IN 1971 (in percent)
Approach
Service

Remedial education
__
Skill training..
Work supervision
Health
Recruitment, counseling, and placement. _ _
Other supportive services2
Program administration
Allowances
Total

OJT

Institutional

Work
support

Rehabilitation

Job
placemerit
assistance

1
15
*
*
3
38
5
38

14
30
*
1
7
2
10
36

3
2
9
*
5
2
11
68

1
6
0
18
28
25
7
15

*
*
1
*
82
2
15
*

100

*Less than 0.5%.
Excludes program direction, research, and support. Includes State and local shares.
Includes payments to employers to compensate for lower productivity of trainees and amounts
which could not be allocated to other services.
1
2

Most OJT programs reimburse employers for the cost of training
and other supportive services, although a few programs provide
allowances and other services directly to enrollees. The institutional
programs focus on remedial education and skill training. Work
support programs emphasize payment of wages for work performed,
and work supervision. Job placement assistance programs provide
counseling, placement, and such services as child care to allow parents
to work. Overall, allowances and wages are the largest part of manpower costs, reflecting the need of enrollees for income support while
participating in training. This need will be somewhat reduced with
the enactment of welfare reform legislation providing basic income
support to all needy families with children, although incentive
allowances will still be provided.

150

THE BUDGET FOR FISCAL YEAR

1973

While a comprehensive array of services is provided by manpower
programs in total, the actual services available to each enrollee are
often limited to those of the particular program in which he participates. Consolidation and coordination of programs under the manpower revenue sharing proposal will better enable enrollees to receive
the services which are most appropriate to their needs.
Table J-11. UNIT COSTS BY APPROACH IN 1971 *
Man-year
unit cost
estimate

Approach

On-the-job training
Institutional training
Rehabilitation
Postschool work support
Subtotal, postschool
In-school work support
Total

Average
Particiduration pant unit
of enrollcost
ment
estimate
(years)

$2,000
2,600
1,150
3,600

0.48
.34
1.26
.49

$1,000
900
1,450
1,750

1,850
1,600

.54
.26

1,000
400

1,800

.45

800

1
Based on man-years of service. Includes State and local share, if any. Excludes child care components. All dollar amounts rounded to nearest 50.

In addition to the great variance in services provided by program
and approach, there are significant differences in overall unit costs.
Table J-11 shows that in 1971, unit costs were highest for postschool
work support programs, reflecting the high cost of wages paid. Both
man-year and participant costs are lowest for in-school programs,
because they are part-time or of short duration. OJT costs are somewhat reduced because the employers' payment of salary costs obviates
the need for allowances in most cases. In all approaches except rehabilitation, the participant unit cost is lower than the man-year cost
because the duration of enrollment is less than 1 year.
Within all approaches, unit costs vary widely among individual
programs reflecting the intensity of services and the clientele group
served. For example, the work incentive program pays lower allowances than most programs because enrollees are already receiving
welfare payments. Job Corps has a high unit cost because housing
and meals are provided in addition to an intensive training program.
COVERAGE OF THIS ANALYSIS

Manpower programs, as that term is used in this analysis, are
Federal programs intended to influence directly the quality and
composition of the work force by increasing the skills and employment opportunities of individuals in the work force, or those who
desire to be in it but who are vocationally unprepared or face other
barriers to employment. Programs serving this objective provide
skill training, transitional employment experience, job placement
assistance, and related child care, social and health services. Manpower
programs generally: (1) operate outside the normal educational
processes, (2) give services for periods of less than 1 year, (3) provide
skill training and job opportunities for nonprofessional jobs, and (4)
target on the disadvantaged sector of the population.

SPECIAL ANALYSES

151

The analysis covers all programs classified as Manpower Training
and Employment Services in the functional classification of the budget,
and programs which are directed toward similar objectives but are
included under other functional classifications such as Income Security,
National Defense, Community Development and Housing, and
Veterans Benefits and Services. (See Part 4 of the Budget of the
United Stetes, 1973.) It excludes all professional training, and programs which are part of the normal educational process, such as
vocational education. These programs are included in Special Analysis
I, "Federal Education Programs."
MANPOWER FUNDS BY AGENCY

The following table shows manpower obligations and outlays by
administering agency and program. Two agencies—the Departments
of Labor, and Health, Education, and Welfare will account for
87% of all manpower outlays in 1973, about the same as in past
years.
Table J-12. FEDERAL FUNDS FOR MANPOWER PROGRAMS BY
ADMINISTERING AGENCY (in millions of dollars)
Obligations

Outlays

Agency and program
1970

1971

1972

1973

1970

1972

1971

1973

Office of Economic Opportunity:
0 E 0 manpower

Department of Defense:
Project Transition

51
112
482

45
185
558

57
338
649
6

60
396
711
20

50
112
441

42
185
523

55
311
551
6

57
393
620
20

10
4

Department of Health, Education,
and Welfare:
Social services training
WIN and social services day care. _
Vocational rehabilitation
Upward mobility
Foster grandparents
Vocational work study
Subtotal, HEW
Department of Housing and Urban
Development:
Model cities manpower
Model cities child care
Community development training
Subtotal, HUD
Department of the Interior:
On-the-job training for Indians..
Institutional training for Indians. _
Indian placement assistance
Subtotal, the Interior
Department of Justice:
Training of offenders

657

8
6

803 1,056 1,193

9
2

613

763

928 1,095

24
9

39
15
1

45
19
2

6
2

24
9
1

33
14
2

41
17
2

3
29
5

3
29
6

3
31
6

3
32
6

2
26
5

1
26
5
33

3
31
6
40

3
32
6
41

152

THE BUDGET FOR FISCAL YEAR

1973

Table J-12. FEDERAL FUNDS FOR MANPOWER PROGRAMS BY ADMINISTERING AGENCY (in millions of dollars)—Continued
Obligations
Agency and program

Department of Labor:
Manpower revenue sharing
Emergency employment assistance
Work incentive training
Employment service
Computerized job placement
ES labor market information
BLS labor market information
OFCC and age discrimination
Program administration and other.
Subtotal, Labor
Veterans Administration:
On-the-job training for veterans. _
Veterans vocational rehabilitation.
Veterans assistance centers
Subtotal, VA__._

1970
1971
Lctual actual

1972
est.

Outlays
1973 1970 1971
est. actual actual

1972 1973
est.
est.

1,344 1,535 1,598 1,538 1,056 1,342 1,454 1,477
99| 1,238
653 1,088

80
325
325

12
27
9
1
113

64
349
23
24
10
3
132

177
374
36
28
11
4
178

112
405
40
27
14
4
180

67
325
6
23
9
1
105

97 140
347 374
23
27
20
22
10
11
3
4
12 \ 163

180
405
31
24
14
4
172

1,911 2,140 3,397 3,558 1,592 1,963 2,848 3,394

87
53
1

117
77
1

161
91
2

209
108
2

87
53
1

117
77
1

161
91
2

209
108
2

141

196

254

320

141

196

254

320

Action:
Foster Grandparents.
Equal Employment Opportunity
Commission:
Equal employment opportunity. _

All Federal agencies:
Disadvantaged youth programs. _
Federal contract compliance

67
7

74
15

78
24

78
32

67
6

74
15

78
23

78
31

Total

2,916 3,390 5,013 5,409 2,519 3,145 4,310 5,141

SPECIAL ANALYSIS K *
FEDERAL HEALTH PROGRAMS

Overview.—Federal outlays for health in 1973 are estimated at
$25.5 billion, 10.3% of all Federal expenditures. While health outlays
in 1973 are $1.7 billion more than in 1972, their share of the total
Federal budget is only slightly larger than in 1972. The following
table shows recent trends and the marked increase in Federal health
expenditures:
Table K-l. FEDERAL OUTLAYS FOR HEALTH COMPARED TO THE TOTAL
FEDERAL BUDGET (dollars in billions)
Actual
1965

1967

1969

Estimated
1970

1971

1972

1973

Total Federal outlays
$118.4 $158.3 $184.6 $196.6 $211.4 $236.6 $246.3
Federal health outlays
$5.2 $10.8 $16.6 $18.1 $20.2
$23.8
$25.5
Health as percent of total outlays. _
4.4
6.8
8.9
9.2
9.5
10.0
10.3

Table K-2 summarizes and distributes Federal health expenditures
for selected years by three major categories and the major components
of those categories. Of the total increase in 1973 over 1972 ($1.7
billion), about 60% is attributable to programs which finance personal
medical care, whereas 25% of the increase goes for health resources
development and 15% for the prevention and control of health
problems.

Outlays in Part 4___
----Plus health outlays assigned to other functions in:
Department of Defense
Veterans Administration
All other agencies

- '

2.6
2. 7
2. 1

Equal total health outlays in this analysis
25. 5
Both Part 4 and this analysis use the same categorical framework to distribute health outlays.
However, for technical reasons Part 4 does not make as detailed a distribution in the outlays from
a single appropriation as is done in this analysis. Thus, some outlays are assigned in this analysis
to a different category.

153

154

THE BUDGET FOR FISCAL YEAR

1973

Table K-2. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED
ACTIVITIES BY CATEGORY (in millions of dollars)

Development of health resources, total
Health research
Training and education
Construction of health facilities
Organization and delivery of health services l _
Financing and providing of hospital and medical
services, total
Direct Federal hospital and medical services _ . .
Hospital and medical services, indirect
Prevention and control of health problems, total.
Disease prevention and control
Environmental control
Consumer safety
Total outlays from Federal and trust funds.
1
2

1965
actual

1969
actual

1971
actual

(1,807)
1,040
317
450

(3,111)
1,528
805
612
166

(3,558)
1,565
1,113
548
331

1972
estimate

1973
estimate

(4,033) (4,475)
1,755 1,982
1,287 1,458
605
600
386
435

(2,936) (12,794) (15,922) (18,887)(19,928)
2,022
2,860
3,339
3,829 4,130
914
9,934
12,583 15,058 15,798
* (418)
(651)
(698)
(856) (1,124)
411
399
496
642
86
92
106
161
154
207
254
321
5,161

16,556

20,178

23,776 25,527

Not tabulated prior to 1967 as a separate activity.
Not separately broken out prior to 1969.

Until the middle 1960's Federal health outlays accounted for about
13% of total national health expenditures. These outlays were
predominantly directed toward biomedical research, construction of
community hospitals, and the provision of medical care to special
Federal beneficiaries, such as veterans, military personnel, and their
dependents. Since the enactment of Medicare, Medicaid, and
programs to support the education of health manpower, Federal
outlays have grown markedly and, in 1971, amounted to 26% of
the Nation's total expenditures for health (table K-3). The chart
following table K-3 displays the Federal health dollar in 1965 and
1973 and shows its changing distribution by activity.
Table K-3. FEDERAL HEALTH OUTLAYS AND NATIONAL HEALTH
EXPENDITURES (dollars in billions)
1965

Total national health expenditures
Health share of GNP (percent)
Federal health expenditures
Federal share of total (percent)

$38.9
5.9
$5.1
13

1971

$75.0
7.4
$20
26

155

SPECIAL ANALYSES

Distribution of All Federal Health Dollars

Training and Education

Training and Education
$1,458
Prevention
ana Control
$1,124

Fiscal Year 1965

Fiscal Year 1973

($5.1 Billion)

($25.5 Billion)

FEDERAL HEALTH POLICIES AND THE 1973 BUDGET

The shifts in the distribution of the Federal dollar and the increase
in the Federal share of the Nation's total health expenditures reflect
problems of national importance for which this administration has
taken action.
A summary of selected key problem areas and the administration's
response follow:
Problem Area
Financial barriers to access to health care
Administration Action
• A Federal Family Health Insurance Plan for low income families
with children.
• A basic health insurance package which must be offered by all
employers to employees and their families.
• Insurance pools to offer insurance to people not covered by the
above two programs.
• Elimination of the monthly Medicare insurance premium for
physician services.

156

THE BUDGET FOR FISCAL YEAR 19 73

Problem Area
Inflation in medical care prices.
Administration Action
• Accelerated research and demonstration on methods and incentives to increase efficiency in the medical delivery system.
• An increase in the supply of health manpower.
• The use of cost-sharing approaches to increase cost consciousness
by both patients and medical personnel.
• Special price and wage guidelines established by the Cost of
Living Council.
Problem Area
Inefficient and overlapping health care delivery systems.
Administration Action
• Loans and grant assistance to stimulate the growth and use of
Health Maintenance Organizations (HMO's).
• An increase in the number of area health planning agencies and a
strengthening of their role in guiding the kinds of facilities and
services needed.
• An emphasis on ambulatory care facilities in Federal construction
grants.
• Stimulation of the use of research results in new techniques and
new technology for health care delivery.
Problem Area
Undersupply and maldistribution oj medical personnel.
Administration Action
• Placement of Federal health personnel in medically underserved
geographic areas.
• Programs to stimulate greater use of primary care physicians.
• New and higher funding levels to provide assured Federal support to health professional schools.
• Emphasis on the use of allied health manpower.
• Development of area health education centers.
Problem Area
Inadequate development or use oj preventive approaches which can avoid
or minimize the need jor health care treatment.
Administration Action
• Reform in nonhealth programs such as welfare, housing, etc.,
which impact on health status.
• A private Health Education Foundation to improve public
awareness of measures needed to maintain good health.
• An increased attack on health problems resulting from environmental pollutants and communicable diseases.
• Accelerated consumer safety activities in the inspection of foods,
drugs, and consumer products to prevent injuries or illnesses
from health hazards.
• Intensified biomedical research, particularly in cancer and
sickle-cell anemia.

SPECIAL ANALYSES

157

• Health care projects directed toward prenatal and well-baby
care.
• Regulations requiring State Medicaid programs to provide
medical screening for children from birth to age 21.
• Efforts to identify and eliminate occupational health hazards.
Problem Area
Special medical problems
Administration Action
• New or expanded programs in family planning, drug addiction,
alcoholism and nursing home standards and inspection.
Federal health programs—as indicated in table K-2—can be
grouped into three basic categories—programs designed to increase
health resources, programs to provide health and medical services (both
directly and indirectly through financing), and programs aimed at the
prevention and control of health problems. Included in these three categories, however, are special impact programs that address particular
national problems that warrant a targeted response. Special Analysis K
addresses each of these three categories followed by a section on
special impact programs.
HEALTH RESOURCES

Health resources refer to health research, health manpower training
and education, construction of medical and health facilities, and
efforts directed toward improving the organization and delivery of
health services. The combined outlays for these programs will rise to
$4,475 million in 1973, an increase of $442 million over 1972.
Health research.— A key to the prevention and treatment of
disease is an understanding of the disease process through biomedical
research.
Of the total funds spent nationally for health research, the Federal
Government accounts for 64% of national expenditures; private industry accounts for 27%; and foundations, voluntary health agencies,
and others provide the remaining 9%. As is indicated in tables K-17
through K-19, health research is supported in a variety of areas by
some 13 Federal agencies. This effort has grown by approximately 30%
in the past 4 years, from approximately $1.53 billion in 1969 to $1.98
billion in 1973.
The principal Federal effort for biomedical research is in the Department of Health, Education, and Welfare (HEW), which accounts for
70% of total Federal health research expenditures. Almost 90% of this
total is provided through the National Institutes of Health (NIH) and
the National Institute of Mental Health (NIMH).
Federal funds support a wide range of research, such as basic
research, disease-oriented research, population research, and environmental health research in a number of settings. Table K-4 displays
some of the major areas of federally supported health research.
In 1973, special emphasis will continue to be placed on high priority research areas. Funds for cancer research will grow to $430
million, an average annual increase of $100 million for 1972 and
1973. Research in cardiovascular disease will be intensified through
the creation of a national network of centers that will be concerned

158

THE BUDGET FOR FISCAL YEAR 19 73

with all major facets of heart disease—prevention, epidemiology,
genesis, clinical manifestations, and treatment. Outlays for cardiovascular research will reach $152 million in 1973. In still another
priority research area, funds for research on sickle cell anemia, a
serious hereditary blood disorder that affects one out of every 500
young blacks, will be increased by 50% over the 1972 level.
Otner areas of health research on which emphasis will be placed
include pulmonary disease, digestive diseases and nutrition, allergic
diseases, mental health, more effective and socially acceptable contraceptive methods, and environmental health problems. NIH will
increase its research efforts on environmental health hazards, as will
other agencies, including the Environmental Protection Agency,
the Department of Transportation, the National Aeronautics and
Space Administration, and the Department of Defense (Defense).
Defense and the Veterans Administration (VA) together provide
one-tenth of Federal health research support and are concerned with
a number of disease entities and health problems related to their
specific missions but which have broader implications. Defense re-r
search concentrates upon traumatic injury and surgical casualt}
management, infectious disease, hazard protection and military
psychiatry. VA emphasizes those diseases that afflict its patient
population.
Table K-4. FEDERAL OUTLAYS FOR HEALTH RESEARCH (in millions of dollars)
1969
actual

Basic research
Categorical research and development, subtotal,
Cancer
Cardiovascular
Mental health
Neurological and visual
Population and family planning
Environmental health
Other categorical research and development
Research facilities construction
Research, total

1971
actual

562
(903)
170
142
76
88
54
87
286
62

489
(1,027)
161
107
86
58
24
196
395
49

1,528

1,565

1972
estimate

1973
estimate

527
576
(1,170) (1,357)
228
278
130
152
88
96
64
56
33
41
253
225
409
473
58
48
1,755

1,982

Training and education.—The rising demand for health services,
resulting in part from increased Federal efforts in financing and
organizing health services, is being met with Federal support to increase the supply of medical manpower. A variety of Federal programs
aid health professions schools, provide student assistance, and emphasize the training of allied health personnel. Overall, Federal
outlays in 1973 for health manpower training and education will be
$1,458 million.
The principal programs of direct support for professional health
manpower and nurses are operated by HEW under the recently
enacted Comprehensive Health Manpower Training Act of 1971 and
the Nurse Training Act of 1971. The major elements of these programs
are:
• institutional assistance in the form of both formula and project
support to increase enrollment and improve the quality of instruction, and
• student assistance in the form of scholarships and loans.

SPECIAL ANALYSES

159

A significant new element in Federal institutional support for health
professions schools will be capitation payments based on the number
of students enrolled. Capitation amounts in 1973 will be $1,775 per
student and $2,828 per graduate in schools of medicine, osteopatlry,
and dentistry; $1,592 per student in schools of veterinary medicine;
$741 per student in schools of optometry, podiatry, and pharmacy;
and $125 per student and $250 per graduate in schools of nursing.
The 1973 budget also contains special capitation bonuses for enrollment increases and special amounts for 2-year medical and dental
schools that convert to full-term institutions as well as for new schools
of medicine and dentistry.
Under these expanded authorities, outlays will increase $217
million in 1973 over 1971, an increase of 56% over the 2-year period.
The outlay increase from 1972 to 1973 will be $106 million or 2 1 % .
Enrollment in medical schools—perhaps the most critical institutional component of the health manpower development complex—has
shown a large increase since 1964 with the addition of more than 4,400
first-year places. Of the total budgets of the Nation's medical schools,
$1,144 million, or more than 50% was derived from Federal grants or
contracts. Support for the education and training programs of medical
schools, however, shows significant increases in 1972 and 1973 over the
levels of earlier years. Table K-5 shows Federal funds paid to medical
schools.
Table K-5. MAJOR AGENCIES PROVIDING FEDERAL FUNDS TO MEDICAL
SCHOOLS (obligations in millions of dollars)
Agency

Department of Health, Education, and Welfare
National Institutes of Health
Research
Education and training
Construction
Other
Health Services and Mental Health Administration
Research
Education and training
Food and Drug Administration
Research
_
Other
Department of Defense—Military
Other
Atomic Energy Commission
Research
Construction
National Aeronautics and Space Administration
Research
Veterans Administration
Research
Other Independent Agencies
Research
Total
Research
Education and training
Construction
Other
* Less than $1 million.

1971
actual

(845)
'796)
638
75
81
2
(48)
11
36
(1)
1
*
(4)
4
(14)
13
*

1972
estimate

1973
estimate

(1,080) (1,110)
(1,022) (1,052)
750
803
212
204
57
42
3
3
(50)
(55)
13
13
37
42
(9)
(3)
Q
3
o
*
1
(9)
(5)
5
5
(14)
(14)
13
14
*
*

5
1
8
(877)
678
111
81
6

10
11
(1,113) (1,144)
793
853
241
254
42
57
8
8

160

THE BUDGET FOR FISCAL YEAR 1973

In 1973, $7 million will be obligated by HEW programs designed
especially to recruit minority and disadvantaged persons.
Table K-6. FEDERAL O U T L A Y S FOR HEALTH TRAINING AND EDUCATION
(in millions of dollars)
1971
actual

Degree or certificate training:
Research training
Physician training
Dentist training
Nurse training
Other health professions training
Paramedical training
All other training
Construction assistance

1972
estimate

143
156
43
77
103
36
444
111

Total

1,113

148
220
50
103
129
52
481
105
1,287

1973
estimate

154
307
79
98
144
51
542
84
1,458

The number of health professions and nursing students receiving
loan and scholarship assistance is shown in table K-7. Loan assistance
will increase from $51 million in 1972 to $57 million in 1973, whereas
scholarship assistance will remain level at $35 million. This emphasis
on loans reflects both the anticipated earning capacity of health
professionals and the new authorities that allow the Federal Government to assume up to 85% of the indebtedness of health professionals
who agree to serve in medically underserved areas. Under the new
authorities, the Secretary of HEW will be able to affect the distribution
of health manpower.
Table K-7. HEALTH PROFESSIONS: NUMBER OF STUDENTS ASSISTED,
BY DISCIPLINE (HEW ONLY)

Discipline

Academic year 1968-69
(actual)
Scholarships

Medicine and osteopathic medicine
Dentistry
Other 1
Nursing3
1
2
3

Total
enrollment

Academic year 1972-73
(estimate)
Loans

Scholarships

Total
enrollment

14,301 6,582 37,712 14,040 8,040 48,600
6,373 3,135 15,408 5,265 3,015
18,400
4,771 4,435 27,194 9,945 5,615 231,500
25,055 12,370 157,700 26,000 19,500 192,000

Includes optometry, pharmacy, podiatric medicine and veterinary medicine.
For pharmacy includes only students in last 4 years for schools with 5 year programs.
Includes post-registered nurse enrollment.

As part of its responsibilities for the support of biomedical research,
HEW also supports research training. In 1973, $165 million will be
obligated to train biomedical researchers.
In addition to programs for the training and education of health
professionals, several Federal agencies conduct programs for the support of allied health personnel. HEW supports training and education
activities in public health and allied health. The program level for

SPECIAL ANALYSES

161

these activities will total $57 million in 1973, compared to $49 million
in 1972.
In 1973, 12 Federal agencies will fund programs to train research
and health care personnel. VA, through its 170 hospitals, most of
which are affiliated with medical schools, trains large numbers of
health professionals. The Department of Labor, under the Manpower
Development Training Act, supports the training of the greatest
number of paramedical personnel of any Federal agency.
Construction of health care facilities.—Federal health care
facilities construction programs include the support of both community
health care facilities to serve the general population and facilities
operated by Federal agencies for special beneficiary groups. In 1973,
Federal outlays for construction of health care facilities, including
environmental health facilities, are estimated at $600 million. Outlays
for health facility construction will decline slightly in 1973, showing
the effect of the shift in financing from primarily grant-supported
construction to guaranteed loans with interest subsidies.
The Hill-Burton program in HEW—the largest Federal program
supporting the construction of community health care facilities—has
contributed to the construction or modernization of over 470,329
hospital and long-term care beds costing over $11.3 billion, of which
$3.2 billion represents the Federal share. Hill-Burton assistance grants
have virtually eliminated a national shortage of hospital beds. Hospital
beds increased from 1,436,000 in 1946 to 1,616,000 in 1970, and one
out of every five of these hospital beds is unoccupied.
Beginning in 1972, Federal support for modernization and construction of hospitals and long-term care facilities has been available
through Federal loan guarantees and interest subsidies. Increasingly
hospitals and long-term care facilities are able to repay loans through
reimbursement from patient charges and third party insurance payments, including Medicare and Medicaid. By the end of 1973, this
program will guarantee and subsidize a cumulative total of $1.5 billion
in loans.
The critical area of need for construction today is outpatient and
other ambulatory health care facilities (hospital outpatient departments, clinics, and community centers) which provide alternatives to
costly hospital care. In 1973 the budget requests $85 million in
grant funds—the full amount authorized by law for construction of
these facilities. These Federal funds are expected to generate about
$283 million worth of construction in approximately 243 ambulatory
care projects. The proposed health maintenance organization (HMO)
legislation will also provide direct loans to public and private nonprofit institutions for constructing ambulatory facilities.
.Other Federal programs also assist in the construction of community
health facilities. The Department of Housing and Urban Development provides mortgage insurance for construction of hospitals,
nursing homes, and group practice facilities. The volume of mortgage
insurance commitments in 1973 by HUD will total an estimated
$562 million, an increase of $102 million over 1972, and will support

http://fraser.stlouisfed.org/
480-700
Federal Reserve
Bank of St. Louis

162

THE BUDGET FOR FISCAL YEAR 19 73

construction or modernization of 7,780 hospital beds and almost
21,920 proprietary and private nonprofit long-term care beds. The
Federal Government will spend $291 million in 1973 for constructing
or modernizing its own hospitals and other health facilities, primarily
those operated by the VA, Defense, and HEW. These expenditures
will be directed primarily to modernizing or replacing existing
facilities rather than for adding to the total bed capacity. This
construction will enable the facilities to increase their operating
efficiency, adjust to the changing needs of beneficiaries, and adapt
to improved medical technology.
Table K-8. HOSPITAL AND HEALTH FACILITY CONSTRUCTION
Outlays (in millions

Number of beds
(o.r projects)1

of dollars)
1971

Federally supported construction of hospitals
and other facilities:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Environmental health facilities
Ambulatory care facilities
Other
Subtotal, federally supported
Federal hospitals and health facilities:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Environmental health facilities
Ambulatory care facilities
Other

1972

1973

87
89
70
9
87
26

47
98
37
12
133
24

38
89
39
12
111
20

368

349

309

35
90
1
38
7
9

1971

7,010
7,984
8,279
(426)

1,964

119
3
47
9

126
3
55

397
188

13
15

(10)

Subtotal, Federal

180

256

291

Total, construction

548

605

600

1972

1973

4,842 4,390
8,470 6,738
3,844 3,084
(659)

(704)

275 1,090
2,584

1,129

997 1,109
(30)

(3)

1
Represents beds and projects which become available in each of the 3 years, irrespective of the
year(s) of related outlays.

Organization and delivery of health services.—Major Federal
programs designed to improve the organization and delivery of health
care include an assistance program for health maintenance organizations (HMO's), regional medical programs, assistance to comprehensive health planning agencies, and the activities of the National
Center for Health Services Research and development. Activities
of the Office of Economic Opportunity (OEO) are also directed to
improving the organization and delivery of health care. Outlays for
these programs will rise to $435 million in 1973 compared with $386
million in 1972.
One of the most significant changes taking place in the organization
of medical services is the growing development of health maintenance
organizations. HMO's bring together a comprehensive range of
medical services under one organization so that a patient is
assured convenient access to all of them. HMO's provide needed
services, including hospitalization, for a fixed annual fee which

SPECIAL ANALYSES

163

is paid in advance by subscribers. Thus, net income rises with the
number of days a subscriber is well and not the number of days he is
in need of expensive physician or hospital care. HMO's therefore have
a strong financial incentive to prevent illness, or at least treat it
efficiently in its early stages.
A study of the Federal employees health benefits program in
1968 indicated 560 days of hospitalization per 1,000 covered active
employees enrolled under HMO-type plans compared to 1,085 and
1,080 per 1,000 active employees enrolled under Blue Cross or indemnity programs, respectively. Similarly, the incidence of surgical procedures was 34 per 1,000 persons under HMO plans compared to 75
per 1,000 enrolled under the Blue Cross and Blue Shield options.
The Administration has proposed legislation to assist in establishing HMO's through technical assistance, planning grants and
contracts, direct loans, and Joan guarantees. $57 million in budget
authority for 1972 and $60 million in 1973 is being requested to assist
over 600 HMO's to become organized. Other legislation will permit
persons covered by Medicare, Medicaid, FHIP, and private insurance
plans to join HMO's. Efforts will also be made in both 1972 and 1973
to convert federally funded health centers into HMO's.
Emphasis on assisting comprehensive health planning agencies will
be continued by increasing the number from 228 in 1972 to 348 in
1973 and expanding their capabilities and responsibilities. Legislation
has been proposed to require approval by the responsible planning
agency before certain capital expenditures can be reimbursed under
Federal financing programs.
The National Center for Health Services Research and Development and

Regional Medical Programs (RMP) will support Federal efforts
directed towards the application of the latest technological advances
to both patient care and the design and management of medical
facilities. The use of medical assistants which permit doctors to see a
larger number of patients will be encouraged in these programs as
well as in health manpower programs. In addition, RMP—working
with the Office of Economic Opportunity—will support a new initiative
aimed at developing emergency health care systems on an areawide
basis. These systems will coordinate emergency room activities,
ambulance services, and communications networks with the community's health care delivery system. Quality-of-care standards and
peer review and utilization review techniques will continue to be supported and explored.
Table K-9. FEDERAL OUTLAYS FOR IMPROVING THE ORGANIZATION
AND DELIVERY OF HEALTH SERVICES (in millions of dollars)
1971
actual

Planning
Technology
Manpower utilization
Health care systems
Total

1972
estimate

1973
estimate

11
39
36
183

82
42
41
221

49
46
242

331

386

435

164

THE BUDGET FOR FISCAL YEAR 1 9 7 3

Americans who live in remote rural areas or in urban poverty neighborhoods represent a special problem because of the absence of
adequate medical resources. Federal efforts will be continued to improve the availability of care in those areas.
Health professionals will be encouraged to practice in medically
underserved areas through loan forgiveness provisions of the new
health manpower training legislation. Under those authorities, the
Federal Government will assume the indebtedness incurred during
education or training. Moreover, the National Health Service Corps
will permit an estimated 600 health professionals to be placed in
approximately 200 medically underserved areas. Area health education
centers will be established in a number of these areas and will provide
a permanent base for attracting health professionals.
The Federal Government will continue its support of outpatient
clinics in medically underserved areas through federally supported
health centers. This support provides an effective means for impioving
and expanding the capacity of the ambulatory health services delivery
system to deliver care. Emphasis in 1973 will be placed on improving
title management of existing centers, enhancing the quality of health
care delivered in those centers, and assisting existing centers to convert to HMO's.
FINANCING AND PROVIDING HOSPITAL AND MEDICAL SERVICES

Programs to finance or provide hospital and medical services include Medicare and Medicaid as wrell as the contract care programs
for certain Federal beneficiaries administered by the Defense Department, the Veterans Administration, and the Department of
Health, Education, and Welfare. In 1973, $19,928 million will be
spent to pay for health services delivered to those individuals who are
eligible for Federal support of their medical care needs. Outlays for
Medicare and Medicaid will rise by $492 million and will comprise the
largest share of the $15,798 million in Federal outlays directed towards
the financing of health care services. Outlays for Federal programs
that provide hospital care and medical services directly to Federal
beneficiaries will only increase by $301 million to $4,130 million in
1973, reflecting a trend away from the direct provision of medical care
to a greater reliance on financing mechanisms and use of community
facilities.
Two key elements in the National Health Strategy will affect the
financing and provision of hospital care and medical services in the
coming years. Legislation proposed by the Administration would
eliminate financial barriers to basic health care protection. The
National Health Insurance Standards Act (NHISA) would require
employers to offer basic health insurance coverage for employees and
their families. The cost of this plan would be borne jointly by employers
and employees. For those needy families with children not protected
under NHISA, the Family Health Insurance Plan (FHIP)—a fedeially administered program—would provide a basic level of protection. Under FHIP, premiums and copayments would be scaled to a
family's income. These proposals will take effect in 1974 and do not
affect the figures in this analysis.

SPECIAL ANALYSES

165

Medicaid.—Until the Administration's proposed new family health
insurance plan is enacted, Medicaid will continue to finance medical
care for low income individuals. Approximately 24 million low income
and medically needy people will receive benefits in 1973 through 52
separate federally aided, State-sponsored programs. The Federal share
of Medicaid costs will be $3.4 billion, or 55% of the total. The bulk of
the decrease in Federal outlays from 1972 is a result of an advance
payment to the States in 1972 to alleviate their fiscal pressures. Some
reduction is also due to the application of wage and price guidelines
established by the Cost of Living Council.
Partly because of the coverage expansion in State Medicaid programs, and partly because of recent Federal regulations requiring that
early screening services be provided to low income children, it is now
estimated that Medicaid will finance services to 11 million children
under age 21 in 1973 compared to 6 million in 1969. The following
table depicts Federal costs and other selected program indicators,
for the period 1970-73:
Payments to medical vendors (millions)
Administrative costs (millions) „__
Percentage of payments to categorically needy
Recipients of service (millions of persons)
Aged 65 or over
Blind and disabled
Children under 21
Otheradults
Payments by type of service (percent):
General and TB hospitals
Nursinghomes
Physicians
Mental hospitals
Drugs
Other

1970
actual

1971
estimate

1972
estimate

1973
estimate

$2,604
$94
69
15
3.0
1.3
7.4
3.3

$3,210
$152
73
18.2
3.6
1.6
8.3
4.7

$4, 181
$220
74
20.6
3.8
1.8
9.4
5.6

$3,261
$171
73
23.5
4.0
2.1
10.8
6.6

32
26
12
8
8
14

32
25
12
9
8
14

35
23
13
7
8
14

35
21
14
7
8
15

In 1972, 65% of the Medicaid dollar was spent on inpatient care.
In an effort to promote the use of less costly ambulatory and preventive care, legislation has been proposed to limit Federal matching for
care provided in nursing homes and mental hospitals to that needed
for active treatment and to institute cost sharing provisions for care
provided in general hospitals. Higher Federal matching levels will be
provided for all ambulatory care to encourage greater use of hospital
outpatient clinics, comprehensive health centers and physicians'
services.
Medicare.—Over 95% of the Nation's aged population will be
enrolled in Medicare in 1973, making them eligible to receive Federal
reimbursements for 45% of their total personal health care costs.
Outlays for the Medicare program will reach $10.4 billion in 1973, of
which 67% will pay for inpatient services provided in hospital and
extended care facilities through the hospital insurance program (HI)
and 24% will pay for physicians' services, home health and outpatient
services through the supplementary medical insurance program (SMI).

166

THE BUDGET FOR FISCAL YEAR

19 7 3

Legislation is being proposed to eliminate the enrollees' premium for
the SMI program to make all Medicare beneficiaries eligible for reimbursement for outpatient services.
Since Medicare began in 1967, hospital admissions per 1,000 beneficiaries have risen 17%, and Medicare payments for hospital stays
have increased by 50%. A portion of this increase in outlays has
been used to pay for hospital services previously provided on a charity
basis. Before Medicare, approximately 17% of hospital stays among
aged persons did not incur charges; since Medicare, this percentage
has been reduced to 3%. Similarly, the proportion of total hospital
charges paid directly by the patient have been reduced to 7% from
38% in 1966. Thus, the impact of Medicare has been to shift a large
pait of the financial burden of medical payments for aged persons
from the private sector to the public sector, as well as to contribute
to higher utilization rates for hospital care by persons 65 or over.
Medicare expenditures have risen significantly from $8.8 billion
in 1969 to $10.4 billion in 1973. As the table below indicates, the rate
of increase for both hospital insurance payments (HI) and supplemental medical insurance payments (SMI) has slowed down since 1969
due to major efforts to instill greater efficiency into the Medicare
program, particularly through intensified review of utilization
practices. Since 1969, the average length of covered hospital stay has
been reduced by more than one day and expenditures for extended
care facilities stays have declined due to the tightening of controls
for unauthorized Medicare use. A change in the regulations for
reimbursing physicians' services under SMI has occurred which
permits carriers to recognize as of July 1 of a fiscal year, only those
charges which fall within the 75th percentile of customary charges
made for similar services during the previous calendar year.
In 1973, additional efforts will be made to contain Medicare cost
increases to a 9.5% growth in outlays for hospitalization costs and
2%% in physician fees. Without these efforts, estimated outlays
would be significantly higher in 1972 and 1973. The following table
displays the pattern of utilization and costs in the program:
Hospital insurance payments:
Hospital admissions (in thousands)
Admissions per 1,000 covered aged
Average length of stay (in days)
Benefit payments (in millions)
Supplementary medical insurance program:
Persons with supplementary medical insurance protection (in millions)
Beneficiaries receiving services (in millions).
Benefit payments (in millions)
Medical prices, percent increase from prior
year (as of June in year shown):
Hospital daily service charge
Physicians'fees
1

1968
5,655
282
14.2
$3,736

1969
5,918
291
14.1
$4,654

1970
6,093
299
13.5
$4,804

1971
6,329
317
12.5
$5,443

1972
6,389
322
12.5
$6,265

1973
7,211
325
12.5
$7,395

18.2
7.7
$1,389

18.8
9.0
$1,645

19.2
9.2
$1,979

19.8
10.3
$2,035

20.1
10.9
$2,240

22.4
11.3
$2,486

12.2
5.5

13.0
7.3

12.1
7.6

13.0
6.8

6.0
*2.5

*6.0
X
2.5

In accordance with Cost of Living Council guidelines.

Other programs.—In addition to Medicaid and Medicare, the
Federal Government finances or provides medical services for certain
special categories of beneficiaries—such as Armed Forces personnel

SPECIAL ANALYSES

167

and their dependents, veterans, American Indians, and poverty
families. These programs include:
• Medical care to active and retired military personnel and their
dependents.—In 1973, Defense will operate 199 hospitals directly
and will contract with community facilities to provide additional
care for its beneficiaries. Outlays for these services will be $2,183
million in 1973, $145 million more than in 1972.
• Medical care to veterans.—VA operates 170 hospitals, long-term
care facilities and outpatient clinics and also provides contract
care for certain veterans. Expenditures for health services to
veterans are estimated to be $2,344 million in 1973, an increase of
$243 million over the 1972 level. Outpatient visits in 1973 are
expected to rise to over 11 million with an increase in the number of patients receiving hospital treatment to 844 thousand
from 826 thousand in 1972.
• Health insurance for Federal employees.—Health benefits are
provided to almost 8.5 million Federal civilian employees and
annuitants and their dependents under the Federal employees
health benefits programs managed by the Civil Service Commission. In 1973, Federal payments to finance these programs will
increase by $108 million to $642 million.
• Indian health services.—Outlays for Indian health services and
facilities will increase by 7% in 1973 to $196 million. These funds
provide comprehensive health services and emphasize ambulatory
care and the training of Indians for leadership roles. Indicators of
improved health among Indians since 1969 include a 16% decline
in infant mortality and a 60% reduction in deaths caused by tuberculosis. The emphasis on ambulatory care is shown by a 20%
decline in the inpatient load of the Indian Health Service and a
28% increase in the number of outpatient visits since 1969.
Table K-10. FEDERAL FINANCING OR PROVISION OF MEDICAL CARE
0Utlay

Provision of direct Federal hospital and
medical services:
General hospital inpatients
Psychiatric hospital inpatients
Long-term care inpatients
Outpatient and other services
Total, direct services
Provision of hospital and medical services
indirect:
General hospital inpatients
Psychiatric hospital inpatients
Long-term care inpatients
Physician services—office, home or institution
Outpatient and other services

;f (i dolTa i ls)° nS
1972

1973

1,788
452
103
995

2,127
455
112
1,135

2,255
1,943 1,943 1,912
491
170
156
159
129
36
38
39
1,256 72,618 76,411 76,749

3,339

3,829

4,130

6,901
232
1,219

8,293
259
1,485

9,085
153
1,256

2,564
1,667

2,936
2,084

3,193124,842
2, 111J

12,583 15,058

15,798

Total, provision of services

15,922

19,928

18,887

1971

» <in thousand,)

1971

Total, indirect services

Numbc

2,103
226
894

1972

2,249
234
1,135

1973

2,272
155
949

29,862 34,461

168

THE

BUDGET FOR FISCAL YEAR

1973

• Federally sponsored health centers.—Medical services for lowincome families in federally funded health centers are provided
through the maternal and child health program, the partnership for
health program, and the OEO neighborhood health center program.
Obligations for these centers will increase by $46 million in 1973
to support 685 community-based comprehensive health projects
expected to serve a target population of approximately 10 million
low-income individuals.
Table K-11. FEDERALLY FUNDED HEALTH CENTERS
1970
actual
Total Federal obligations (millions of dollars)
Partnership for health
Maternal and child health
Community mental health centers (NIMH)
OECM
Number of centers funded
Partnership for health
Maternal and child health
NIMH (operating grants)
OEOi
Number of persons in target areas served in year
(thousands):
Partnership for health 2
Maternal and child health 2
NIMH
OEO

1971
actual

1972
estimate

1973
estimate

223.6

338.5

436.9

447.6

26.2
75.8
47.6
74.0

66.3
83.4
90.1
98.7

101.6
92.0
135.1
108.2

116.2
101.3
135.1
95.0

449

527

639

685

26
115
245
63

47
115
300
65

65
115
389
70

88
115
422
60

276
575
33,000
1,500

600
654
40,000
1,580

950
718
52,000
2,324

1,380
774
56,000
2,124

1
In addition to 49 neighborhood health centers (of which 25 were transferred to HEW in 1971
and 1972 and 10 more will be transferred in 1973), the OEO numbers include comprehensive health
care
projects in outpatient departments, group practice projects, and community network projects.
2
Represents numbers of persons actually served.

Distribution of health care outlays by age groups and economic status.—Table K-12 distributes the Federal outlays for the
"provision of hospital and medical services" category among three
major age groups and between indigent and nonindigent persons.
Outlays for the development of health resources and for prevention
and control of health problems have been excluded from the table
since they are designed to serve the entire Nation and are not normally
allocable by population group or income.
The largest health care expenditure increase in both absolute and
percentage terms will be for other adults, rising by $581 million to
$6 billion in 1973. This increase reflects the enactment of pending
legislation extending the Medicare program to disabled social security
beneficiaries. Approximately 45% of total health care expenditures
will cover health care for the needy in 1973. The 1973 outlays for the
needy remains at the 1972 level due to a 1973 advance Medicaid
payment of approximately $340 million in June 1972 and does not
represent an actual decreased level of activity.
Aged.—Sixty percent of personal health care outlays will be on
behalf of the aged. The $500 million increase for this age group in 1973
is almost entirely attributable to the Medicare and Medicaid programs.

SPECIAL ANALYSES

169

In 1973, approximately 36% of Federal Medicaid payments will support medical services for the aged, although they comprise only 17%
of the program's beneficiaries.
Other adults.—In 1973, nonaged adults will receive $6.0 billion in
health care services—$581 million over 1972 primarily due to pending
Medicare legislation. Of the dollars spent on this group, 54% will go
for the indigent.
Children and youth.—Federal health outlays for children will amount
to $2.1 billion in 1973. One-half of this amount will go for indigent
children. Beginning in 1972, special efforts will be devoted to an early
and periodic screening program for young Medicaid recipients.
In summary, about 60% of the Federal expenditures for personal
health care is on behalf of the aged, 30% for nonaged adults, and
over 10% is for children. The latest Social Security Administration
report concerning total public and private health outlays in 1970
indicates that the Federal Government pays about 54% of the total
health costs for the aged, 11% of the total outlays for nonaged adults
and about 16% of the total costs for children.
Table K-12. ESTIMATED HEALTH CARE EXPENDITURES BY POPULATION
AND INCOME GROUPS1 (in millions of dollars)
1971
actual

Total, all recipients

1972
estimate

1973
estimate

15,912

18,876

19,915

Aged (65 and over)
Other adults (19-64)
Children and youths (0-18)

9,585
4,655
1,672

11,272
5,461
2,142

11,772
6,042
2,100

Indigent, total

7,227

8,817

8,867

Aged (65 and over)
Other adults (19-64)
Children and youths (0-18)

3,752
2,637
838

4,598
3,084
1,135

4,586
3,224
1,057

8,685

10,059

11,048

5,833
2,019
834

6,675
2,378
1,007

7,187
2,819
1,043

Nonindigent, total
Aged (65 and over)
Other adults (19-64)
Children and youths (0-18)
1

Does not include foreign nationals receiving health care services outside the United States.

PREVENTION AND CONTROL OF HEALTH PROBLEMS

Major Federal programs to prevent and control health problems
are in the areas of consumer safety, communicable diseases, traffic
accidents, occupational safety, environmental health, public health
education, and foreign health assistance. This reflects the high priority
accorded the prevention of illness and injuries. Outlays for these
activities will increase to $1,124 million in 1973 from $856 million in

170

THE BUDGET FOR FISCAL YEAR 19 73

1972. In addition, physicians will be encouraged to provide preventive
care through HMO's and a continuing emphasis will be placed on
health research.
Consumer safety.—A considerably expanded thrust to protect the
health and safety of the consumer is reflected in the increase in outlays
of $67 million in 1973 over 1972. Federal efforts in food and product
safety show the greatest increases. Under pending legislation, the Food
and Drug Administration (FDA) in HEW will be given an expanded
role in consumer protection and redesignated the Consumer Safety
Administration.
FDA and the Department of Agriculture have the leading Federal
roles in protecting the public from dangerous or mislabled foods,
drugs, and other products. FDA food inspection activities will be
expanded to insure the safety, nutritional adequacy, and accurate
labeling of the Nation's food supply. The meat and poultry- inspection
programs of the Department of Agriculture protect consumer health
by assuring that all fresh and processed meat and poultry and their
products that are shipped in interstate and foreign commerce are
wholesome and suitable for human consumption. Research on the
effects and hazards of pesticide residues and chemicals on crops and
livestock foods will be increased.
FDA will also expand its capability to collect, process, and analyze
data in order to minimize hazards associated with toys, household
chemicals, cosmetics, clothing, and other consumer products. Product
safety inspections and consumer injury investigations will increase
approximately 300% from 1972 to 1973. In addition, legislation will
be proposed to strengthen the control over hazardous household
products.
To insure that drugs and therapeutic devices are safe and effective
for their intended uses, FDA will continue inspecting drug manufacturing processes, examining over-the-counter and prescription
drugs, and evaluating new drugs prior to marketing. Proposed legislation would strengthen FDA's ability to assure the safety and effectiveness of medical devices by providing authority for standard setting
and premarketing clearance of devices when necessary.
Disease control.—The Center for Disease Control (CDC) in
HEW leads the Federal efforts to prevent and control disease. Disease
surveillance conducted by CDC provides a national alarm system to
identify outbreaks of disease. Followup support, such as vaccine and
technical assistance, is provided to State and local health departments.
Special efforts to eradicate rubella (German measles), to control
venereal disease, and to alleviate nutritional problems will continue
to be emphasized in 1973. Fifty-five million children age 1 through
14 will be inoculated against rubella. Technical assistance, drugs,
personnel, and public education are furnished to States and localities
in order to gain control over venereal diseases. Several Federal
agencies provide technical assistance and public education to alleviate
and prevent nutritional diseases.
CDC conducts a comprehensive national program to improve and
standardize the performance of the Nation's clinical laboratories.
This program also has responsibility for the licensure and evaluation
of clinical laboratories engaged in interstate commerce.

SPECIAL ANALYSES

171

Accidents and occupational safety.—Accidents are the leading
cause of death for persons between the ages of 1 and 37 and the
fourth leading cause of death overall. In addition, accidents cause
millions of disabling injuries each year. Federal programs to help
prevent accidents will be expanded in 1973.
Traffic accidents resulted in 50,000 deaths in 1970, half of which
involved drivers or pedestrians under the influence of alcohol. Special
emphasis has been placed on treating alcoholism as discussed in the
section on special impact programs. Other highway safety programs
support the removal of hazards; the installation of safer guard rails,
light poles, etc.; and the use of new international signs. In addition,
the Department of Transportation continues its regulatory efforts to
require automakers to provide safer cars.
The 1973 budget also requests increases under the Occupational
Safety and Health Act to reduce the 14,000 deaths and more than
2 million disabling injuries resulting each year from occupational
accidents and disease.
Environmental control.—The Federal Government supports environmental health programs in HEW and in EPA. The programs in
HEW consist mainly of grants and technical assistance to States and
communities to reduce the prevalence of lead-based paint poisoning
in children, to control rodents, and to develop environmental planning
capabilities. In 1973, $9.5 million in grants will be awarded to about
50 communities to screen approximately 1.5 million children currently
at risk of having or acquiring lead poisoning and to support the
development of community organization and public education to prevent future lead poisoning. Under the Federal rodent control program,
project grants in the amount of $15 million will be funded in 34
communities in 1973.
EPA health programs provide health intelligence relative to the
effects of environmental pollution on the health of the American
people. This information and the information derived from research
aid in setting environmental standards and taking regulatory actions.
Environmental programs reported in this section are only those having
a direct impact on health; all other environmental piograms are now
discussed in the Environmental Special Analysis, Section S.
Public health education.—Prevention and control of illnesses
and injuries can be improved greatly through public health education.
The proposed National Health Education Foundation will serve as a
national instrument to stimulate and coordinate a comprehensive
health education program.
Other Federal public health education efforts will continue in such
areas as nutrition, smoking, drug abuse, family planning, and automotive safety. These efforts will be conducted mainly through direct
Federal service programs in the National Center for Family Planning
Services, the Indian Health Service, and the Center for Disease
Control in HEW, the Department of Agriculture, and the Department
of Transportation.
Foreign health assistance.—Efforts by the United States to
prevent and control disease in other nations are undertaken by the
Agency for International Development (AID), the Peace Corps, and

172

THE BUDGET FOR FISCAL YEAR 1973

international agencies to which the U.S. contributes financially, such
as the World Health Organization and the Pan American Health
Organization. AID and the Peace Corps provide technical assistance
to other nations through training and treatment in areas of communicable disease control and eradication, nutrition, public health education, family planning, and environmental health. Outlays by AID, the
Peace Corps, and the State Department for these purposes will increase in 1973 to $233 million.
Table K-13. FEDERAL OUTLAYS FOR THE PREVENTION AND CONTROL
OF HEALTH PROBLEMS (in millions of dollars)
1971
actual
Disease prevention and control
Environmental control
Consumer safety
_
Total

1972
estimate

399
92
207

496
106
254

698

856

1973
estimate

642
161
321
1,124

SPECIAL IMPACT PROGRAMS

Special impact programs are Federal programs which have been
designed and targeted to health problems that are sufficiently unique
to warrant a categorical assistance. These programs include drugabuse activities, alcoholism projects, the provision of family planning
services, and nursing home improvement efforts.
Drug abuse.—In response to the growing national drug problem
and the need to coordinate Federal drug abuse-related programs, the
President established the Special Action Office for Drug Abuse Prevention within the Executive Office of the President. This Office will
direct the Federal efforts in treatment, rehabilitation, education, and
research relating to controlling the demand for drugs. Obligations
for these activities rose from $132 million in 1971 to $310 million in
1972. This effort will continue in 1973 with a further increase in
obligations of $55 million. These obligations are in addition to law
enforcement activities which are discussed in Special Analysis O and
amount to $229 million in 1973.
HEW, through NIMH, funds major drug abuse treatment, rehabilitation and research programs, and the National Clearinghouse for
Drug Abuse Information within NIMH will expand its efforts to
disseminate current data and information. The Office of Education
in HEW has the major role in drug abuse education and training.
Defense and VA will intensify efforts to control the drug problem
among our military personnel in Southeast Asia and our returning
veterans.
Six other Federal agencies also fund programs to combat the effects
of drug abuse. These include the OEO's support of treatment, rehabilitation, and education programs for the poor and the Department
of Labor's rehabilitation activities. Within the Department of Justice,

SPECIAL ANALYSES

173

the Bureau of Prisons administers treatment programs for Federal
prisoners, the Bureau of Narcotics and Dangerous Drugs conducts
training and research programs, and the Law Enforcement Assistance
Administration supports a broad range of community drag abuse
programs.
Table K-14. ESTIMATED OBLIGATIONS FOR DRUG ABUSE PROGRAMS
(in millions of dollars)
1969

Treatment and rehabilitation:
Health, Education, and Welfare
Defense
Justice
Veterans Administration.._
Office of Economic Opportunity
Housing and Urban Development
Other

1971

22.9

1972

1973

.9
.6
2.2
1.4

40.7
.4
18.9
.7
12.1
6.0

83.6
48.2
19.1
16.4
13.0
9.3

97.4
62.6
18.3
21.6
20.0
9.3
1.0

28.0

78.8

189.6

230.2

1.4
.6

12.7
20.9
.2
2.3
.7

31.2
18.4
8.8
3.1
2.5
.4

32.7
13.1
12.4
4.3
1.0
.9

2.0

36.8

64.4

14.1
1.1

11.3
.5
3.3
1.0

34.6
9.5
4.4
1.3
2.5
3.0
.8

37.8
14.6
5.1
2.8
2.0
6.9
1.4

Subtotal

15.5

16.6

56.1

70.6

Total

45.5

132.2

310.1

365.2

_
_
___

Subtotal
Education and training:
Health, Education, and Welfare
Justice
Defense
Housing and Urban Development
Office of Economic Opportunity
Other
Subtotal

____

Research, planning, and coordination:
Health, Education, and Welfare
Defense
Justice
Veterans Administration
Office of Economic Opportunity
Special Action Office for Drug Abuse Prevention
Other

Alcoholism.—Alcohol abuse and alcoholism are national problems
that touch every community and State. In 1972 the Federal Government began to shift the responsibility for determining project priorities
to the States through formula grants.
NIMH will continue to support its ongoing alcoholism treatment
projects to develop model programs from which States will be able to
pattern their programs. In addition, in 1973 NIMH will support about
70 projects transferred to it from OEO with an increase of $10 million
in budget authority for this purpose.
Other Federal programs involved in the effort to reduce alcoholism
and its effects are administered by VA, which will spend $15 million
to treat alcoholism in veterans; the Social and Rehabilitation Service
of HEW which will earmark $32 million for alcoholic rehabilitation;
and the Department of Transportation will fund $32 million in projects
aimed at reducing the incidence of drunken driving and the associated
high percent of accidents involving the use of alcohol.

174

THE BUDGET FOR FISCAL YEAR

1973

Table K-15. ESTIMATED OBLIGATIONS FOR ALCOHOLISM
(dollars in millions)
1969

Treatment and rehabilitation:
Health, Education, and Welfare:
National Institute of Mental Health
Social and Rehabilitation Service
Veterans Administration
Office of Economic Opportunity
Subtotal
Education and training: Health, Education, and Welfare
Research:
Health, Education, and Welfare
Transportation
Subtotal
Total

1971

1972

1973

68.3
37.4
12.5
2.0

78.2
31.7
14.5

8.3
26.7
8.1
11.0

14. 1

54.1

120.2

124.4

1.8

4.8

6. 2

6.6
7.4

8.4
29.4

8.9
31.7

6.2

14.0

37.8

40.6

21.0

69.9

162.8

169.8

14.1
_

PROGRAMS

Family planning.—Federal support of family planning services
and research will continue in 1973 with Federal obligations increasing
to $240 million, a threefold increase since 1969. Of this amount, $183
million will support family planning services to approximately 3.5
million low-income people.
Family planning services are funded primarily through the National
Center for Family Planning Services and the maternal and child
health program in HEW and OEO. Efforts will be concentrated on
providing services to hard-to-reach groups such as teenagers, rural
dwellers, and migrants, as well as to insuring that family planning
services are included as a basic part of comprehensive health service
programs. The National Center will also spend $3 million to train
about 2,200 paramedical personnel in the most appropriate techniques
to deliver family planning services to low-income women and to train
administrative personnel to improve the management and program
development of federally sponsored family planning projects.
Family planning research activities are supported by NIH and
AID. Obligations directed primarily towards the development of
new contraceptives which are effective, safe, and socially acceptable
will rise from $52 million in 1972 to $58 million in 1973.

SPECIAL ANALYSES

175

Table K-16. ESTIMATED OBLIGATIONS FOR FAMILY PLANNING
SERVICES AND RESEARCH (dollars in millions)
1971
actual

Research (total)
National Institutes of Health
Agency for International Development
Services to low-income persons in the United States (total) _
Health, Education, and Welfare (total)
National Center for Family Planning Services
Maternal and child health
Other HEW
Office of Economic Opportunity
Number of individuals served (millions of persons)

1972
estimate

1973
estimate

$40.3

$51.3

$57.8

$28.3
$12.0

$39.3
$12.0

$44.8
$13.0

$80.3

$147.7

$182.6

$57.1

$123.7

$167.6

$33.6
$17.0
$6.5
$23.2

$98.9
$17.0
$8.7
$24.0

$140.0
$17.0
$10.6
$15.0

2.2

3.1

3.5

Nursing home improvement.—The administration has initiated
a major effort within HEW to improve standards in the Nation's
nursing homes to assure that facilities receiving Federal funds are in
compliance with Federal and State regulations. Legislation has been
proposed that would authorize Medicaid to pay 100% of the State
costs of inspecting nursing homes. In 1970, 900,000 Medicaid or
Medicare recipients were served by 7,000 skilled nursing homes or
extended care facilities. Outlays of $6.8 million in 1972 will be increased
to $11.6 million in 1973.
As part of this effort, HEW will train 2,000 State personnel to
inspect nursing homes in 1972 and 1973—almost a tenfold expansion
of the 1971 training program. Approximately 21,000 nursing home
employees will also participate in 1-week courses designed to improve
the quality of service they deliver to nursing home patients. In
addition, a new program of five demonstration "ombudsman" units
aimed at identifying and solving patients' complaints and problems
will be established.
EXPENDITURES FOR HEALTH ACTIVITIES BY AGENCY

The following tables distribute the health-related expenditures of
Federal agencies by the categories used in this analysis. Except for
HEW and parts of the Civil Service Commission, health-related
outlays of all other agencies are, because of their major purpose,
assigned to functions other than health (650) in part 4 of the Budget
document. The tables, therefore, indicate the predominant budget
functional code for each agency. Other special analyses such as those
on research and development, education, and manpower also include
all Federal outlays in their areas. They will thus include, where
pertinent, the same outlays that are tabulated in this analysis.

TableK-17. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1971 (in millions of dollars)
Functional
code

Department of Health, Education, and Welfare
Health Services and Mental Health Administration,
National Institutes of Health
Food and Drug Administration
Social Security Administration
Social and Rehabilitation Service
Other
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
Agency for International Development
Office of Economic Opportunity
_..
National Aeronautics and Space Administration
Atomic Energy Commission
Civil Service Commission
Department of Labor
Department of State
National Science Foundation
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1971.
*Less than $100,000.

Health
research

Training
Organizaand
Construe- tion and
education
tion
delivery

650
650
650
650
650
650/700

,115.7
151.8
942.2
21.8

713.3
175.5
527.6
1.1

051
804
551
350
404
152
551
250
058
906
607/609
150
606

90.4
67.9

1.3
7.8
134.1
106.8

44.2
9.8
7.2

7.0
11.6

73.3
101.1
.3

335.8
323.6
9.3
2.5

Direct
Federal
hospital
and
medical

178.3 11,569.6
178.0
321.8

181.9

.3
2.6
7.7

70.4
.1

37.3

7.8
291.4

3,338.6 12,583.3

698.3 20,177.8

1,466.1

15.8
35.8

1,656.9

7,875.1
3,362.3
10.4
350.5
111.3

.2
.5

Total

5.2

.4
74.1

7.9

Prevention and
control
of health
problems

322.7 14,490.2
258.0 1,633.5
4.2 1,513.1
85.9
60.5
7,875.1
3,364.0
18.6
5.9 2,121.1
2,034.8
44.4
219.8
175.6
20.9
4.1
147.2
120.4
187.2
73.5
117.2
15.7
70.7
137.1
7.8
34.5
21.3
33.5
154.3
24.7
291.4

254.7
224.9
29.8

.4
76.2
8.7

Indirect
Federal
hospital
and
medical
services

30.1
24.7

126.4
4.9
3.4
5.3

45.4

9.2

1,564.6

1,113.3

548.3

331.3

Table K-18. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1972 (in millions of dollars)
Functional
code

Department of Health, Education, and Welfare
Health Services and Mental Health Administration
Nationallnstitutesof Health
Food and Drug Administration
Social Security Administration
Social and Rehabilitation Service
Other
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
Agency for International Development
Office of Economic Opportunity
National Aeronautics and Space Administration
Atomic Energy Commission
Civil Service Commission
Department of Labor
Department of State
National Spience Foundation
__._
Other agencies._
Agency contributions to employee health funds
Total outlays for health, 1972

Health
research

Training
and
Construeeducation
tion

650
650
650
650
650
650/700

1,258.6
159.5
1,065.6
33.5

855.3
197.9
643.2
2.6

051
804
551
350
404
152
551
250
058
906
607/609
150
606

98.3
77.7

2.1
9.5
142.8
123.4

46.9
15.8
6.4
68.6
104.5

342.2
318.6
8.6
6.0

269.2
238.1
31.1

9.0
88.5
99.7
9.3
_

5.6
15.7
___

Direct
Federal
hospital
and
medical
services

Indirect
Federal
hospital
and
medical
services

Prevention and
control
of health
problems

187.3 13,811.7
186.9
425.9
._

381.1
300.0
8.5
72.6

.4
17.0
51.8
__

1,635.3
1,965.3

8,974.1
4,400.9
10.8
403.0
136.0

6.7
195.4
5.5
152.8

7.9
15.4

161.4

.4
10.7
9.2

109.6
.1

12.2

40.8

11.3
424.6

385.9

3,828.9

15,058.2

31.0
46.8

.5
_
127.1
5.2
3.8
7.5

.2
___
57.4

1,754.8

1,286.9

605.4

Organization and
delivery

22.2
_._

17.5
22.5
52.6

Total

17,105.4
1,826.8
1,757.1
114.7
8,974.1
4,403.5
29.3
2,374.6
2,419.1
61.1
242.3
26.8
182.8
176.9
68.7
127.2
110.0
155.7
37.9
34.8
228.6
424.6

856.3 23,776.5

Table K-19. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1973 (in millions of dollars)
Functional
code

Department of Health, Education, and Welfare
Health Services and Mental Health Administration.
National Institutes of Health
Food and Drug Administration
Social Security Administration
Social and Rehabilitation Service
Other
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
Agency for International Development
Office of Economic Opportunity
National Aeronautics and Space Administration
Atomic Energy Commission
Civil Service Commission
Department of Labor
Department of State
National Science Foundation
Other agencies.
Agency contributions to employee health funds
Total outlays for health, 1973Less than $100,000.

Health
research

Training
Organizaand
Construe- tion and
education
tion
delivery

650
650
650

1,468.7
184.3
1,239.9

979.6
206.2
758.7

307.0
282.3
8.7

650
650
650/700

44.5

3.2

3.0

051
804
551
350
404
152
551
250
058
906
607/609
150
606

1.9
9.7
111.1
81.9

145.7
153.2

47.3
15.5
8.0

5.8
12.4

297.9
262.2
35.6

Direct
Federal
hospital
and
medical

92.5
9.2

8.9

18.9
61.0

Prevention and
control
of health
problems

Total

198.8 14,381.8
198.3
492.3

591.4 18,225.2
455.7 2,081.3
10.9 2,053.7
179.7
124.8

10,436.4
3,441.5
11.6
471.9
165.7

10,436.4

.5
13.0
134.0

Indirect
Federal
hospital
and
medical

1,710.6
2,178.6

22.5

7.1

3,443.9
34.3
2,580.5
2,690.8
70.2

209.4

256.8

5.6
149.8

26.9
179.0
144.1

121.6

57.8
26.5

57.8
139.8

112.9

11.1

30.4
47.5

141.6
6.2
4.6
8.7

48.3

19.6

42.1

13.7
504.7

64.5

35.0
244.4
504.7

1,981.7

1,458.3

600.1

434.9

4,130.3

15,797.7

1,124.0

25,527.1

.4
3.6

138.0

137.6

46.8
22.9

192.8
41.2

SPECIAL ANALYSIS L
FEDERAL INCOME SECURITY PROGRAMS

Federal income security programs will exceed $100 billion in 1973.
These programs provide benefits for 50 to 60 million Americans to
replace income lost due to retirement, disability, illness, unemployment, poverty, or death of a family's chief wage earner.
This year marks the first time that the value of preferential tax
treatment for various groups will be included in this analysis, wherever
the Federal revenues foregone constitute an important direct income
supplement to the individual benefited. These benefits total $6.6
billion in what might be termed "tax transfers/' since these tax
revenues foregone represent a transfer of purchasing power to the
beneficiaries. Cash benefit outlays continue to dominate total income
security benefits accounting for 74% of the benefits. Benefits provided
in-kind (such as medical care and services, food stamps, and public
housing) account for another one-fifth. The new category of tax
transfers constitutes only 7% of the total, but provides important
income supplementation to the Nation's 21 million elderly.
Sustained reform is the distinguishing attribute of the Nation's
income security programs in recent years. Proposed program reforms
will provide more equitable treatment of recipients and strengthen
incentives for individuals and families to become more self-supporting,
consonant with the administration's income strategy.
OVERVIEW:

1973

Total Federal income security benefits will reach an estimated
$101.9 billion in 1973, and roughly 8% of the gross national product
(GNP). Budget outlays for cash or in-kind programs will constitute
nearly 40% of the Federal budget in 1973. Income security outlays
will increase roughly $10 billion between 1972 and 1973—accounting
for almost 90% of the total growth in the Federal budget.
Cash benefits are estimated at $75.1 billion for 1973, up $7 billion
over 1972 and $15 billion over 1971. Social security (OASDI) benefit
outlays in 1973 will be 14% above their 1972 levels, and constitute
almost three-fifths of total cash benefits in 1973.
In-kind benefits continue to rise rapidly, and reach the $20 billion
level in 1973—mostly in health benefits.
In addition to benefit outlays in the form of cash or services, there
is a third type of income security benefit provided by the Federal
Government, the "tax transfers" included in this analysis for the first
time this year. Specific provisions of the personal income tax law reduce tax liabilities for particular groups of persons. These constitute
Federal outlays just as fully as if the taxes had been collected, and a
check then sent to the beneficiaries of these tax transfers. Most
of these benefits accrue to the elderly, and constitute a $4.3 billion
income supplement to the Nation's senior citizens.
179

180

THE BUDGET FOR FISCAL YEAR 1973
Table L-1. FEDERAL INCOME SECURITY BENEFITS
1971
actual

1972
estimate

Federal outlays for cash benefits (millions):
Social security (OASDI)
Federal employee benefits
_.
Veterans benefits
Public assistance
Unemployment insurance
Railroad retirement
Other programs
Proposed legislation included above

$34,482
7,097
5,792
5,109
5,340
1,889
403

$38,502 $43,834
8,041
9,510
6,194
6,569
6,306
6,961
6,044
5,458
2,084
2,069
684
706
(25) (4,045)

Subtotal, outlays, cash benefits

60,112

67,855

75,106

Federal outlays for in-kind benefits (millions):
Food and nutrition
Healthcare
Housing........
Proposed legislation included above

2,840
10,888
733

3,681
12,651
1,248

3,931
14,480
1,763
(476)

Subtotal, outlays, in-kind benefits

14,461

17,580

20,175

3,210
650
75
1,150

3,925
690
95
1,295
(350)

4,335
790
250
1,250
(605)

5,085

6,005

6,625

Tax transfers (millions):
Benefits to the aged
Benefits to veterans
Benefits to welfare recipients and working mothers
Benefits to disabled and unemployed
Proposed legislation included above
Subtotal, tax transfers
Total benefits

79,658

Federal outlays for administration

2,265

1973
estimate

91,441 101,906
2,607

2,865

INCOME STRATEGY

The administration has adopted an income strategy in reforming
income security programs, seeking to increase the effectiveness of
these programs in meeting national goals. The income strategy
embodies four basic principles:
—Equity.—Benefits should be distributed in a consistent manner
among beneficiaries with similar circumstances. For example,
programs paying benefits based on need should consider all
resources in determining benefits.
—Adequacy.—Benefits should bear a reasonable relationship to
need, and be adjusted periodically to maintain that adequacy.
Examples include recent amendments to the food stamp program
providing allotments large enough to purchase a nutritionally
adequate diet, and the proposed national standards under welfare
reform.
—Graduated benefits.—Disproportionate drops in benefits as income
rises should be avoided as a disincentive to increased earnings
(where that possibility exists). As a general rule, where benefits
are related to income, that relationship should resemble a straight
line rather than a series of steps which7 produce work disincentives. Veterans pensions and dependents compensation have been
reformed recently to scale benefits more directly with income.

SPECIAL ANALYSES

181

—Sel)^regulation.—The lag of program benefits behind changed
circumstances can cause serious hardship. An effort is being made
to make programs more self-adjusting with changes in basic
conditions. Examples include:
• Food stamps (enacted) and social security (proposed), where
benefits would be adjusted automatically for changes in the cost
of living. (Financing would also be automatic under social
security.)
• Unemployment insurance, where extended benefits will be
automatically triggered by changed economic circumstances.
Where self-support is possible in part now, or in the future, income
security programs provide present support, or supplementary support.
At the same time other efforts are made to remedy the cause of the
temporary or longer term poverty. Income security programs must
provide encouragement to sustain personal dignity and independence.
Where self-support is not possible, income security programs provide
the wherewithal to live decently. Where the transfers in the former
category should be on a fairly temporary basis, the groups aided here
may have to receive more or less permanent program benefits.
PROGRAM THEMES

The most sweeping applications of these principles involve programs
for the aging, the poor (welfare reform and food stamps), the unemployed, those serving in the military, and veterans who have served in
the past.
THE ELDERLY: SOCIAL SECURITY

Special programs for the aging received strong impetus from commitments made to the elderly at the White House Conference on
Aging held in November 1971. Income security programs covered in
this analysis meet resource needs of the elderly through income
transfers and the provision of food, housing, and medical services.
The financial problems of the elderly are marked. Nearly onequarter of those 65 and over are low-income persons. Many others face
the same fear as fixed incomes become progressively inadequate with
the passage of time.
Several actions to ease the financial burden of the elderly have
already been taken. Social security benefits will have been increased
by one-third between 1969 and mid-1972 (taking into account the
5% benefit increase proposed in H.R. 1). Coupled with greater income
assistance to the elderly poor, the following proposed social security
improvements will add a total of $5Y2 billion to the incomes of the
elderly:
—Automatic benefit increases to keep pace with the cost of living
(the consumer price index);
—Benefits rising 5% across the board, effective July 1, 1972;
—Financing of benefits with automatic changes in the "wage base"
(raising the maximum earnings subject to the social security
payroll tax in step with increased earnings in the economy);
—Liberalized earnings or retirement test (the amount of permissible
income before benefits are reduced) which permits up to $2,000 of
earnings with no benefit loss and provides a 50% offset from that
point without limit;

182

THE BUDGET FOR FISCAL YEAR 1973

—Increased widow's benefits equal to the full amount of her deceased husband's entitlement.
When enacted, these improvements will make major strides toward
overcoming poverty for Older Americans.
THE NEEDY: WELFARE REFORM

The present welfare system has failed. It is too far gone for piecemeal improvement. Nothing short of sweeping change can make income assistance for the needy effective, humane, and worthy of
taxpayer support.
The present system is not a system at all; it is a congeries of 1,152
localized approaches to a national problem. Aside from lacking national standards for payments, eligibility, and enforcement, it suffers
other serious deficiencies. Most importantly, it lacks incentives for
self-support. Conversely, it often creates a greater sense of dependency.
The rapid increase in welfare recipients compounds the problems of
existing welfare programs. Costs have doubled in 5 years, and threaten
serious financial problems for many State treasuries.
Welfare reform is focused on the basic problems of present welfare
programs. It will:
—Provide national eligibility standards—covering for the first
time, all families with earners who work full time but who do not
earn enough to support their families;
—Establish minimum benefit standards (at $2,400 for a family of
four with no income and $195 per month for an aged, blind, or
disabled couple);
—Establish strong work incentives and requirements to:
• register all able-bodied adults (except mothers with preschool
children) for suitable work and training;
• reduce benefit payments by $800 for each adult family member
who refuses suitable work or training, and cutting State supplementary payments by a proportionate amount;
• exempt the first $720 of earnings in computing benefits—
smoothing the transition from welfare to work; and
• improve incentives to earn by reducing benefits by 67% for
earnings over $720 per year instead of 100%.
—Establish a national administration for welfare that assures
equitable treatment and permits a cross-check on earnings
and other resources;
—Offer increased opportunities and funds for training, public
employment and child care to enable the many recipients who
desire work—but lack the requisite skills or adequate care for
their children—to achieve their goal of self-support; and
—Provide substantial fiscal relief to States.
Pa3onents will not begin until 1974. The 1973 budget provides
$450 million for a Government-wide allowance for planning for
welfare reform. At the time of enactment, whatever resources for
planning and administration are required will be provided. Considerable efforts have been made for the successful implementation of this
program, and to lay the sound administrative foundation to insure
effective operation in the ensuing years.

SPECIAL ANALYSES

183

THE NEEDY: FOOD AND NUTRITION

The administration has fostered substantial growth in programs to
attack the causes of hunger in America. The expansion in the food
stamp program has been tenfold in 4 years—from $229 million in 1969
to $2,239 million estimated for 1973. Some 14.5 million persons now
receive assistance, double the number in July 1969, taking the Federal
family food programs together.
Child nutrition programs have also grown rapidly. Children receiving free or reduced-price school lunches in 1973 will total 8.4
million—over 2 ^ times the number 3 years ago.
In addition, the administration has supported reforms to improve
overall program effectiveness. Amendments to the Food Stamp Act,
supported by the administration, were enacted early in 1971. These
amendments, currently being implemented in most States will:
—Provide an allotment sufficient to purchase a nutritionally
adequate diet at a cost no greater than 30% of income for any
household;
—Introduce standard eligibility requirements throughout the
Nation. Income eligibility standards will be increased in all
States but one for a four-person family, increasing participation
substantially;
—Provide increased bonuses for the poorer recipients, including
free stamps for the poorest;
—Permit recipients to purchase a fraction of the total allotment;
—Tailor benefits more closely to income; and
—Require all employable recipients to accept suitable jobs or job
training if these are available.
THE UNEMPLOYED

The Employment Security Amendments of 1970 provide for a
national program of extended benefits. Beginning January 1972,
workers who have exhausted their regular benefits will receive up to
13 weeks of extended benefits until the national insured unemployment rate has dropped below 4.5% for 3 consecutive months. States
have had the option of providing 13 weeks of extended benefits prior
to January 1972, and 22 States have done so. The 1970 amendments
also extended unemployment insurance coverage to nearly 9 million
additional workers, bringing the total number covered by Federal
and State laws to more than 62 million.
In December 1971, the Congress enacted a 6-month program to
provide temporary benefits of a further 13 weeks to unemployed
workers in States where the insured unemployment rate equals or
exceeds 6.5%. An estimated 700,000 workers in 12 States will benefit
from this program.
MILITARY RETIREMENT AND VETERANS BENEFITS

Military retirement.—Administration proposals on the uniformed
services retirement and survivor benefit programs will soon be before

184

THE BUDGET FOR FISCAL YEAR 19 73

the Congress, developed from recommendations of an interagency
committee appointed at the direction of the President. These proposals are aimed at:
• Improving the Government's ability to attract and retain the
kinds and numbers of qualified members of the uniformed services required; and
• Providing an acceptable level of economic protection for
personnel and their families at the time of separation, in retirement, or when death occurs on active duty or in retirement.
The military retirement system remains a noncontributory retirement benefit. Changes would:
—Revise the nondisability retirement program by weighting
benefits more for older retirees with longer service, and providing
reduced annuities for younger retirees until they reach conventional retirement age—with a deferred annuity or lump-sum
payment for those who separate with more than 10 but less than
20 years' service;
—Revise the reserve retirement system by providing for full
annuities at ages 60 and 55, depending on years of service, and
an optional actuarially reduced annuity beginning at age 50;
—Replace the present retired serviceman's family protection plan
with a plan similar in many respects to the benefits of the plan
for survivors of civil service retirees; and
—Provide a one-time adjustment of retired pay for all members of
the retired population to the level of retired pay based on January 1, 1971, pay scales as they reach conventional retirement age.
The benefits of the present system were automatically increased
with the cost of living by 4.5% on June 1, 1971.
Veterans pension.—Pension benefits are payable, on a needs
basis, to wartime veterans and dependents of deceased veterans for
non-service-connected disability and death. Legislation in 1970 increased pensions effective January 1, 1971, by an average of 9.6%, with
slightly higher rates for veterans at the upper end of the income scale.
Recent legislation has revamped the veterans pension system. As
a result of the reform, benefits will rise by an average of 6.5% effective
January 1, 1972. The changes are based on principles of the income
strategy, and constitute an important forward step:
—Formula in place of steps.—The new formula strengthens the
principle that the size of a person's benefits should vary with the
amount of his income, eliminating the more than 20 income
categories that existed previously. Under the old step system, a
person's benefits fell abruptly whenever his income moved across
the $100 line which separated one income category from another,
so that a small increase in outside income could actually bring
about a lower overall income. The new formula fine tunes benefit
amounts to an individual's income position, changing benefits by
a few cents whenever income changes by one dollar. The danger
of abrupt declines in pensions will thus be eliminated.
—Greatest help to low-income recipients.—The new formula scales
benefits progressively, so that those with lowest incomes will
receive the most help. Under the new pension formula, for example, a single veteran whose outside income is above $2,200 will

SPECIAL ANALYSE®

185

lose 84 cents in pension for every dollar of additional outside
income. But if a veteran's income is below $1,000, his reduction
rate will be only 36 cents in pension per dollar of additional
outside income.
Veteran's compensation.—Monthly
compensation is provided
for veterans who have incurred or aggravated a disability as a result
of military service. The relationship of the amount of compensation
to the disability and the impairment of earning capacity is under
intensive review.
Compensation benefits were amended in 1970 to provide increases
in rates of disability compensation ranging from 8% to 12%, effective
August 1970. The administration is proposing legislation to raise
compensation levels in 1972 to reflect increases in the cost of living
since benefit rates were last adjusted.
Recently enacted legislation will increase and restructure monthly
compensation benefits for some 290,500 widows, children, and dependent parents of veterans who have died as a result of service-incurred
disabilities. The increase will range from 5% to 10%, depending primarily on the effective date of the previous benefit increase.
OTHER PROGRAM DEVELOPMENTS

A number of improvements were made in other income security
programs in calendar year 1971.
Work incentive program (WIN).—The WIN amendments signed
into law in December 1971, parallel the workfare recommendations
of welfare reform, but stop short of full welfare reform.
Under these amendments, all able-bodied welfare recipients will be
required to register for jobs or job training—excepting the aged, children under 16 or attending school, those who are caring for ill or incapacitated persons, and mothers of small children. The Federal Government will also assume 90% of the cost of manpower, child care, and
supportive services. At least one-third of WIN expenditures must be
used for on-the-job training and public service employment—reflecting
a clear preference for real jobs, as opposed to long-term classroom
training. (See Special Analysis J for further details on Federal manpower programs.)
Housing.—In-kind benefits to enable lower income families and
elderly individuals to obtain adequate housing are provided under the
five major Federal housing assistance programs. Through 1972, over
$2.5 billion authority has been approved to enter into long-term subsidy contracts under the four major assistance programs in the Department of Housing and Urban Development. This level will provide
assistance to over 2.3 million housing units. In 1973, $566 million
additional authority will be committed to assist over 500,000 additional housing units under these programs. Federal housing payments
generally begin when the housing unit is occupied and are estimated at
nearly $1.8 billion in 1973, a $515 million increase over 1972. Over
50% of the families receiving housing assistance are recipients of other

186

THE BUDGET FOR FISCAL YEAR 19 73

forms of income assistance for low-income families. The elderly families also participate fully in these housing programs, representing
nearly one-third of all housing units presently occupied. Assistance
for the elderly will increase in 1973, under the rental housing assistance
programs and through increased emphasis on congregate housing
which was authorized by the Housing and Urban Development Act
of 1970.
The fifth major housing program is administered by the Farmers
Home Administration in the Department of Agriculture and serves
lower income families in rural areas. In 1973, commitments will be
made to assist 142,000 additional housing units, a 28,000 increase
over 1972. An estimated 470,000 housing units will have been committed from 1969 through 1973 under the direct and insured rural
loan programs. (See Special Analysis M for further details on Federal
housing programs.)
Medical benefits.—Proposed legislation on the in-kind health
benefit programs, Medicare and Medicaid, would curtail overutilization of hospital and other institutional services. The proposals would
provide increased program control of Medicare, and increased emphasis
in Medicaid on preventive medical care.
Recent regulations require early screening services to children
through Medicaid, and proposals include higher Federal matching for
ambulatory care as an encouragement of hospital outpatient clinics,
comprehensive health centers, and 7physicians7 services. Medicare
regulations for reimbursing physicians services have been tightened to
permit carriers to recognize only those changes which fall within the
75th percentile of customary charges made for similar services during
the 6 months.
The premium requirement for supplementary medical insurance is
proposed to be lifted from the elderly beneficiaries and financed
through other revenue. (See Special Analysis K for further details on
Federal health programs.)
Railroad retirement benefits.—The system is now faced with a
beneficiary roll significantly larger than the work force that must
finance benefits. The contribution base for the railroad retirement
system continues to decline as the work force in this industry declines.
The Commission on Railroad Retirement was created on August 12,
1970, to make a study of the railroad retirement system and to recommend ways to provide benefits on an actuarially sound basis. A central
feature of the Commission's work is the development of more accurate
projections of benefits and taxes under the railroad retirement system
taking into account the future development of the industry, changes
in social security benefits, and future trends in wages and prices. A
final report is expected June 30, 1972.
Civil service retirement.—These benefits were automatically increased with the cost of living by 4.5% on June 1, 1971.

SPECIAL ANALYSES

187

INCOME STRATEGY AND TARGET GROUPS

The analytical structure applied to income security expenditures is
particularly important in the context of an income strategy. The
analysis below is organized by target group; that is, people who share
similar problems and circumstances—the aged, the disabled, the unemployed, mothers with small children and no breadwinner, and those
low-income persons who cannot earn quite enough to live decently
through their own efforts alone.
Within each target group, members have a similarity of problems
and of needs. The piecemeal development of income security programs,
however, means that persons with similar restrictions on their capacity
for self-support:
• face a range of eligibility requirements or tests for different
programs which meet the needs of similar circumstances;
• may fall between restricted or selective programs covering
similar groups;
• may receive benefits inadequately related to need, due to overlapping programs;
• may face disproportionate drops in benefits as income rises or as
other program benefits rise.
The analytical categories used in this analysis include: (1) annuitants; (2) other aged beneficiaries; (3) the disabled; (4) mothers with
dependent children; and (5) unemployed workers and low-income
groups.
The two categories of aged, annuitants, and other aged beneficiaries,
account for more than half of income security benefit outlays, with
annuitants receiving 25% of total income security benefits, and other
aged, an additional 34%. The disabled ($14.9 billion), mothers and
children ($7.8 billion), and unemployed and other low-income ($13.4
billion) are the remaining target groups.
The relative increases from 1971 to 1973 in benefits to the various
categories are not widely spread, ranging from 24% to 34%.
Table L-2. INCOME SECURITY BENEFITS BY TARGET GROUP
Benefits (millions)
1971
actual

Annuitants
Other aged
Disabled
Mothers and children
Unemployed or low income
Other
Total

1972
1973
estimate estimate

$20,517 $23,109 $25,887
26,727 30,479 34,166
11,242 12,873 14,914
6,079
6,852
7,779
10,794 13,093 13,385
4,299
5,035
5,775
79,658

Perof In
total
1971-73
1973

Percent
1971-73

25.4
33.5
14.6
7.6
13.1
5.7

$5,370
7,439
3,672
1,700
2,591
1,476

26.2
27.8
32.7
28.0
24.0
34.3

91,441 101,906 100.0

22,248

27.9

THE AGED

The most striking fact about the aging process is the severance of
the head of the household from full-time gainful employment and the
consequent need for income maintenance programs. An income
approach protects the dignity of the elderly by enabling them to buy
what they need for themselves.

188

THE BUDGET FOR FISCAL YEAR

1973

The aged suffer from poverty to a considerably greater extent than
the general population. The aged poor are comprised of those who
were impoverished by shifting from work income to retirement,
those who were needy before they became aged, and women who
depended on their husband's incomes as the main source of support.
Even if wage-replacement programs were improved so that no person
who was not needy before retirement
would be impoverished by retiring,
there would still be almost 31/2 million aged individuals living below
low-income thresholds.
Table L-3. INCOME SECURITY BENEFITS FOR THE AGED
Benefits (millions)
1971
actual

Covered employment:
Social security (OASI) members
Railroad employees
Federal civilian employees
Uniformed services members
Coal miners'widows
Public assistance including refugees and Indians
Income-tested veterans pension
Subtotal, cash benefit outlays
Medicare
Medicaid
Other in-kind
Subtotal, in-kind benefit outlays
Tax transfers
Total

1972
estimate

1973
estimate

$27,119 $30,247 $34,535
1,682
1,862
1,846
2,261
2,551
2,938
724
813
928
71
118
136
1,436
1,676
1,707
938
988
1,037

Percent
increase
1971-73

27
10
30
28
92
19

11
26.0

34,231

38,256

43,125

7,477
1,930
396

8,505
2,331
572

9,347
2,565
681

9,803

11,407

12,593

28.5

3,210

3,925

4,335

35.0

47,244

53,588

60,053

27.1

25
33
72

The largest source of income security benefits for the elderly stem
from employment-related retirement programs. Of these, the largest by
far is the social security system, which provided payments of $27.1
billion in 1971 to 12.9 million retired workers, their 4 million dependents, and to 3.7 million elderly widows. Of these beneficiaries, 17.4
million were 65 or over.
Other employment-related programs will provide $5.8 billion in
1973, or some 14% of total cash outlays benefiting the aged. These
benefits are estimated to exceed by 23% their 1971 levels, a somewhat
slower rate of expansion than that for social security benefits—-27%
over the 2-year period.
The remaining cash benefits for aged persons are income-tested
grants. In 1971, $1.4 billion of welfare grants w7ere made to the aged,
almost entirely through old-age assistance. This amount will reach
$1.7 billion in 1973, assisting some 2.2 million aged persons. Old-age
assistance provided within each of the 50 States has State-determined
eligibility and benefit levels.
Veterans pension provided benefits of $938 million for an additional
760,000 needy aged—all veterans—in 1971. This amount will rise
to $1,037 million in 1973, although caseload will not rise, reflecting

SPECIAL ANALYSES

189

increased benefit levels. Any person who has seen wartime military
service, is over age 65, and meets the financial requirements, is eligible
for this cash benefit.
The elderly receive considerable additional benefits from in-kind
and tax transfer programs. In 1973, an estimated 59% of total cash
outlays for income security purposes will go to the elderly. However,
the proportion of total in-kind benefits received by the aged will be
62%, and the proportion of total income security tax transfers going
to the elderly in 1973 will be 65%.
Medicare is the major in-kind program benefiting the aged. This
is a unique income security program to finance medical services in
the event of nonchronic illness. All persons over age 65 with social
security coverage and, in addition, those persons who were age 65
before the year of enactment (1965) are automatically provided with
hospitalization insurance and can elect supplementary medical insurance covering physicians' services. Medicare benefits will reach
$9.3 billion in 1973, covering 21 million aged persons. Medicare
outlays are financed in part from contributions under OASDHI.
Medicaid in 1973 will furnish $2.6 billion of medical services to
needy aged persons. Medicaid covers costs of chronic illness, and the
cost sharing required by Medicare for those aged persons not able to
meet these expenses from their own resources. Medicaid, like old-age
assistance, has State-determined eligibility and benefit levels.
Other in-kind program benefits received by the aged provide food
and shelter on an income-tested basis. Needy aged participate in
public housing and other subsidized housing at approximately twice
the rate at which other low-income persons participate in these housing
programs.
Food stamps and commodity surplus distribution pay part of the
cost of food for needy aged persons, reaching almost $J4 billion in 1973.
Specific provisions of the Federal personal income tax are designed
to benefit the aged. The major dollar impacts accrue from the extra
exemptions available to all persons 65 or over, from the exclusion of
all social security benefits from tax liability (not just the portion
representing a return of the taxpayer's original contribution), and to
a much lesser degree, the retirement income credit. The net supplementation of the spending power of the retired and elderly achieved
by these particular tax law provisions is an estimated $4.3 billion
in 1973.
TARGET GROUPS

Annuitants.—There are four federally run contributory retirement
systems: social security (OASI), railroad retirement, civil service, and
the foreign service retirement system. Outlays for these four programs
represent benefits paid to retired persons who made contributions to
these trust funds during their working life.
Other income security benefits are basically financed by taxes
levied on different groups of persons than those receiving the payment.
The coverage of these retirement plans is suggested by their names,
with social security reaching most wage and salary workers and many
self-employed persons in the United States.
In all four systems, the benefit calculations are based upon the
history of contributions.

190

THE BUDGET FOR FISCAL YEAR

1973

Table L-4. ANNUITIES TO PRIMARY BENEFICIARIES IN CONTRIBUTORY
RETIREMENT SYSTEMS^ANNUITY BENEFITS, BENEFICIARIES, AND
AVERAGE PAYMENTS BY SYSTEM
Benefit outlays
Number of bene(millions)
ficiaries
(thousands)
1971
1972
1973
1971
1972
1973
actual
est.
est.
actual
est.
est.

Average monthly
payments
1971 1972 1973
actual est. est.

Old-age and survivors
insurance___
$17,455 $19,669 $22,106 10,676 11,156 11,644 $136 $147 $158
Railroad Retirement
.Board....
1,040
1,159
1,151
390
394
397 223 245 242
Civil Service Commission..___
2,003
2,260
2,608
493
528
562 338 357 387
Foreign Service retirement
19
21
22
2
2
2 833 859 869
Total

20,517

23,109

25,887

_.__

._..

Under old-age and survivors insurance (OAS1) 10.7 million retired
workers received pensions in 1971 related to the amounts paid into the
system. Some 389,500 recipients in 1971 are primary beneficiaries under
the railroad retirement system, but about 40% of these retirees are
also recipients of social security benefits. A total of 493,300 persons are
beneficiaries of the civil service retirement system and 1,900 of the
foreign service retirement system, with little or no overlap between
these two Federal employee systems. At least 40% of beneficiaries of
the two Federal civilian employee systems are also receiving social
security.
The probable total number of primary beneficiaries of all the contributory retirement systems is thus 11.2 million persons in 1971, and
12.2 million in 1973.
Outlays of the social security system constitute a fairly constant
85% of the annuities to the primary beneficiaries under the four contributory retirement systems. These annuity-tvpe outlays constituted
$20.5 billion in 1971 and will rise to $25.9 billion in 1973. The 1973
expenditure represents an increase of 12% over the estimated 1972
level.
There is a wide range among the systems in the average benefit
per primary beneficiary, reflecting the differences among them in
contribution rates—from $158 per month for OASI in 1973 to $869
per month for the foreign service.
Other aged.—This category includes those programs or parts of
programs which benefit the aged, but where the benefit outlay to a
specific individual is based upon criteria other than his or her own
contribution. The criterion of the program may be a contributions
history of some related person, and is not necessarily based on any
measure of need. This definition includes benefits to aged widows under
contributory retirement programs, and to the widows of uniformed
servicemen; benefits to the wives of annuitants which are based upon
the husband's contribution history; the minimum benefit payments
under social security and railroad retirement which, in effect, put a
floor under the payments made based on earnings; payments to aged
retirees from the uniformed services who make no contribution to

SPECIAL ANALYSES

191

their retirement system; public assistance to the aged; Medicaid
benefits to elderly persons; Medicare; and certain in-kind benefits to
needy, aged persons. Underlying all these program outlays is the
presumption that persons past a certain age (for example, 65) are
generally not self-supporting through their own current earnings.
Benefits to aged persons present difficult problems of meshing,
consistency, and equity among the various program benefits. This is
due in good part to the multiplicity of program payments serving this
target group, and to the maturity of the programs of which they are a
part.
Table L-5. BENEFITS FOR THE AGED EXCEPT ANNUITIES TO PRIMARY
BENEFICIARIES: BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT
Benefits (millions)
1971
actual

1972
est.

1973
est.

Number of beneficiaries (thousands)

Average monthly
payments

1971
actual

1971 1972 1973
actual est. est.

1972
est.

1973
est.

Benefits to widows:
Social security (OASDI) members
$5,168 $5,781 $7,331 3,727 3,934 4,150 $119 $120 $144
Railroad employees _. _
371
278
280 112 118 119
400
405
275
Federal civilian employees
240
157
148
164 135 143 156
270
307
Uniformed services
72
69
members
417
66
548
574
457
497
529
Coal miners
71
48
66 153 156 156
16
118
136
Benefits to wives of living
retirees:
Social security (OAS80
74
69
DI) members.__. 2,545 2,792 3,076 3,053 3,132 3,207
99 109 107
Railroad employees _. _
252
216
214
211
280
278
Minimum benefit payments:
Social security (OAS65
60
63
DI) members
1,624 1,646 1,615 2,264 2,174 2,066
94
94
16
17
93
15
17
Railroad employees
19
18
Dependents of aged retirees:
Social security (OASDI) members..__
327
359
407
546
560
568
50
53
60
Aged retirees, uniformed
70
75 400 424 478
64
356
430
services
307
773 101 108 112
774
760
988 1,037
Aged veterans
938
60
64
65
Medicare
7,477 8,505 9,347 10,400 11,000 12,000
Public assistance to the
aged, including refugees and Indians:
66
66
57
Old-age assistance
1,436 1,676 1,707 2,117 2,121 2,159
650 268 308 329
631
601
Medicaid
1,930 2,331 2,565
In-kind benefits to needy
aged:
7
7
6
221 2,448 2,542 2,593
204
Food
163
84
91
337
455
332
460
368
Housing
233
58
Tax transfers
3,210 3,925 4,335
Total

26,727 30,479 34,166

192

THE BUDGET FOR FISCAL YEAR

1973

Aged widows.—Aged widows account for $8.7 billion in benefit
outla}^ in 1973—or 26% of all benefits to the aged outside of annuities to primary beneficiaries. Some 3.7 million aged widows received
benefits from social security in 1971 with 1.1 million widows covered
in other programs. There is considerable overlap of these other program beneficiaries with those covered by social security.
Widows of annuitants under the four contributory retirement
systems have limited entitlement to annuities after the death of the
primary beneficiary. For example, there is incomplete vesting—or the
automatic right to benefits. Remarriage of the widow may, depending
upon the particular program, terminate the widow's benefit based
upon her husband's contribution. Under social security, benefits
depend upon age (either 62 or 60—at a reduced rate) and other earned
income. Civil service benefits for widows depend upon the election by
the retiree of benefits financed through a reduction in his own annuity
while still living, and are available to the widow regardless of age or
other income.
Retired members of the uniformed services similarly can elect a
reduced annuity to provide survivors benefits. For veterans benefits,
the surviving widow of a veteran who died due to a service-connected
disability is entitled to survivors benefits, and the widow of any
veteran of wartime service can receive a small, income-tested pension.
Military retirement or dependents' indemnity compensation benefits to widows are not adjusted for income, while pensions for veterans'
widows are so adjusted (with 10% of social security benefits excluded
from countable income).
Aged wives of retirees.—Under OASI and railroad retirement, $3.4
billion will be paid in 1973 as benefits to women in their capacity as
wives of covered retirees. This entitlement is independent of any contribution history of their own, and requires only that they exceed a
particular age, although it will vary with both her husband's and her
own earned income. Where a wife has dual entitlement under social
security based upon her earnings history, as well as her husband's, she
will receive only the larger benefit. In the railroad retirement system,
she receives both benefits. In 1973, 352,000 wives will have dual
entitlement under, social security in which the wife's benefit exceeds
the benefit based upon own earnings.
Payments based on the minimum.—In 1971, $1.6 billion of social
security outlays were paid in the form of statutory minimum amounts
to retired workers, to the dependents of such retired workers, and to
noninsured beneficiaries age 72 and over. This will remain at $1.6
billion in 1973 as new retirees come into the system with contributions
over the minimum. A total of 2.3 million persons received such minimum benefit payments in 1971, which will fall to 2.1 million during
1973.
Aged retirees of the "uniformed services.—The retirement systems for
the uniformed and military services are wholly federally financed, and
therefore the benefits paid cannot be related to a contributions history.
Aged retirees from the military and other uniformed services (those
over 65) received $307 million of benefits in 1971 and will receive an
estimated $430 million in 1973. There are 75,300 persons under these
programs at an average benefit of $5,700 per year in 1973.

SPECIAL ANALYSES

193

Disabled.—The disabled is a target group for whom there is a
presumption of permanent inability to achieve self-support. Eligibility
for an income security benefit for the disabled person may be based on:
membership in a contributory retirement system (OASDI, or civil
service), on military service, on occupation (coal miner), or on
indigency (welfare).
Almost 8 million persons in the United States are currently receiving
income security benefits from Federal programs on the basis of
medically verified physical or mental disability. The disabled will
receive $11.2 billion in 1971, and these benefits will reach $14.4 billion
in 1973—an increase of almost one-third. The increases are distributed among the types of programs from which disabled persons
draw income security benefits: disability insurance provisions of
retirement systems; disability compensation for persons with wartime
military service; public assistance to adults and disabled male heads
of families; Medicaid; and special benefits to disabled coal miners.
Table L-6. BENEFITS FOR THE DISABLED: BENEFITS, BENEFICIARIES, AND
AVERAGE PAYMENT
Benefits (millions)
1971
actual

1972
est.

1973
est.

Number of
Beneficiaries
(thousands)
1971
actual

1972
est.

Average monthly
payments
1973
est.

1971 1972 1973
actual est. est.

Civilian covered employment:
Disability insurance
$3,381 $3,960 $4,584 2,669 2,925 3,122 $178 $180 $189
Federal civilian employees.
692
766
883
219
233
246 263 274 299
Railroad employees
106
114
113
36
36
35 207 224 225
Coal miners..
181
356
317
45
94
120 207 212 212
Uniformed services:
Military service-connected
disability
3,277 3,518 3,836 3,013 3,095 3,155
91
95 101
Other: nonincome-tested__
569
644
756
150
158
166 316 340 380
Other: income-tested
438
462
485
306
301
306 119 128 132
Public assistance to the disabled, including refugees
and Indians:
Aid to the blind
60
64
65
81
81
82
62
66
66
Aid to the permanently
and totally disabled.—
646
855
950
943 1,067 1,192
57
66
66
AFDC (disabled male
head of family)
291
364
417
927 1,017 1,345
26
30
26
Medicaid
332
401
442
180
197
215 153 170 171
Medicare changes
534
750 .___ . . . .
60
In-kind benefits to needy
disabled: Food
72
89
97
698
738
754
8
10
11
Tax transfers
1,195 1,280 1,435 ____
.... .... ....
Total

11,242 12,873 14,914

....

—.

About $4.2 billion was provided to the disabled covered by retirement systems in 1971. Members of the social security system and the
railroad retirement system are eligible for retirement benefits computed
on their earnings history to the date of permanent disability. They
receive additional benefits for dependent children residing with them

http://fraser.stlouisfed.org/
480-700 O—72
Federal Reserve Bank of St. Louis

194

THE BUDGET FOR FISCAL YEAR 1973

although not for a non-aged wife. Federal civilian employees receive
a disability benefit based on total disability for his previous
occupation—paying a minimum benefit of 40% of the average of
his highest 3 years of earnings. However, when he reaches age 65 this
benefit is adjusted to the retirement annuity to which his contributions to date of disability retirement actually entitled him.
The uniformed services have an entirely different method of
computing benefits to the disabled. Rather than relating benefits
to previous levels of earnings, they are scaled to the degree of physical
impairment. Disability retirement from the military, and veterans
compensation and indemnities, are both provided for disabilities
which are presumptively service-connected. Veterans' pensions
provide benefits to persons who have seen wartime military service
and have suffered non-service-connected disability, where financial
need can be demonstrated. Together, these programs provided $4.3
billion of benefits in 1971, and will increase to $5.1 billion by 1973.
Under the recently enacted (December 1969) Federal Coal Mine
Health and Safety Act, compensation is paid to black lung victims in
amounts related to the workmen's compensation law provided for
Federal employees (FECA). Registration for benefits began in 1970.
By 1973, benefits to disabled coal miners will be paid in the amount
of $317 million.
Social security benefits were concurrently received by 9 1 % of
disabled coal miners in 1971, bringing all of these persons above the
low-income threshold.
Public assistance is provided for disabled persons under three
categories: the blind, the permanently and totally disabled, and the
disabled heads of families who meet the asset and income eligibility
tests for aid to families with dependent children. There are great
diversities among the program benefits, depending upon the State
of residence, in this as in other welfare programs.
Approximately 1.7 million persons receive disability benefits under
social security. Another 220,000 individuals receive benefits through
Federal civilian employee programs. Allowing for overlap, some
1.8 million persons receive disability benefits calculated on their
previous earnings. In 1971, there were 3.5 million persons receiving
disability benefits based upon uniformed service. It is estimated that
by 1973, 120,000 disabled coal miners will be receiving special benefits
under the black lung program.
Approximately 1.3 million adults and almost three-fourths of a
million children are supported by welfare payments predicated upon
the disability of the adult. These persons are all eligible for Medicaid
benefits.
Several provisions of the personal income tax code provide tax
transfers to specific disabled persons. The largest of these by far is
the exemption from taxation of compensation or pension payments
received by veterans. Additionally, the exemption of disability insurance benefits under social security, the exclusion of workmen's
compensation benefits from taxation, and provisions excluding certain
types of payments such as sick pay, all provide tax benefits for disabled persons receiving particular program benefits.

SPECIAL ANALYSES

195

Mothers and dependent children.—Benefit eligibility varies considerably for this last target group for whom self-support is not
assumed to be universally possible. This group includes mothers
with dependent children, and no male breadwinner.
These mothers receive income security benefits under two types of
programs, the first being related to the employment of a deceased
husband. In 1971, $3.6 billion was provided to widows of covered
employees under OASDI. Some 1.5 million families receive survivors
benefits from social security, and an additional 350,000 families
received benefits under other employment-re'ated programs. These
benefits parallel widows benefits under each of the systems with the
addition of allowances for dependents.
Beginning in 1970, benefits are provided to widows and children
of deceased coal miners who suffered from black lung disease. By 1973,
these outlays will reach $21 million for this target group. It is estimated
that 6,000 families will receive these benefits, with seven-eighths of
these families also receiving social security benefits.
Table L-7. BENEFITS FOR MOTHERS WITH DEPENDENT CHILDREN AND
NO HUSBAND: BENEFITS, BENEFICIARIES AND AVERAGE PAYMENT
Benefits (millions)
1971
actual

1972
est.

1973
est.

Number of beneficiaries
(thousands)
1971
actual

\9T2
est.

1973
est.

Average monthly
payments
1971
actual

1972 1973
est.
est.

Benefits to widows of covered
employees:
Social security (OASDI)
members
$3,639 $3,932 $4,320 3,268 3,369 3,474 $101 $101 $106
Railroad employees
21
24
25
12
12 152 153 154
12
Federal civilian employees.
80
89
101
42
44 167 177 191
40
Uniformed service members
97 103 in
345
373
426
296
302
313
Coal miners _
_
4
6 250 255 255
11
18
21
1
Public assistance (AFDC)
mothers with preschool
children:
Cash payments
28
27
1,525
1,863 2,133 4,743 5,665 6,881
26
408
Medical services
493
548
212
181 157. 198 252
223
50
60
210
Tax transfers
Total

6,079

6,852

7,779

The second type of assistance to mothers with dependent children
are means-tested programs—dominated by welfare. Approximately
$1.5 billion of cash payments was made in 1971 to women with preschool children. These AFDC families with preschoolers received an
additional $408 million of medical services. Estimates are not available
for the other in-kind benefits provided to this group. Cash payments
and medical services to female-headed AFDC families with preschool
children will reach $2.7 billion in 1973.
The major provision of the income tax law benefiting this target
group is deductibility of child-care expenses up to $600 per year for

196

THE BUDGET FOR FISCAL YEAR 1973

one child ($900 for two or more) if income is less than $6,000. Legislation now before Congress would substantially liberalize this benefit,
increasing the maximum amount deductible to $4,800 (or $92 per
week) for one or more children for family income up to $18,000.
Transitional low income.—The bulk of the population of the
United States—48%—are able-bodied men and women, as compared
to 10% who are aged. A much smaller proportion of the beneficiaries
and outlays under programs are made on behalf of the able-bodied
temporary poor.
The intent of income security outlays for able-bodied men and
women is to tide over such persons during intervals when they cannot
support themselves, until other measures correct the causes of such
inability to provide self-support.
Benefits are available from a range of programs, with great variation
in benefits and in the stringency of eligibility requirements. There is
a great potential for harmonizing and rationalizing outlays for this
target group, and it is one of the main focuses of welfare reform. In
many cases, there is not much consistency in the distribution of these
benefits. The pyramiding of separate programs leads, in some instances, to disproportionate decreases in income security benefits
when own income rises, creating incentive effects adverse to the fundamental aim of these programs, that of ending dependency on Government benefits.
The major system of unemployment insurance is a dual responsibility of Federal and State governments. Under this system, 72% of
all workers are covered. State governments pay the costs of benefits—
estimated at $5.3 billion in 1973, and constituting 93% of unemployment benefits expected to pay under all public programs. The States
also administer the program but the Federal Government pays for
the administrative costs. Benefit levels and duration vary among the
States because each State is allowed to establish its own benefit level.
There are also unemployment benefit programs for Federal employees and ex-servicemen, railroad employees, and for unemployed
workers in industries adversely affected by foreign trade. These programs are State-administered but are federally financed.
Some 7.7 million persons were aided with unemployment benefits in
1971 and it is anticipated that 8.0 million persons will receive unemployment benefits in 1973. These outlays total $5.7 billion in 1971,
rising to $6.4 billion in 1972, and declining to $5.8 billion in 1973, as
the economic situation improves.
A second set of programs providing income security benefits to
able-bodied men and women are means-tested cash and in-kind benefit
programs. Approximately $1.2 billion was spent in 1971 under cash
assistance to families with able-bodied unemployed fathers, cash assistance to families in the AFDC program with all children in school,
and to Cuban refugees and Indians. In-kind food, housing, and medical
service benefits were provided through Medicaid, public housing, food
stamps, child nutrition programs, and commodity distribution to these
and other low-income families and children. These outlay will reach a
level of $5.1 billion in 1973.

SPECIAL ANALYSES

197

Table L-8 BENEFITS FOR TRANSITIONAL LOW-INCOME AND OTHER:
BENEFITS, BENEFICIARIES AND AVERAGE PAYMENT
Number of bcneAverage monthly
Benefits (millions)
ficiaries
(thousands)
payments
1971
1972
1973
1971
1972
1973 1971 1972 1973
actual
est.
est.
actual
est.
est. actual est. est.
Temporary unemployment:
Unemployment insurance
Other unemployment benefits
Long-term unemployment:
Unemployed fathers
Mothers with all children
in school
Other income-tested 1
In-kind benefits, low income:
Food 2
Housing 2
Medical
Tax transfers

$5,229 $5,860 $5,275 7,072 8,742 7,326 $62 $56 $60
517
568 593 599 648 73 74 73
534
867 1,052

1,242
74

1,422 3,162 3,776 4,587
186 203
86 HI

27
41

27
33

26
35

500
557
630

2,790
880
672
740

3,002 23,903 24,427 25,861
1,303 728 993 1,503
739 476 384 337
645

7
57
109

8
74
146

10
72
183

Subtotal, transitional
low income
1_

10,794

13,093

13,385

Uniformed service retirees
under 65
Food for nonneedy children.
Other

2,575
493
1,231

3,000
590
1,445

3,629
599
652
702
602 30,020 30,422 32,330
1,544

358
383
1
2
___. _.__

431
2
____

4,229

5,035

5,725

Subtotal, other
Total
1
2

185

301

1,016
54
2,106

345

726

15,201 18,312 19,384

Includes all AFDC-related assistance to refugees and Indians.
Includes all benefits to AFDC and UF families.

Additional benefit outlays to able-bodied men and women are
made to uniformed services retirees under the age of 65. Some 599,000
persons received $2.6 billion upon retirement after at least 20 years
of service in the military forces. This outlay will reach $3.6 billion in
1973 with the enactment of proposals now before Congress.
The provision of income tax law providing significant tax benefits to
persons in this target group is the exemption from taxation of unemployment insurance benefits.
TOTAL FEDERAL BENEFITS TO LOW-INCOME PERSONS

The low-income population is defined by the Census Bureau in
terms of family size and annual family income before taxes. In 1970,
25.5 million Americans had incomes below the low-income level ($3,944
for a family of four). Of the total, 48% were under 21 and 18% were
65 or over; and 69% were white and 31% nonwhite.
In general, the low-income population has been decreasing since
1959, when there were 39.5 million persons in this category. The

198

THE BUDGET FOR FISCAL YEAR 1973

proportion of this category in female-headed families (excluding female
unrelated individuals) has risen from 18% in 1959 to 30% in 1970,
reflecting the faster rise of male-headed families to higher income levels.
Table L-9 displays estimates of direct benefits to low-income persons
through Federal expenditures and direct loan programs. The latest
available program and demographic information was used in deriving
these estimates. Possible effects of revenue sharing proposals are not
reflected.
Table L-9. TOTAL FEDERAL BENEFITS TO LOW-INCOME PERSONS BY
FUNCTIONAL PROGRAM AREAS (outlays in billions of dollars)

Income security/cash
Income security/in-kind _
Education
Health
Manpower
Other

Total

1966
actual

1967
actual

1968
actual

1969
actual

1970
actual

1971
actual

1972
est.

1973
request
(est.)

8.1
.3
.5
.8
.9
.5

8.3
.3
.9
2.1
1.2
.7

9.0
.4
1.1
3.1
1.4
.9

9.8
.6
1.1
3.6
1.4
.9

10.7
1.1
1.2
4.1
1.5
1.2

13.2
2.4
1.5
5.0
1.9
1.5

15.2
3.2
1.7
6.2
2.3
2.1

15.6
3.6
1.7
6.0
2.6
2.0

11.3

13.5

15.9

17.5

19.7

25.5

30.6

31.5

Income security/cash programs are the largest single component
of Federal benefits to low-income persons—an estimated 50% of the
total in 1973. These programs—chiefly social security and public
assistance—account for 40% of the dollar growth from 1971 to 1973.
Another 17% of the growth during this period is in health programs
(e.g., Medicare and Medicaid). The greatest relative increase is in
the income security/in-kind category, mostly due to increases in
food stamps and housing payment programs. The second largest
relative increase is in the manpower category, due in large part to
the new emeigency employment assistance program. Overall, Federal
benefits to low-income persons in 1973 will be $31.5 billion, 80%
above the 1969 level. At least $11 billion (35%) in 1973 will go to
low-income elderly.
Table L-10. TOTAL FEDERAL BENEFITS TO LOW-INCOME PERSONS BY
ANALYTICAL CATEGORIES (outlays in billions of dollars)

Human investment
Low-income entitlement
Normal entitlement-..
Maintenance
Low-income entitlement
Normal entitlement.-.
Total

1966
actual

1967
actual

1968
actual

1969
actual

1970
actual

1971
actual

1.8

2.5

3.1

3.4

4.2

4.9

(1.5)
(.3)
9.5

(2.1)
(.4)
11.0

(2.6)
(.5)
12.8

(2.6)
(.5)
14.3

(2.8)
(.6)
16.3

(3.4)
(.8)
21.3

(3.8)
(1.1)
25.7

(4.1)
(1.2)
26.2

(3.4)
(6.1)

(3.8)
(7.1)

(4.8)
(8.0)

(5.5)
(8.8)

(6.9) (10.3) (13.7)
(9.5) (11.0) (12.0)

(13.2)
(13.0)

11.3

13.5

15.9

17.5

19.7

25.5

1972
est.

30.6

1973
request
(cst.)

5.3

31.5

SPECIAL ANALYSES

199

Table L-10 shows Federal outlays to low-income persons by analytical categories. Human investment programs are intended to enhance
individuals' capabilities to become self-supporting. Programs in this
category actively promote education, the development of work skills,
and community and economic development. Maintenance programs
provide income support and essential services to maintain individuals'
or families' level of living. This category includes income security/cash
programs and food, health, and housing assistance. Within either
category, programs are classified by eligibility criteria. Persons qualify
for low-income entitlement programs specifically because they have low
incomes. Normal entitlement programs are those for which low-income
persons qualify for some reason other than their income level—e.g.,
because of prior work experience (social security) or because of age
(Medicare).
PROGRAM EXPENDITURES

Income security benefits will reach $102 billion in 1973. Of this, the
largest program is OASDI at $43.8 billion. Benefits will be received by
28.3 million persons in 1973. The second largest program is Medicare
at $9.9 billion, serving 21 million of these same persons. Next in size
is public assistance at $7.0 billion.

200

THE BUDGET FOR FISCAL YEAR 1973

Table L-11. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY
DEPARTMENT AND PROGRAM

Department, agency, and program

Department of Health, Education, and Welfare:
Social security:
Old-age and survivors insurance
Disability insurance
Hospital insurance
Supplementary medical insurance
Public assistance:
Maintenance payments
Medicaid
Special benefits for disabled coal miners
Assistance to refugees
Public health service officers retirement
Medical care for retired commissioned officers
Proposed legislation included above
Total, Health, Education, and Welfare
Veterans administration:
Disability and dependency and indemnity compensation
Veterans and survivors pensions
Life insurance (net subsidy)
Other veterans benefits
Proposed legislation included above
Total, Veterans Administration
Department of Labor:
Unemployment insurance (State programs)
Railroad unemployment
Unemployment compensation for Federal employees and ex-servicemen
Trade adjustment activities
Federal workmen's compensation
Total, Labor
Department of Defense—Military:
Military retirement
Medical care for retirees
Proposed legislation included above
Total, Defense
Department of Agriculture:
Food stamps
Child nutrition
Special milk
Removal of surplus commodities
Total, Agriculture
Civil Service Commission:
Civil service retirement
Special annuities (CSC)
Total, Civil Service Commission

Benefit outlays (in millions of
dollars)
1971
actual

1972
estimate

1973
estimate

31,100
3,381
5,442
2,035

34,542
3,960
6,265
2,240

39,250
4,584
7,395
2,486

5,109
3,228
297
75
11
3

6,306
3,898
548
98
13
3

6,961
4,289
538
126
17
(3,903)

5,068

5,787

65.649

3,354
2,330
17
91

3,552
2,504
19
119
(25)

3,776
2,664
18
113
(148)

5,792

6,194

6,569

5,229
95

5,860
110

5,275
93

422
16
163

424
74
165

475
90
189

5,926

6,633

6,122

3,386
180

3,928
245

4,796
307
(470)

3,566

4,173

5,102

1,523
837
91
347

1,997
1,216
94
346

2,239
1,282
93
313

2,797

3,653

3.928

3,024
1

3,413
1

3,931
1

3,025

3,414

3,932

SPECIAL ANALYSES

201

Table L-ll. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY
DEPARTMENT AND PROGRAM—Continued

Department, agency, and program

Railroad Retirement Board:
Railroad retirement

Benefit outlays (in millions of
dollars)
1971
actual

1972
estimate

1973
estimate

1,889

2,084

2,069

1,889

2,084

2,069

558
42
132

839
81
328

1,018
138
607

733

1,248

1,763

Total, Transportation

Department of State:
Foreign Service retirement

Total, Interior

Department of Commerce:
NOAA officers retirement

3,210
650
75
1,150

3,925
690
95
1,295
(350)

4,335
790
250
1,250
(650)

5,085

6,005

6,625

79,658

91,441

101,906

Total, Railroad Retirement Board
Department of Housing and Urban Development:
Public housing
Rent supplements
Home ownership and rental housing assistance
Total, Housing and Urban Development
Department of Transportation:
Coast Guard retirement

Total, State
Office of Economic Opportunity:
Emergency food program
Total, Office of Economic Opportunity
Department of the Interior:
General assistance to Indians

Total, Commerce
Tax Transfers:
Benefits to the aged
Benefits to veterans
Benefits to welfare recipients and working mothers
Benefits to disabled and unemployed
Proposed legislation included above
Total, tax transfers
Total, Federal benefits

SPECIAL ANALYSIS M
FEDERAL HOUSING PROGRAMS
COVERAGE AND SCOPE OF THE ANALYSIS

A wide variety of Federal programs and activities have a direct or
indirect impact on the production of housing. These include programs
of direct Federal construction of housing (primarily for civilian
employees or military personnel), basic involvement in mortgage
financing, and subsidies for housing for low- and moderate-income
families. In addition, major activities outside the Federal budget,
involving both Government-sponsored enterprises and private investment, occur as a direct result of Federal programs and policies. This
analysis summarizes the impact of these Federal programs and activities. Programs are included if they:
• Assist the production or sale of family housing;
• Assist in preventing deterioration of the existing housing stock;
and
• Provide certain
other types of indirect support for housing
production.1
This analysis concentrates on the financial and budget impact of
Federal and federally assisted housing activities. In particular, it
focuses on federally assisted financial commitments (which usually
precede starts) and on outlays (which usually follow completions).
Table M-1. SUMMARY OF FEDERAL HOUSING PROGRAMS
(in millions of dollars)
1971

Budget outlays for housing programs, excluding proceeds from sale
of financial assets
Less: Proceeds from sale of financial assets
Net budget outlays for housing programs

Federally assisted private investment in housing
Borrowings by Government-sponsored enterprises included above.

3,169
—1,749
1,420

40,565
(—461)

1972

1973

4,686
5,577
—2,626 —3,521
2,060

2,056

41,276 38,208
(2,214) (3,538)

SUMMARY

Federal budget outlays for housing are expected to total $2.1 billion
in 1973, about the same as in 1972, but $636 million above 1971. The

SPECIAL ANALYSES

203

1973 estimates reflect an increase of $516 million in payments on outstanding long-term subsidy contracts supporting housing for low- and
moderate-income families coupled with a substantial increase in
insured loans originated in rural areas for subsequent sale by the
Farmers Home Administration.
The impact of these and other increases, however, is entirely offset
by an $895 million increase in the sale of financial assets and other
reductions, with the result that net budget outlays remain virtually
unchanged from 1972 to 1973.
In addition to activities included within the Federal budget totals,
Government-sponsored enterprises (the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and the
Federal home loan banks) are expected to borrow $3.5 billion for
investment in housing, compared to $2.2 billion in 1972. Also outside
the budget totals, $38 billion is estimated to be forthcoming from
private investors for federally assisted housing programs, compared
with the $41 billion estimated for 1972.
Table M-2. BUDGET OUTLAYS FOR HOUSING PROGRAMS (in millions of dollars)
1971
actual

Budget outlays for housing by agency:
Department of Housing and Urban Development
Department of Defense—Military
Department of Agriculture
Veterans Administration
Federal Home Loan Bank Board
Small Business Administration
Other agencies
Total

Financial asset sales included above:
Department of Housing and Urban Development
Department of Agriculture
Veterans Administration
Total

Budget outlays for housing by type of programs:
Guaranteed or insured financing
Direct Federal financing without subsidy
Subsidized housing for special groups:
Financing combined with subsidy
Subsidy without Federal capital investment
Assistance to sponsors of housing for low- and moderate-income
families
Federally operated housing
Research and development on housing
Other assistance for housing
Total

1972
estimate

1973
estimate

1,148

1,544

595
-185
-133
-191

712
31

795
-31

-255
-221

-235
-215

140
46

197
52

81
56

1,420

2,060

2,056

285

668

1,506

1,914

2,378

244

427

475

1,749

2,626

3,521

-278
-178

132

-397

-741

649
797

490

291

1,312

1,828

11
528
28

15
644
23

-137

-159

14
729
11
-151

1,420

2,060

2,056

1,605

Units committed.—The completion or sale of a unit frequently follows
by lengthy periods the first commitment on the part of the Federal
Government affecting that unit. For example, the agreement to insure
a mortgage or provide a subsidy for a multifamily unit may predate by

204

THE BUDGET FOR FISCAL YEAR

1973

18 months to 3 years the time when that unit is ready for occupancy.
This lag reflects the time required to plan and construct the project.
Because of this lag, the units made available for occupancy in any year
largely reflect commitments made by the Government in prior years.
In 1973, the Federal Government expects to make commitments to
assist a total of more than 2 million units of new and rehabilitated
housing, including 609,000 subsidized units. Commitments to assist
the sale of existing housing are expected to total 1.8 million units in
1973, including 83,000 subsidized units.
Table M-3. HOUSING UNITS COMMITTED UNDER FEDERAL PROGRAMS
(in thousands of units)

Type of assistance

Guaranteed or insured financing:
Guaranteed or insured mortgages..
Insurance on deposits in thrift institutions
Direct Federal financing without subsidy
Subsidized housing for special groups:
Subsidy combined with financing. __
Subsidy without Federal capital
investment: Low- and moderateincome families
___.
Direct Federal construction or acquisition:
Military family housing
Other
Other Federal assistance
Less: Estimated duplication *
Total

New or rehabilitated
1971
actual

Existing

1972
1973
estimate estimate

1971
actual

1972
1973
estimate estimate

483

457

519

872

818

903

450

458

420

556

681

638

510

508

200

119

497

631

560

8
13
-35

12
*
21
-18

1,561

2,190

13
*

*
*

28
-13

-29

-8

-1

2,085

1,460

1,751

1,823

•Less than 500 units.
Represents estimate of insured or guaranteed mortgages purchased by thrift institutions.

Units completed.—In combination, Federal housing programs are
expected to assist in the completion for occupancy of almost 1.5 million
units of new or substantially rehabilitated housing in 1973. In addition,
these programs will facilitate the sale in 1973 of an estimated 1.7
million units of existing housing. Of the new or rehabilitated units,
666,000 in 1973 will be subsidized, compared with 458,000 in 1971 and
624,000 in 1972.

SPECIAL ANALYSES

205

Table M-4. HOUSING UNITS MADE AVAILABLE UNDER FEDERAL
PROGRAMS (in thousands of units)
New or rehabilitated
Type of assistance

Guaranteed or insured financing:
Guaranteed or insured mortgages-__
Insurance on deposits in thrift institutions
Direct Federal financing without subsidy
Subsidized housing for special groups:
Subsidy combined with financing
Subsidy without Federal capital investment: Low- and moderateincome families—._
Direct Federal construction or acquisition:
Military family housing
Other
.
Other Federal assistance
Less: Estimated duplication*
Total

1971
actual

Existing

1972
1973
estimate estimate

137

269
269

387

1971
actual

1972
1973
estimate estima t

543

329
3
29
468

543
5
43
703

648
6
48
1,066

117

138

7
*

5
*

341

486

608

6
*

9
*

1
*

657

*
*

6
-14

6
-20

8
-23

-1

-8

-5

983

1,437

1,464

1,302

1,766

1,724

*Less than 500 units.
Represents estimate of insured or guaranteed mortgages purchased by thrift institutions.

DESCRIPTION OF FEDERAL HOUSING PROGRAMS

The following material describes the various types of Federal
programs to aid housing.
Guaranteed or insured financing.—In terms of total housing units
affected, the predominant characteristic of Federal housing programs
is an emphasis on facilitating the flow of private mortgage credit
through the use of insurance and guarantee programs. Leading
examples are the insured and guaranteed housing loan programs of
the Department of Housing and Urban Development (HUD), the
Department of Agriculture (USDA), and the Veterans Administration (VA), and the insurance of deposits in thrift institutions by the
Federal Savings and Loan Insurance Corporation (FSLIC). Budget
outlays from insurance programs are a relatively small part of the
total. In HUD mortgage insurance operations and in the FSLIC,
fees, premiums, and other revenues generally exceed insurance claims^
permitting reserves to be built up to cover possible losses in the
future. VA's loan guarantee program generally operates at a loss, as
the bulk of the loans now outstanding were guaranteed without the
collection of fees.
The USDA in its housing programs serves as mortgage originator
and servicer as well as insurer. In this capacity, it may actually
supply a portion of the financing required for the loans it insures,
generally on an interim basis pending sale of the loans to private
investors. The USDA insured housing loan program is addressed to
meeting the needs of low- and moderate-income families. This includes
loans containing an "interest credit7' feature, under which the borrower
pays reduced interest rates, depending on income.

206

THE BUDGET FOR FISCAL YEAR 197a

Direct Federal financing without subsidy.—This category includes
programs which provide direct loans, or their equivalent in the form
of Government purchase of mortgages, but without attaching an
explicit subsidy to the loan. These programs are generally designed
to serve areas where private mortgage credit is not readily available
(e.g., rural areas and small towns) or to finance mortgages which the
private market is not prepared to accept (such as mortgages on housing
of new and experimental character, or housing in urban renewal areas).
Subsidized housing for special groups: Financing combined with
subsidy.—This category covers Federal programs which provide a
subsidy while simultaneously providing part or all of the capital
financing required for the production of the housing unit. The most
common method is the low-interest rate direct loan, which is used,
for example, in the Small Business Administration's disaster loan
program.
In addition to low-interest loans, there are several programs which
provide a one-time capital grant to reduce the cost of housing to the
occupant. These include grants for farm labor housing available from
USDA.
Subsidized housing for special groups: Subsidy without Federal
investment.—This category includes programs under which the Federal
Government subsidizes a dwelling unit for which the basic capital
financing is provided by private investors at market rates of interest.
The programs in this category (low-rent public housing, rent supplements, rental housing assistance, and homeownership assistance) are
expected to add 608,000 units available for occupancy in 1973,
representing a large part of the housing for low- and moderate-income
families produced in that year. Under these programs, the Federal
Government agrees to provide an annual (or monthly) payment on
behalf of a specified unit of housing, with the subsidy contract usually
running for the life of the mortgage or bond issued to finance the unit.
This may be for a period of up to 40 years. In the case of the homeownership and rental housing assistance programs, the payment
represents a part of the interest cost on the mortgage. In the case of
low-rent public housing and rent supplements, the payment commonly
covers both principal and interest on the bond or mortgage and may
cover a part of the operating costs as well. In all four programs, the
subsidy payment can be flexible, with rising income on the part of the
occupant being reflected in a lower subsidy. Outlays for these programs
will continue to rise steadily, reaching $1.8 billion in 1973 as new
subsidy contracts are added to the continuing costs of contracts
approved in prior years.
Subsidized housing for special groups: Assistance to sponsors of housing
for low- and moderate-income families.—This category includes programs of grants and loans to groups developing and operating housing
for low- and moderate-income families. Also included are programs of
assistance to nonprofit sponsors funded in HUD, Agriculture, and the
Appalachian Regional Commission, and certain assistance to Indian
tribes provided by Interior. Outlays in 1973 are expected to total $14
million.

SPECIAL ANALYSES

207

Federally operated housing.—The predominant activity in this category is the provision of family housing for military personnel, totaling
9,000 units to be made available in 1973. In addition, a few units will
be completed for civilian employees of a number of other Federal
agencies. This consists of housing for employees who must, of necessity,
be stationed in areas where adequate private housing is not available.
Research and development—The HUD research and technology program is the primary focus for Federal research and development in
housing. Operation Breakthrough will be completed in 1973. Major
new HUD efforts include developing ways to improve housing management and testing housing allowances. In conjunction with HUD,
the Building Research Division of the National Bureau of Standards
will continue its program to develop improved building codes and
standards.
Statistical and market analysis.—In order to provide policymakers
at all levels of Government and the private sector with information on
housing needs and production and the condition of financial markets
related to housing, the Federal Government maintains an ongoing
program of statistical and market analysis. These activities range from
short-range analyses of individual housing markets to broad gage
statistics on housing production and mortgage flows.
HOUSING ACTIVITIES OF GOVERNMENT-SPONSORED ENTERPRISES

Several Government-sponsored enterprises, outside the budget, are
of major importance in bousing production. These are the 12 Federal
home loan banks, the Federal National Mortgage Association (FNMA)
and the Federal Home Loan Mortgage Corporation (FHLMC). All
operate to channel funds into mortgages by borrowing in the capital
markets and directing these funds into mortgages. In the case of the
Federal home loan banks, the investment takes the form of advances to
thrift institutions which, in turn, invest the bulk of their assets in
home mortgages. FNMA purchases FHA-insured and VA-guaranteed mortgages directly. The FHLMC purchases primarily "conventional" mortgages (those not federally insured or guaranteed).
All have the result of increasing the total supply of mortgage financing.
The net increase in home loan bank advances in 1973 is expected to
total $1.9 billion. The net increase in FNMA mortgage holdings is
estimated at $4.4 billion, while that of the FHLMC is estimated at
$0.4 billion.
FEDERALLY ASSISTED PRIVATE INVESTMENT IN HOUSING

The vast bulk of housing in the United States is financed privately
including most of that portion which is federally assisted. Directly or
indirectly, Federal housing programs are expected to affect decisions
by private investors involving some $38 billion in 1973. This includes
a $19 billion increase in savings at thrift institutions regulated by
the Federal home loan bank system which, together with advances
from the home loan banks, will permit these institutions to increase
their housing investments by almost $21 billion. Of this total, about

208

THE BUDGET FOR FISCAL YEAR

197a

$3 billion will be in mortgages insured or guaranteed by the Federal
Government. Of the remaining $18.7 billion increase in outstanding
guaranteed mortgages, $4.4 billion will be held by FNMA, and $0.4
billion by the FHLMC, leaving $13.9 billion for purchase by other
private investors. These investors will also purchase an estimated
$2.1 billion of tax-exempt notes and bonds financing the construction
of low-rent public housing and will finance $3.5 billion of borrowings
by FNMA and the Federal Home Loan Bank System.
In order to facilitate investment in Government insured or guaranteed mortgages, the Government National Mortgage Association is
authorized to guarantee mortgage-backed securities. Under this program, private financial institutions accumulate a supply of mortgages
and sell securities based on these mortgages to investors, promising
to pass on the principal and interest collections. GNMA will guarantee
$3.1 billion of these securities in 1973. This amount will constitute
part of the net increase in outstanding guaranteed or insured mortgages
shown in table M-5.
Table M-5. NET FEDERALLY ASSISTED PRIVATE INVESTMENT IN
HOUSING (in millions of dollars)
1971
actual

Increase in outstanding guaranteed or insured mortgages:
Federal Housing Administrationl
Veterans Administration._._
Farmers Home Administration

1972
estimate

1973
estimate

14,397
1,966
1,280

17,565
3,305
1,603

16,244
3,448
1,969

17,644

22,473

21,661

-5,478
-2,168
—446

-4,600
-4,887
—524

-3,000
-4,402
—398

9,551

12,462

13,860

26,917
2,995

26,072
— 1,159

20,600
— 1,900

29,912

24,913

18,700

Increase in outstanding guaranteed public housing bonds and notes.

1,563

1,687

2,110

Increase in outstanding borrowings from the public by Governmentsponsored enterprises:
Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation

1,476
-2,551
615

775
739
700

475
1,478
1,585

Subtotal
Less net increase in holdings by:
Thrift institutions regulated or insured by the Federal Home
Loan Bank System (estimated)
Federal National Mortgage Association.
Federal Home Loan Mortgage Corporation
Net from other private investors
Increase in assets of thrift institutions regulated or insured by the
Federal Home Bank System
Less net increase in advances from Federal Home Loan banks
Net from other private investors

Subtotal_.__

-461

2,214

3,538

Total

40,565

41,276

38,208

___

Includes property improvement loans and.some nonhousing mortgages.

SPECIAL ANALYSIS N
FEDERAL CIVIL RIGHTS ACTIVITIES
COVERAGE AND SCOPE OF THE ANALYSIS

This analysis of Federal civil rights activities comprises more than
the traditional programs and policies related to civil rights enforcement. In addition to Federal activities regarding the protection of
such rights as voting, public accommodations, fair housing, and
equal employment opportunity in the public and private sectors,
there are included Federal programs specifically related to the provision of equality of other opportunities to certain identifiable minority
groups. The latter programs include activities in desegregation assistance, civil rights research and information dissemination, and the
conciliation and prevention of racial disputes. Total outlays have risen
from $911 million in 1969 to $2.6 billion in 1973
Outlays (or Civil Rights Activities
$ Billions

3
I

1 Minority Assistance

2.6

Enforcement

2.0
2—
1.6

1.!
I—

1969
Fiscal Y « a «

http://fraser.stlouisfed.org/
480-700 O—7S
Federal Reserve Bank of St. Louis

1970

1971

1973

1972
Estimate

209

210

THE BUDGET FOR FISCAL YEAR 19 73

Further, there are included in this analysis programs which have as
their goal the broadening of economic participation on the part of
minorities including the achievement of self-determination by American Indians. These programs include the many efforts of Federal
agencies to foster minority business enterprise and to increase minority bank deposits, education programs to expand assistance to
minority institutions, and Federal expenditures to improve the
living conditions of American Indians. The distinction between the
categories of moneys discussed in this analysis is an important one
and the reader is cautioned to read carefully the definitions contained
in the footnotes to the various tables.
Programs relating to problems of the economically and socially disadvantaged, even when they include1 substantial minority participation, whether in manpower training, community action, or bilingual
education, will not be treated as civil rights activities for they are more
properly considered in other analyses in this document.
Table N-1. FEDERAL CIVIL RIGHTS OUTLAYS BY PROGRAM CATEGORY
(in millions of dollars)
1971
actual
Civil rights enforcement: 1
Federal service equal employment opportunities
Military services equal opportunities
Private sector equal employment opportunities
Equal educational opportunity
Fair housing 2
Enforcement and investigation 3
Program direction, research and information dissemination
Indian programs
Civil rights conciliation and prevention of disputes

1972
estimate

1973
estimate

27.80
5.95
34.43
70. 30
7.55
34.15

30.80
20.30
49.89
122.90
9.07
46.48

32.30
28.25
66.29
400.00
10.88
50.07

4.96
0.40
4.20

5.88
0.70
5.60

7.01
0.80
6.50

189.74

291.62

602.10

459.09
909.00
18.90

624.56
1,100.00
29.15

715.87
1,200.00
42.11

Subtotal.

1,386.99

1,753.71

1,957.98

Total

1,576.73

2,045.33

2,560.08

Subtotal
4

Minority assistance programs:
Minority business enterprise 5
Indian programs (estimate)
Minority higher educational assistance6.

law.
2

Civil rights enforcement programs guarantee and protect the basic civil rights as denned by

Excludes funds for departmental personnel who directly administer housing and urban development programs but also concern themselves with the objectives of fair housing laws.
3 Includes all title VI efforts except HUD.
4
Minority assistance programs broaden opportunities for economic participation and selfdetermination.
5
Excludes
the minority bank deposit program and Indian programs.
6
Outlays for all Federal financial assistance to predominantly black colleges (developing institutions
and land-grant colleges) to improve the educational opportunities of minority group students will
exceed $200 million in 1973, more than double the 1969 level. These outlays exclude the Federal
share of Howard University expenses—$53.2 million (1972); $62,3 million (1973). However, outlays
shown in the above table reflect only the HEW program for strengthening developing minority
institutions and assistance to minority institutions from the National Science Foundation and the
Department of Agriculture.
1
For example, although 45% of the participants in manpower training programs are minorities,
refer to Special Analysis J, Federal Manpower Programs.

211

SPECIAL ANALYSES

Federal Service equal opportunities.—Government policy prohibits discrimination based on race, color, religion, sex, or national
origin. Executive Order 11478, and implementing regulations and
instructions issued by the Civil Service Commission, call for the
application of this policy as an integral part of personnel administration. During 1971, 14,936 Federal employees and applicants contacted equal employment opportunity counselors for advice and
assistance.
The head of each Federal executive department and agency is
charged with establishing and maintaining an affirmative program of
equal employment opportunity in his agency.
Agency programs are documented in written plans of action, with
many including the use of numerical goals and timetables as an
effective affirmative personnel management tool. Careful consideration is also given to assure that recruitment activities reach all sources
of job candidates, that present employee skills are fully utilized, and
that upward mobility programs and opportunities are provided.
Outlays for Federal civil service equal employment opportunity
programs will increase by 16% in the 2 years, 1971 to 1973, to $32
million. Man-years will increase by 336 to 2,455. Although firm projections on the results of these increased efforts are difficult to make,
the favorable trends observed in recent years should continue.
Increase in Minorities by Grades

—November 1969-May 1971

Percentage
60
55.7
50 —

40-

30 —
SI.4
15.7
10

7.3

—1.1
10-

1-4

5-8

'General Schedule and Similar Grade Groupings.

9-11

12-13

14-15

16-18

212

THE BUDGET FOR FISCAL YEAR 19 73

As of May 31, 1971, nearly one-fifth (19.5%) of Federal employees
were members of minority groups. Despite a decrease in overall
Federal employment, there has been a continuing trend of more
minorities in Federal service and increased opportunities for minorities
in the middle and upper grade and pay levels. (See chart 2.) Under
general schedule and similar pay plans, more than 13,000 minority
employees were hired between November 1969 and May 1971, and
minority increases in the middle and upper grade levels occurred at
much faster rates than for nonminorities. As of October 31, 1970,
women occupied 33.2% of Federal white-collar positions. Five
thousand more women held positions at GS-7 through GS-12 than
in the previous year. At the same time, the number of women holding
positions at levels GS-13 and above increased by 7%.
Two special programs have been set up to address the problems
observed in implementing equal employment goals in the Federal
Government. Within the overall equal employment opportunity
program, the Federal women's program addresses the particular
employment needs and problems of women, and the Spanish-speaking
program implements a 16-point Presidential mandate on opportunities
for Spanish-speaking citizens.
The placement of 621 women in middle-management executive
jobs (GS-13—GS-15) between April and December 1971, and of
1,151 Spanish-speaking Americans to Federal jobs, between May
1970 and May 1971 is largely attributable to the special efforts of
these programs. Additional progress was evidenced by the appointment of 79 women and 23 Spanish-speaking Americans since 1969 to
the highest executive positions in the Federal structure ($28,129 to
$42,500), many of which had never been held by either a minority
employee or a woman before.
Military services equal opportunities.—Each of the military
services have placed equal opportunity officers and their staffs at
various levels within their individual command structures. They
guide, monitor, and evaluate all matters pertaining to the equal
opportunity and treatment of military personnel and their dependents
and are responsible for and participate in race relations councils,
seminars, and training. In 1973, outlays for providing equal opportunities for members of the armed services will increase 38% to
$28.3 million. An additional 550 man-years will be devoted to these
efforts.
The Defense Race Relations Institute, located at Patrick Air
Force Base, Fla., trains officers and enlisted men for service with
their units as instructors. Training and education in race relations
are also included in service schools ranging from basic training to the
senior service colleges. Special programs are also designed to increase
minority participation in skilled jobs, examine current testing procedures for cultural bias, and to develop race relations handbooks.
Recruiting efforts are increasing to insure balanced minority participation in the military services. All services have increased the

SPECIAL ANALYSES

213

percentage of minority recruiters. In the service academies, an example of success can be found in the current school year freshman
class. The enrollment of 126 black freshmen exceeds the number of
minority graduates for the preceding decade, and total black student
population has risen from 128 in 1969 to 299 in 1971.
Private employment.—Title VII of the Civil Rights Act of 1964
prohibits discrimination on the basis of race, color, religion, sex, or
national origin by either employers, unions, or employment agencies.
Executive Order 11246, as amended, requires Federal Government
contractors to provide similar opportunities. The agencies charged
with these responsibilities, the Equal Employment Opportunity Commission, the Justice Department, and the Office of Federal Contracts
Compliance and 15 cooperating agencies will receive $66.3 million in
resources in 1973, an increase of 33%.
The 1973 budget of the Equal Employment Opportunity Commission will allow it to increase the size of its regional office staff and
increase investigations and conciliations. Projected cash benefits resulting from Commission conciliations will grow from $2.2 million in
1969 to $18.9 million in 1973. The Commission will double in 1973 the
amount of its grants to State and local agencies responsible for the
administration of State and local equal employment opportunity
laws from $1.5 million to $3 million. These additional resources will
allow such agencies to expand their capabilities, particularly on those
cases referred by the Federal Equal Employment Opportunity
Commission.
Enforcement of title VII is the responsibility of the Justice Department which enters into litigation to secure compliance with the law
where it finds patterns or practices of employment discrimination in
labor unions, companies, or industries. In 1973, expenditures in this
area by the Justice Department will increase by 35% and enable the
Department to initiate additional cases. The effectiveness of this program can be measured by the numerous favorable court decisions and
consent decrees and their results: a significant increase in the number
of jobs opened to minority persons and women. The rate of corrective
consent decrees obtained by negotiation in employment pattern and
practice cases has more than doubled in the first 6 months of 1972,
compared with 1971.
Executive Order 11246 prohibits the practice of discrimination in
Federal contracts, subcontracts, and on federally assisted construction
projects. Nondiscrimination assurances cover construction as well as
industrial work forces and require affirmative action on the part of
recipients of Federal contract moneys to promote the equal employment of minorities and, under recently revised guidelines, women.
Approximately 300,000 new hires and promotions have been promised
in such action plans. In 1973, those Federal agencies responsible for
implementing this order will spend $33.7 million, more than double
the 1971 outlay of $16.4 million. The number of compliance reviews
performed under this program will also continue to increase—12,300
(1969); 22,500 (1971); and 52,000 (1973).

214

THE

BUDGET FOR FISCAL YEAR

1973

Equal Employment Opportunity Commission Activities
S Million*
30

Thousands

-15

Investigations Completed

25 —

Expenditures

20 —

-10

15 —

1967
Fiscal Y i

1968

1969

f970

1971

1972

(973
Estimate

Twenty-five "citywide" plans for affirmative action in the construction industry, including the well-known "Philadelphia plan,"
have either been signed or imposed setting goals and timetables for
the employment of 28,000 additional minorities by craft. By the end
of 1973, these plans should be operating in 100 cities.
Efforts begun in 1972 to increase the effectiveness of both title VII
and Executive Order 11246 will be continued. Such efforts 2 include
the implementation of a performance management system in the
Equal Employment Opportunity Commission and improved techniques of compliance review and management in contract compliance
agencies.
Other highlights include:
• The Federal Communications Commission, an independent regulatory agency, will spend $0.3 million in 1973 to investigate
complaints of employment discrimination by broadcasters and
common carriers and to review licensees' annual reports of employment patterns.
• The Department of Labor will spend $1.8 million in administering
the Equal Pay Act. In 1971, $15 million in back wages was
found owed to 35,000 women as a result of such efforts.
2
Under this system, managers define explicit program objectives, establish time-phased performance targets consistent with available resources, and then periodically must report comparisons
of accomplishments against targets.

215

SPECIAL ANALYSES

Federal Contract Compliance Activities
$ Millions

Reviews, Thousands

35Contract Compliance Reviews
30 —

Contract Compliance Expenditures

25 —

— 50

20 —

15 —

10 —

-10

5 —

1968
Fiscal Years

1969

1970

1971

J972

!973
Estimate

Equal educational opportunity.—The Department of Health,
Education, and Welfare and the Justice Department have primary
responsibility for assuring equal educational opportunity in public
schools for all citizens on a nondiscriminatory basis and to assure that
there is no discrimination against either faculty or administrators. In
1973, education programs in support of these goals will be funded for
$1.1 billion, including capital assistance to predominantly black
colleges (developing institutions and land-grant colleges). Outlays
will grow by 179% to $455 million.
To enforce Federal laws requiring equal educational opportunities
for public school students, the Justice Department will spend $2.5
million in the coming year, 39% more than in 1971. Though substantial
compliance with the contitutional mandate has been achieved in
recent years, the Justice Department continues its enforcement
supervision in 255 cases involving 530 school systems.
The desegregation of schools is progressing nationwide. On a national scale, the number of black students in all black schools has
decreased from 40% in 1968 to an estimated 12% in 1971 and, in the
South, from 68% in 1968 to an estimated 9% in 1971.
Currently, the Federal Government is also taking steps to end the
discrimination against Spanish-speaking and other non-Englishspeaking pupils through the provision of bilingual and bicultural
education programs.

216

THE BUDGET FOR FISCAL YEAR 19 73

To continue these positive programs, legislation has been proposed
to provide $1.5 billion over a 2-year period to local educational agencies
and other public or private nonprofit institutions to help further
eliminate the effects of minority group isolation in school systems.
This emergency school assistance program will also provide financial
assistance to aid children in overcoming the educational disadvantages
resulting from minority group isolation.
Fair housing.—Title VIII of the Civil Rights Act of 1968 makes
unlawful any discrimination on the basis of race, color, religion, or
national origin in the sale, rental, or financing of housing. Executive
agencies are required to cooperate with the lead agency in this area,
the Department of Housing and Urban Development (HUD), in the
administration of title VIII, and to conduct their programs and activities in a manner that affirmatively furthers fair housing opportunities
for all Americans.
Expenditures for the administration of fair housing programs in
executive departments and agencies will increase by 20% in 1973 to
$10.9 million.
• HUD will spend an additional 70% over 1972 to strengthen its
efforts under title VIII.
• The Department of Justice will spend $1.9 million in the development, litigation, and negotiation of cases to enforce title VIII.
• The Department of Defense will spend $1.3 million to assure the
rights of all military personnel to available off-base housing.
• The General Services Administration (GSA) will spend $0.8 million, an increase of 60%, to assure that federally constructed
buildings or leased space are located where there is an adequate
supply of low- and moderate-income housing available on a nondiscriminatory basis.
• In cooperation with the fair housing goal of the executive branch,
the independent Federal financial regulatory agencies are instructing the institutions subject to their supervision to give public
notice that their real estate lending services are available without
regard to race, color, religion, or national origin.
HUD will expand its capability to process individual complaints
under title VIII. At the same time, it will continue its major efforts
to ensure that the administration of housing and urban development
programs further the fair housing objectives of title VIII. Such efforts
include the recent issuance of policy on affirmative marketing and
advertising guidelines and policies for project selection of federally
assisted programs; the initiation of a national advertising campaign
and expanded affirmative action programs aimed at all elements of
the public; and plans to move to conduct community wide hearings
and reviews of community patterns of resistance to rights granted
under title VIII.
The Justice Department has brought more than 100 suits against
more than 300 defendants in 24 States and the District of Columbia
aimed at securing comprehensive affirmative relief to correct the
effects of past housing discrimination and to maximize equal opportunity in the future. In addition, more than 180 voluntary compliance
agreements have been negotiated with title insurance companies,

SPECIAL ANALYSES

217

real estate boards, private apartment house owners, and realtors
nationwide. The Department's efforts are supplemented by private
lawsuits under the Fair Housing Act, and the complaints to the
Secretary of HUD, as noted above.
The Defense Department expects to continue its successful implementation of the open off-base housing program. In 1967, less than
20% of the multiunit rental facilities surveyed were indicated as
available to all military personnel on an equal opportunity basis.
Four years later, 98% of surveyed facilities are pledged to a policy
of nondiscrimination. Between 1969 and 1971, black military occupancy in these facilities has increased nearly 50%. In 1973, Defense
will devote 125 man-years to furthering this record of achievement.
GSA, under Executive Order 11512 and a memorandum of understanding with HUD (June 11, 1971), will expend 43 man-years on
matters relating to the positive impact that selection of sites for
Federal facilities can have on the social and economic conditions in
the area. GSA and HUD expect to develop affirmative actions plans
where necessary to insure that an adequate supply of low- and
moderate-income housing will be available on a nondiscriminatory
basis. For agencies like A EC, which procure space and facilities on
their own, efforts are also expected to increase in this area.
The Federal Reserve Board of Governors, the Federal Deposit
Insurance Corporation (FDIC), and Comptroller of the Currency
have issued policy directives to the banks subject to their supervision,
and the Federal Home Loan Bank Board published regulations,
all in support of the Civil Rights Act of 1968. The policy directives
and the regulations require that, effective March 1, 1972, financial
institutions post notices in their lobbies and include statements in
their advertising giving public assurance that their real estate financing
is available without regard to race, color, religion, or national origin.
In addition, the Federal Reserve Board is using a civil rights questionnaire in its bank examinations to improve compliance with civil
rights legislation by banks under its supervision. The FDIC and the
Comptroller of the Currency have given notice inviting public comment on a petition by public interest groups to adopt regulations
which will require recordkeeping by banks concerning mortgage
loan applicants and applications to assist in determining compliance
with title VIII objectives.

T H E BUDGET FOR FISCAL YEAR 1973

218

Table N-2. FEDERAL CIVIL RIGHTS OUTLAYS BY TYPE OF ACTIVITY
(in millions of dollars)
1971

1972

1973

7.10
27.05
15.37
27.27
38.15
4.50
70.30

9.50
37.20
25.34
32.55
57.83
6.30
122.90

11.60
42.60
33.30
38.15
68.16
8.20
400.00

189.74

291.62

602.10

1,015.20
248.60
9.80
93.29
9.80
10.30

1,213.85
354.90
14.30
146.76
13.60
10.30

1,349.51
354.90
14.30
210.07
18.90
10.30

Subtotal

1,386.99

1,753.71

1,957.98

Total

1,576.73

2,045.33

2,560.08

Civil rights enforcement:1
Complaint conciliation
Complaint investigation
Compliance review and monitoring
Legal enforcement
Program direction and research
Technical assistance
Equal educational opportunity
Subtotal
Minority assistance programs: 2
Capital assistance—grants
Capital assistance—loans
Capital assistance—guarantees
Procurement from minorities
Program direction and support
Technical assistance

law.
2

Civil rights enforcement programs guarantee and protect the basic civil rights as defined by

Minority assistance programs broaden opportunities (or economic participation and self-determination, including Indian programs.

Civil rights enforcement.—Primary responsibility for the enforcement of civil rights laws and constitutional guarantees is vested in the
Department of Justice. This includes the development, negotiation,
conciliation, and litigation of cases and complaints. In 1973 the Justice
Department and other agencies with enforcement responsibility will
spend $50 million, an expansion of 47% over 1971 resources.
In addition to activities related to employment discrimination, fair
housing and public education, which are treated elsewhere in this
analysis, the efforts of the Department will be directed toward
increased compliance with those laws which prohibit the interference
with basic civil rights, including the rio;ht to vote and the use of public
accommodations and facilities. The Department will also coordinate
other Federal agencies enforcement of title VI of the 1964 Civil Rights
Act which prohibits discrimination in federally assisted programs.
In 1973 the Justice Department will allocate additional resources
for litigation to protect the civil rights of citizens whose rights have
been violated under color of law, including special protections for
migrant workers, prison inmates, and American Indians. A new unit
has also been established concerned with civil litigation involving
injustices and substandard conditions in correctional institutions,
mental hospitals, and juvenile homes.
The voting rights program continues to involve investigations and
litigation to secure to all citizens the right to register and vote without
discrimination or intimidation. In addition, all proposed changes
affecting voting which are submitted to the Attorney General under
the Voting Rights Act must be investigated, reviewed, and adjudicated

SPECIAL ANALYSES

219

in the Department of Justice. More than 1,000 such changes were
received in the past year. In support of the voting rights program, the
Civil Service Commission provides personnel to prepare and maintain
lists of eligible voters and to observe election procedures in States or
other political subdivisions designated by the Attorney General. The
Commission receives complaints, hears and determines challenges, and
assists in the defense of challenge cases filed in the U.S. circuit courts
of appeals. In 1973, the Commission will spend $1 million to assist in
this responsibility.
The coordination by the Justice Department of the title VI requirements of agency grant programs will in 1973 continue to emphasize,
in addition to litigation, the monitoring of title VI operations in 22
departments and agencies. This coordination should result in a continuing improvement of title VI enforcement.
Civil rights program direction, research, and information

dissemination.—Expenditures
grouped in this category of program
concern include all moneys for the direction and management of civil
rights activities not counted elsewhere as well as Federal research and
information dissemination efforts similarly unaccounted for. Outlays
will increase in this area by 20% to $7 million in 1973.
• Legislation is being proposed for the Commission on Civil Rights
to:
—expand its jurisdiction to cover sex discrimination;
—extend the Commission for 5 years; and
—remove the present limitation on its appropriations.
Commission efforts will also increase through central staff and
State advisory committee activities in California, Hawaii, New
York, and Washington focusing on the problems of AsianAmericans.
• The Women's Bureau, Department of Labor, will devote $1.4
million to questions and issues relating to the utilization of
womanpower and the economic, legal, and civil status of women.
Priority is given to programs for improving the economic position of women who are economically and socially deprived,
especially minority women and youth. The Bureau works with
appropriate State, national, international, local, and union
organizations, and concerned individuals in achieving its goals.
• The Cabinet Committee on Opportunities for Spanish-Speaking
People, created by statute in 1969 to advise on the particular
needs and problems of the Spanish-speaking, has been allocated
a 42% increase in funds in the coming year and will open two
field offices.
Civil rights conciliation and prevention of disputes.— The

Community Relations Service of the Department of Justice was
established by title X of the Ciril Rights Act of 1964 to provide
assistance to communities in resolving difficulties arising from discriminatory practices which disrupt or threaten to disrupt peaceful
relations among citizens. It also seeks to aid efforts being made to
eliminate disparities between groups, to achieve compliance with the
act, and to reduce and prevent racial tensions. The Service actively
cooperates with appropriate Federal, State, and local agencies, private

220

THE BUDGET FOR FISCAL YEAR 1973

and public groups, and individuals on methods and programs for the
peaceful resolution of racial disputes.
In 1973, the Service will spend $6.5 million, an increase of 13%, to
enlarge the number of State governments and agencies assisted; to
expand to 42 the number of major urban centers served; and to augment its conciliation, mediation, and technical assistance programs.
Indians.—The policy of the Federal Government relating to
American Indians is set forth in the message sent to the Congress on
July 8, 1970.
"Federal termination errs in one direction, Federal paternalism
errs in the other. Only by clearly rejecting both of the^e extremes
can we achieve a policy which truly serves the best interests of
the Indian people. Self-determination among the Indian people
can and must be encouraged without the threat of eventual
termination/'
The policy of self-determination—solutions to local Indian problems
by Indians—is being fostered. This includes tribes taking over the
services on reservations previously performed by the Government as
well as the participation of tribes in the development of the initial
1973 budget program considered by the Bureau of Indian Affairs
(BIA), Department of the Interior. The BIA budget provides about
50% of the funds that go to Indians on reservations.
• Expenditures to protect the basic civil rights of Indians will
increase by 25% in the Office of the Solicitor, Department of the
Interior. Twenty-seven man-years will be devoted in 1973 to
providing legal services to BIA and to complying with the
requirements of the Civil Rights Act of 1968.
• The National Council on Indian Opportunity, which serves as a
direct communications link between the Indian people and
appropriate officials of the U.S. Government, will:
—encourage full use of Federal programs to benefit Indians;
—encourage interagency coordination and cooperation;
—measure impact and progress of Federal programs; and
—suggest ways to improve such programs.
This section also includes other expenditures on Indian programs.
In 1973, these programs will have outlays of approximately $1.2
billion and support the economic and social development of American
Indians on reservations.
Minority business enterprise.—The moneys and programs discussed in this section aim to broaden economic participation on the
part of minorities to permit them to take their rightful place in
society. Outlays for minority business enterprise are designed to increase minority business opportunities. Expenditures result primarily
from grants, loans, loan guarantees, and the provision of special
opportunities to minority entrepreneurs to provide goods, labor, and
services to either Federal agencies or contractors.
The Office of Minority Business Enterprise (OMBE) was created
in the Department of Commerce on March 6, 1969 (Executive Order
11458), to coordinate all Federal programs wfrch could be of assistance
to minorities who seek to establish or expand businesses. It offers
advisory services and counseling and serves as a clearinghouse
for all information relating to minority enterprise.

SPECIAL ANALYSES

221

To promote equality of minority access to business opportunities
and resources, OMBE stimulates the development of new areas of
assistance for minority business formation and strengthening both
in the public and private sectors. OMBE's scope was broadened on
October 13, 1971 (Executive Order 11625), to include grant and
contract authority to local and national business development
organizations. Program development and management expenditures
wffl grow fivefold from $2.0 million in 1971 to an estimated $10.6
million in 1973. The new minority business development management
and technical assistance funds are expected to expand similarly—from
expenditures of $6.8 million in 1972 to $30 million in 1973. Funding
for OMBE efforts will total $63.6 million next year.
Other expenditures for minority business development include:
• Outlays of $1.9 million in 1973 by the Small Business Administration to administer section 8(a) of the Small Business Act.
This unique procurement tool permits SBA to obtain procurement contracts from other Federal agencies and to award subcontracts for the performance of these contracts to the minority
or disadvantaged to help them become owners of self-sustaining
manufacturing, construction, and other related service enterprises. SBA expects to expand the contracts negotiated from an
estimated 1,600 worth $100 million in 1972 to 2,500 worth
$175 million
in 1973. Companies assisted will rise from 900 to
l,200.3
• SBA will have more than $336 million in loans and loan guarantees
obligated in 1973 for minority business development and expects
to award $5 million worth of contracts for management and technical assistance.
• The Department of Commerce, outside of OMBE, will fund a
projected $41.7 million worth of grants to minority enterprises
and obligate an estimated $4.9 million in development loans
in 1973.
• The Office of Economic Opportunity will spend $27.7 million
in grants for minority economic development projects next year.
• The Department of Agriculture will provide a projected $24.9
million in farm ownership and operating loans and $2.7 million
in grants and advisory services to aid minority agricultural
enterprises.
• The Department of Housing and Urban Development will spend
in 1973 $22.9 million to provide business opportunities arising
through Model Cities grants.
• The Department of Interior will make business development
loans to Indians, Eskimos, and Aleuts of more than $6.5 million
in 1973. The Indian tribal grants program is expected to increase
from $28 million in 1971 to $70 million in 1973. Tribes and
Indian groups will be compensated in larger amounts as they
provide basic social services and property management functions
previously performed by the Federal Government.
• The Department of Labor will assist approximately 450 minorityowned businesses with on-the-job training contracts totaling
more than $15 million in 1973.
3

All Federal procurement from minorities under Section 8(a) is reported under the lead agency, SBA.

222

THE BUDGET FOR FISCAL YEAR 19 73

• Forty-three minority enterprise small business investment corporations (MESBIC's) have been licensed since 1969 with a
total private capitalization of $11.6 million. With the provision
of Federal matching funds, this produces total capital of more
than $34 million. MESBIC's provide venture capital to expand
the range of financing opportunities available to minority enterprises. This administration has also proposed legislation to increase the Federal funding opportunities available to MESBIC's
by amending the Small Business Investment Act of 1958.
Total funding for minority business enterprise programs will increase by 15% to an estimated $715.9 million in 1973. Outlays for
program management are expected to aggregate $12.5 million and for
technical assistance grants $139 million. Obligations for loans and
loan guarantees will amount to $340 million and $14.3 million
respectively. Procurement from minorities will grow to more than
$210 million. In the aggregate, efforts to assist minority business
development will expand 236% between 1969 and 1973.
Minority bank deposits.—Between September 30, 1970, when the
Administration began a combined Government/private sector program
to increase deposit balances in minority banks by $100 million, and
December 31, 1971, deposits in the Nation's 37 minority banks
increased by $242.2 million, an expansion of 61%. This program, under
the direction of the Treasury Department and the Commerce Department respectively, has provided these banks with $80 million in
additional lending resources. The Federal Government contributed
approximately $70 million of this increase. Deposits are expected to
increase further in 1973.

SPECIAL ANALYSES

223

Table N-3—FEDERAL CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND
AGENCY (in millions of dollars)
1971

1972

1973

Civil rights enforcement: 1

Department of Agriculture
Department of Commerce
Department of Defense
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Treasury Department
Atomic Energy Commission
Cabinet Committee on Opportunities for Spanish-Speaking
People
___
Civil Rights Commission
Civil Service Commission 2
Environmental Protection Administration
Equal Employment Opportunity Commission
Federal Communications Commission
General Services Administration
National Aeronautics and Space Administration
Postal Service
Veterans Administration
Other Independent Agencies
Subtotal

3.60
.80
11.00
78.30
6.08
.82
28.72
5.02
.02
2.07
.25
1.32

3.91
.90
29.00
134.80
6. 74
1.65
38.00
6.80
.05
2.70
.58
1.53

5.00
1.20
38.60
413.00
10.00
2.59
42.00
6.50
.05
3.38
.66
1.90

.59
3.17
28.20
.31
15.75
.20
.87
.24
1.36
.79
.26

.92
3.56
31.60
.44
21.70
.30
1.96
.48
1.43
.87
1.70

1.20
4.41
33.40
.43
29.50
.30
3.29
.53
1.54
.90
1.72

189.74

291.62

602.10

43.20
45.58
305.50
62.60
418.40
59.50
58.40
296.60
97.21

57.56
59.07
366.48
71.00
528.60
67.80
42.30
443.20
117.70

57.90
91.70
385.81
89.80
570.00
68.85
48.50
518.20
127.22

Minority assistance program: 3

Department of Agriculture
Department of Commerce
Department of Health, Education, and Welfare
Housing and Urban Development
Department of Interior
Department of Labor
Office of Economic Opportunity
Small Business Administration4
Other independent agencies
Subtotal

1,386.99 1,753.71 1,957.98

Total

1,576.73 2,045.33 2,560.08

1
2

Civil rights enforcement programs guarantee and protect the basic civil rights as defined by law.
All Federal service equal employment opportunity outlays are reported under the lead agency,
Civil
Service Commission.
3
Minority assistance programs broaden opportunities for economic participation and selfdetermination,
including Indian programs.
4
All Federal procurement from minorities through Section 8(a) of the Small Business Act is reported
under the lead agency, Small Business Administration.

CONCLUSION

The civil rights programs of the Federal Government are manyfaceted. They range from the legal assurances of nondiscrimination to
provision of employment and business opportunities. The steady
expansion in the resources dedicated to these efforts is evidence of the
intent to continue progress toward making equal opportunity a
reality for all Americans.

SPECIAL ANALYSIS O
FEDERAL PROGRAMS FOR THE REDUCTION OF CRIME
The Federal crime reduction program is a combination of direct
action on the Federal level and support for criminal justice systems
at the State and local level. The objective is to generate a comprehensive, cooperative, and effective national response to the crime
problem by all elements of the total criminal justice system. This
analysis reflects, therefore. Federal enforcement and correction activities, that portion of judicial functions related to the criminal justice
process, Federal research into the causes of crime and the means of
controlling it, and Federal support of State and local crime reduction
programs. Illicit drug traffic and organized crime are special targets
of Federal law enforcement efforts, and these efforts are being intensified, with special attention to specific crimes at the local level. In the
drug area, increased emphasis is being directed at the breakup of
local drug distribution networks. Also, local governments are being
encouraged to develop, with Federal technical and financial assistance,
programs targeted to those specific crime situations where analysis
indicates a concentrated effort can produce significant results in the
reduction of crime.
ACCOMPLISHMENTS OF THE PAST YEAR

During the past year a number of actions have been taken to
improve the effectiveness of the criminal justice system. Events of
particular importance were:
• The Special Action Office for Drug Abuse Prevention was
established in the Executive Office of the President to develop
overall Federal strategy for drug abuse prevention, education,
treatment, rehabilitation, training, and research programs in
all Federal agencies.
• New initiatives undertaken in the fight against drug abuse include
expansion of the drug treatment and rehabilitation programs within the Veterans Administration and Department of Defense, increased funding for narcotics enforcement by the Departments of
Justice and Treasury, and efforts to secure international cooperation in suppressing illegal drug traffic.
• A national conference on corrections was convened in Williamsburg, Va., to analyze corrections problems and recommend
specific approaches for improving correctional programing. Proposed by the Attorney General was a prison reform program,
which will include minority hiring, intensive education programs
for offenders, and creation of a National Corrections Academy as a
center for correctional research, education and training for
Federal, State, and local correctional personnel.
• A computerized system was established to enable Federal,
State, and local law enforcement agencies to obtain criminal
224

SPECIAL ANALYSES

225

history records in minutes over the FBI's National Crime
Information Center communications network. In addition to
personal identification information, the file shows arrest charges,
the disposition of each case, sentencing details, and custody
and supervision status. The purpose of the new system is to
coordinate efficiently the exchange of criminal history information between computerized State information systems and
Federal agencies.
• An interdepartmental council was named to plan the coordination of all Federal juvenile delinquency programs. Established
under amendments to the Juvenile Delinquency Prevention and
Control Act of 1968, the council is composed of representatives
of Federal agencies with responsibilities for administering juvenile
delinquency programs.
• The Omnibus Crime Control Act of 1970 strengthens State and
local correctional programs by requiring that a fixed portion of
grants made by the Law Enforcement Assistance Administration
be used for improvements in correctional activities. The act provides for a variety of improvements in Federal law enforcement,
including reorganization of the Law Enforcement Assistance Administration, increased protection for the President and members
of Congress, and creation of a Wiretap Commission.
• The National Advisory Commission on Criminal Justice Standards and Goals was formed to carry out a complete study of the
Nation's criminal justice system. The Commission will establish
national goals, performance standards, and priorities to help all
criminal justice planners in the nation. The study is expected
to take 1 year.
Table 0-1. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME
BY AGENCY * (in thousands of dollars)
Agency

The Judiciary
Executive Office of the President
Office of Economic Opportunity
Department of Agriculture
Department of Commerce
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housingand Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Atomic Energy Commission
General Services Administration
National Aeronautics and Space Administration
Postal Service
Veterans Administration
Other independent agencies
Total Federal outlays
1

Does not include Department of Defense—Military.

http://fraser.stlouisfed.org/
480-700 O—72
Federal Reserve Bank of St. Louis

Outlays
1971
Actual

60,703
15,500
4,511
800
4,551
98,510
17,228
22,916
742,641
14,373
53,598
38,958
167,894
104
38,513
1,342
32,654
37,560
399
1,352,755

1972
estimate

1973
estimate

76,132
96,194
2,800
6,500
18,200
21,500
4,665
4,665
1,100
1,100
4,605
4,749
166,197
204,428
26,450
34,465
25,104
27,309
1,043,907 1,277,454
32,700
43,300
141,771
141,771
51,497
42,887
228,592
250,856
43,551
987
39,054
66,034
255

42,068
350
42,922
77,753
262

1,973,601, 2,320,533

226

THE BUDGET FOR FISCAL YEAR 1973
1973 BUDGET HIGHLIGHTS

The 1973 budget provides for outlays of $2,321 million related to
reduction of crime, an increase of $347 million over comparable
expenditures in 1972 and $968 million more than 1971 outlays. It is
estimated that expenditures for crime reduction programs at all levels
of government—Federal, State, and local—will exceed $17 billion in
1973. Of the $2,321 million of Federal outlays in 1973, $923 million
or 40% of the total will directly support State and local crime reduction
activities. In 1972, 36% of Federal expenditures assisted State and
local governments in this area; in 1971, 3 1 % were devoted to this
purpose. In dollar terms, the increase in 1973 is $218 million more than
Federal outlays directed to State and local law enforcement in 1972.
Application of resources to the reduction of the illicit drug traffic,
a major contributor to crime in America, will be expanded throughout
the full range of Federal programs. The Departments of Justice and
Treasury will give special emphasis to combatting the manufacture,
distribution and smuggling of illicit narcotics and dangerous drugs.
A total of $273 million will be spent on all Federal narcotics enforcement programs in 1973. In addition, the Department of Health,
Education, and Welfare, Veterans Administration and Office of Economic Opportunity will conduct significantly expanded drug treatment
and rehabilitation programs. Outlays for this purpose will be approximately $162 million in 1973. Another aspect of the Federal Government's fight against drug abuse involves suppression of the cultivation, refinement, and distribution of illicit narcotics abroad. Outlays of
$36 million in 1973, compared to $12 million in 1972, will support
international drug control.
CRIME REDUCTION PROGRAM BY ACTIVITIES

The budget outlays reported by this special analysis cover all
domestic Federal programs directly related to or closely associated
with crime reduction, except outlays associated with military programs of the Defense Department. The analysis also includes estimated costs of the criminal adjudication function of the judiciary. It
excludes general social programs, even though such programs may
indirectly reduce crime, unless they are clearly within the context
of crime reduction or prevention, e.g., vocational training of prisoners,
treatment of juvenile delinquents. Also, the analysis does not include
background investigations for employment, administrative inspections, or investigations primarily of a regulatory nature which may
in rare cases result in the application of criminal sanctions. Where
activities involve both civil and criminal proceedings, e.g., operation
of courts, an allocation of outlays to the criminal function has been
estimated.
Crime research and statistics.—Crime research and statistics encompass Federal activities designed to produce data and information
concerning crime, criminals, and the criminal justice system. Also
included are programs to develop improved methods and techniques
for operation of the criminal justice system.
• Over $70 million of Federal funds will be expended for crime
research and statistics in 1973, as compared with $46 million
in 1971 and $31 million in 1972. Total outlays in 1973 consist of
$25 million for statistical activities and $45 million for research.

SPECIAL ANALYSES

227

Table 0-2. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY
MAJOR PROGRAM AND SELECTED ACTIVITY * (in thousands of dollars)
Outlays
Major program and selected activity

Crime research and statistics:
Statistics on crime, criminals, and criminal justice system.__
Research on criminal behavior and sociology of crime
Program total
Reform of criminal laws
Services for prevention of crime:
Public education on law observance, enforcement and crime
prevention
Special programs for rehabilitation of alcoholics and narcotics.
Prevention and control of juvenile delinquency
Development of other community crime prevention services.
Program total
Federal criminal law enforcement:
Enforcement in support of Federal systems
General Federal law enforcement
Federal police
Specialized activities against organized crime
Support for Federal law enforcement
Program total
Assistance to State and local police activities:
Intelligence and information systems
Education and training of enforcement officers
Laboratory support
General police activities
Control of civil disorders
Combating organized crime
Other
Program total
Administration of criminal justice:
Conduct of Federal criminal prosecutions
Operation and support of Federal court systems
Assistance to States and localities for improved administration of justice
Other supporting programs
Criminal defense for the poor
Program total
Rehabilitation of offenders:
Operation of Federal correctional institutions
Federal probation, parole and community treatment
Federal inmate education and training
Federal inmate medical treatment
Other programs supporting Federal corrections
Assistance to States and localities for improved correctional
programs
'_
Program total
Planning and coordination of crime reduction programs
Total Federal outlays
1

Does not include Department of Defense—Military.

1971
actual

1972
estimate

~~
1973
estimate

7,545
23,122

13,070
32,960

25,363
44,720

30,667

46,030

70,083

1,293

1,835

2,313

10,705
57,749
45,409
24,998

17,815
133,432
65,636
37,606

22,627
161,894
80,967
46,789

138,861

254,489

312,277

236,448
288,397
56,526
66,577
27,939

257,833
468,457
68,885
82,681
35,634

262,929
480,293
70,255
86,600
33,195

675,887

913,490

933,272

10,052
61,913
9,398
53,562
4,673
7,524
6,834

17,736
87,302
14,740
74,260
7,537
12,446
11,497

24,358
111, 203
18,074
86,015
9,357
15,454
14,624

153,956

225,518

279,085

29,018
56,441

35,168
71,261

41,008
83,221

17,905
682
5,854

29,482
742
12,524

37,725
1,310
13,527

109,900

149,177

176,791

85,124
18,486
6,943
12,491
5,220

106,076
19,664
8,750
14,996
9,591

152,827
27,467
9,045
15,826
14,446

85,149

186,697

264,055

213,413

345,774

483,666

28,778

37,288

63,046

1,352,755

1,973,601

2,320,533

228

THE BUDGET FOR FISCAL YEAR 1973

• The National Bureau of Standards within the Department of
Commerce, in cooperation with the National Institute of Law
Enforcement and Criminal Justice within LEAA, will continue
development of law enforcement equipment standards in order
to advise police departments on criteria for purchasing equipment.
• The Bureau of Narcotics and Dangerous Drugs is continuing
research to identify new esoteric material appearing in illicit
traffic, facilitate identification of the source of legitimate drugs
diverted into illegal markets, perfect equipment for remote
detection of illicit drug manufacturing, and develop new analytical methods for the analysis of abusable substances.
• The Federal Aviation Administration is continuing research and
development projects to perfect automated techniques for detection of weapons and explosives aboard aircraft and identification
of potential hijackers.
• The Law Enforcement Assistance Administration will begin publication of estimates of the incidence and socioeconomic cost of
crime as determined by the National Crime Panel. Efforts will
also be directed to developing comprehensive data centers on
criminal justice statistics in the States.
Reform of criminal laws.—Criminal law reform includes Government efforts to improve the effectiveness of the Nation's laws.
• Total outlays for reform of criminal laws will be $2.3 million in
1973. Over $1.9 million of this amount will support projects to
reform State and local laws.
• The Department of Justice is evaluating the recommendations of
the National Commission on Reform of Federal Criminal Laws
and will submit legislation to provide both substantive and
procedural reforms in 1973.
• There will be established during 1973 a Commission on the Review
of the National Policy Toward Gambling, pursuant to the Organized Crime Control Act of 1970. The purpose of the Commission is to study Federal, State, and local policy and practices
with respect to gambling activities and to recommend codification, revision, or repeal of existing statutes pertaining to gambling.
• Twenty-four States and three island possessions have now adopted
the Uniform Controlled Dangerous Substance Act. Efforts will
continue within the Bureau of Narcotics and Dangerous Drugs
to foster enactment by as many States as possible.
• The Department of Justice has drafted a Model State Explosives
Act which has been submitted to the Council of State Governments for approval. The proposal is designed to reflect the regulatory pattern created by the recently enacted Federal explosives
law.
Prevention of crime.—Crime prevention includes Government efforts
to limit or render less probable the commission of criminal acts by
means other than direct enforcement or general correctional activities.
Included are public education, alcoholic and drug addict rehabilitation,
treatment of juvenile delinquents, and projects to improve policecommunity relations.

SPECIAL ANALYSES

229

• Outlays of $312 million will be devoted to crime prevention
programs in 1973. This expenditure represents an increase of
$58 million over 1972 and 550% over the outlay level in 1969.
• The Office of Education in the Department of HEW is strengthening its program to improve the education of delinquent children
in institutions with the objective of returning these children to
their communities with a better attitude toward themselves,
their parents, school, and work.
• The Veterans Administration will open up to 12 additional drug
dependence units and 15 additional alcoholism treatment units.
The goal is to offer treatment and rehabilitation services to an
estimated 20,000 addicts in the 44 special treatment units to be
operated in 1973. A total of 7,500 veterans will be treated for
alcoholism.
• The Special Action Office for Drug Abuse Prevention will develop
a national strategy for the reduction of drug addiction and drug
abuse by developing drug abuse programs, setting program goals
and objectives, formulating policies and standards for operating
agencies, and evaluating the performance of all drug abuse
programs.
• The Bureau of Prisons will operate the former Public Health
hospital at Fort Worth as the sixth Federal institution offering
drug treatment in addition to other rehabilitation programs.
Early indicators of progress with specialized treatment efforts
point to substantial success in deterring a return to criminal
activity by inmates designated as high-risk offenders.
Federal criminal law enforcement and Federal police.—Law

enforce*

ment involves direct Federal Government efforts to detect, identify,
and apprehend violators of criminal laws. Representative programs
include criminal investigations, policing of certain Federal areas, and
special concerted programs against organized crime, and illicit narcotics trafficking.
• Expenditures of $933 million will support Federal investigative
and police activities in 1973. This compares with total outlays of
$913 million in 1972 and $676 million in 1971 for this purpose.
• The Criminal Division of the Department of Justice returned indictments against 2,122 defendants in organized crime cases in
1971, mainly through use of organized crime strike forces operating in 17 cities. Expanded resources applied to this program in 1973
are expected to produce increased indictments.
• Resources of Federal and local governments will be combined to
mount an intensive effort in 24 major cities against the street
and mid-level traffic in illegal drugs and narcotics.
• The Internal Revenue Service will conduct over 7,000 tax fraud
investigations in 1973 and will continue to enforce the revenue
laws related to alcohol, tobacco, and firearms. Special emphasis
will be given to suppression of illicit drugs through investigations
of drug traffickers.
• The U.S. Marshals Service will improve its ability to conduct
operations through installation of a modern communications
network connecting deputy marshals with central offices and
linking the 93 Marshals with the Department of Justice.

230

THE BUDGET FOR FISCAL YEAR 1973

• Increased resources will be directed to the Joint State-Federal
Narcotics Task Force in New York City. During 1971, its first
full year of operation, 110 drug-related arrests were made by
the task force, which is aimed at middle-level traffickers.
• The Treasury Department will spend $6 million for further construction of the $53 million training center at Beltsville, Md.
The facility is expected to be operational by 1975 and will provide
recruit, advanced, specialized, and refresher training for over
8,500 students each year from participating Federal enforcement
agencies.
• The National Park Service will enlarge the training curriculum
for Park Rangers to reflect the expanding role of the Ranger in
law enforcement, accident investigation, and fire suppression.
• The Immigration and Naturalization Service expects to apprehend an estimated 455,000 deportable aliens in 1973, a substantial
increase over the 400,000 illegal aliens located in 1971. In addition, Border Patrol agents seized 48,500 pounds of marihuana,
over 50 pounds of heroin and cocaine, and 750,000 capsules of
dangerous drugs in 1971. It is anticipated that narcotics seizures
by INS agents will increase by one-third in 1973.
• An Indian Police Academy is being operated by the Bureau of
Indian Affairs to train Federal and tribal officers performing
enforcement duties. Approximately 300 officers will attend a 10
week course of instruction in 1973.
• Under authority of the Water Quality Improvement Act of 1970,
the Coast Guard will enforce regulations governing discharge of
oil from vessels by boarding and inspecting ships in U.S. navigable
waters.
• The Securities and Exchange Commission will continue its investigation of persons suspected of organized crime activities
who appear to be involved in manipulation of the securities
markets and the illegal use of investment companies registered
under foreign jurisdiction.
• As a result of recent legislation, the investigative activities of the
U.S. Postal Service in 1973 will reflect increased enforcement
responsibilities concerning shipment of narcotics and dangerous
drugs and broader investigation of bombs and bomb threats.
Assistance to State and local police.—Included in this category are
Federal efforts to provide or improve activities which support or upgrade State and local police and investigative agencies.
• Outlays of $279 million will be devoted to assisting State and
local law enforcement activities in 1973, an increase of $54
million over 1972 and $125 million over 1971. Approximately
$111 million will be spent to train State and local police and
$15 million will support State and local efforts against organized
crime.
• The bulk of Federal assistance to State and local law enforcement
will be provided by the Law Enforcement Assistance Administration. In 1973 LEAA will award block grants of $480 million to
finance programs selected by State planning agencies. Additional
grants will be awarded for technological improvements, collection
of statistics, and development and implementation of statewide

SPECIAL ANALYSES

•

231

plans. Moreover, law enforcement education program funds will
provide loans and stipends to approximately 100,000 State and
local policemen, court employees, and correctional personnel.
LEAA discretionary grants to States and localities will be made
in support of a concentrated attack on urban crime—homicide,
rape, robbery, and burglary—in eight selected cities. The program
will stress the achievement of an early and significant impact on
crime by the development of new techniques and strategies which
can be adopted in other urban areas.
Several Federal investigative agencies offer training to State and
local police. In 1973 the Bureau of Narcotics and Dangerous
Drugs will train over 85,000 police officers, and the FBI will
graduate approximateJy 2,000 State and local police from the
National Academy and other specialized courses at Quantico, Va.
During 1973 an estimated 89,000 persons will be enrolled in vocational education classes in Law Enforcement Training and Police
Science Technology, supported by $3.6 million in grants from the
Office of Education in HEW.
In cooperation with experts in the field of law enforcement, the
Veterans Administration has developed a model on-the-job training program for policemen, leading to a journeyman's status for
the trainee. In 1973, 20,000 participants are expected to attend
State training programs patterned after this model.

Administration of criminal justice.—This category includes the
preparation and prosecution of criminal cases, operation of court
systems, trial of cases, provision of defense counsel in certain cases,
and related activities.
• Expenditures of $177 million will be applied to the administration of criminal justice and the prosecution of criminal cases in
1973, including $38 million to assist State and local court
systems. Operation of the Federal courts will require outlays of
$83 million and $41 million will be spent to conduct criminal
prosecutions.
• In 1973 U.S. attorneys will file over 53,000 criminal cases, terminate an estimated 49,200 cases, handle 201,000 criminal complaints, and conduct over 35,000 proceedings before grand juries.
• The U.S. Marshal Service will support the administration of
criminal justice by serving an estimated 350,000 processes,
executing over 27,000 warrants, and transporting approximately
40,000 prisoners. Marshals will continue to preserve order in Federal courtrooms, as well as insure the safety of judges, juries,
and witnesses.
• The Bureau of Narcotics and Dangerous Drugs will expand its
program of training State prosecutors to handle cases under the
newly enacted State Uniform Controlled Substances Acts.
• The Federal court system will increase the level of its support
personnel by almost 20% in order to expedite an expanded caseload in 1973.
Rehabilitation oj offenders.—These programs include Government
custody and rehabilitation of criminal offenders. Included are the
supervision and operation of correctional institutions, inmate and

232

THE BUDGET FOR FISCAL YEAR 1973

offender treatment and training programs, probation and parole
services, and other supportive functions.
• Outlays for rehabilitation of offenders are projected at $484 million in 1973, as compared with $346 million in 1972 and $213
million in 1971. Of the 1973 total, $264 million will be allocated
to State and local correctional programs, an increase of 4 1 %
over the 1972 level and 210% over the 1971 figure.
• In 1973 the Bureau of Prisons plans to have construction underway on five metropolitan correctional centers (New York,
Chicago, San Diego, Philadelphia/New Jersey, and San Francisco), a behavorial research center at Butner, N.C., and a West
Coast Youth complex. In addition, planning and site acquisition
will proceed for four future facilities.
• A variety of programs designed to assist offender rehabilitation
will be conducted by the Office of Education in HEW. Included
are programs which fund the training of adult education personnel
working in correctional institutions, support vocational training
for inmates in State institutions, and provide library services for
correctional activities.
• The Law Enforcement Assistance Administration will award
grants totaling $261 million for support of State and local
correctional activities in 1973, as compared to $88 million in 1971.
Funding will take the form of block action grants, discretionary
grants, and grants earmarked for correctional programs.
• The Department of Labor will spend $40 million to finance ongoing offender rehabilitation projects and to initiate a new comprehensive correctional program which will assist States in
coordinating available Federal and State resources for trainees.
Planning and coordination.—Included in this category are outlays
supporting State and local planning and coordination of crime reduction activities.
• Expenditures of $63 million are provided for planning and coordination of federally-supported crime reduction programs in 1973.
The major Federal agency involved in this activity is the Law
Enforcement Assistance Administration.

SPECIAL ANALYSES

233

Table 0-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY
MAJOR PROGRAM AND AGENCY * (in thousands of dollars)
Outlays

Major program and agency
1971
actual

1972
estimate

1973
estimate

Crime research and statistics:

The Judiciary
Office of Economic Opportunity
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Justice
Department of Transportation
Atomic Energy Commission
National Aeronautics and Space Administration
Postal Service
Program total

145
1,600
11
5,435
20,629
660
104
1,342
741

292
1,700
12
5,478
36,058
953

360
1,500
12
9,557
56,875
1,200

987
550

350
229

30,667

46,030

70,083

1,132
161

1,835

2,313

1,293

1,835

2,313

13,900
93
55,692
13,619
538
43,932
454
60
10,573

16,500
96
110,682
22,500
629
73,072
350
64
30,596

20,000
98
128,872
28,250
661
94,550
1,000
70
38,776

138,861

254,489

312,277

4,511
800
3,654
19,300
314,419
3,265
53,598
37,842
167,894
38,513
31,853
238

4,665
1,100
3,764
20,604
377,256
3,300
141,771
50,192
228,592
43,551
38,440
255

4,665
1,100
3,871
21,672
380,399
3,300
141,771
40,685
250,856
42,068.
42,623
262

675,887

913,490

933,272

2,555
1,416
122,998
26,987

3,055
1,671
185,354
35,438

3,655
1,963
234,490
38,977

153,956

225,518

279,085

Reform of Criminal laws:

Department of Justice...
Other independent agencies
Program total
Services for prevention of crime:

Office of Economic Opportunity
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Transportation
Postal Service
Veterans Administration

Program total
Federal criminal law enforcement:

Department of Agriculture
Department of Commerce
Department of Defense—Civil
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
General Services Administration
Postal Service
.
Other independent agencies
Program total....

_
__._

Assistance to States and local police activities:

Department of Health, Education, and Welfare
Department of the Interior
Department of Justice
Veterans Administration
Program total

234

THE BUDGET FOR FISCAL YEAR 1973

Table 0-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY
MAJOR PROGRAM AND AGENCY * (in thousands of dollars)—Continued
Outlays

Major program and selected activity

1971
actual

1972
estimate

1973
estimate

Administration of criminal justice:

The Judiciary
Department of
Department of
Department of
Department of
Department of

Defense—Civil
Health, Education, and Welfare
the Interior
Justice
Transportation

Program total.._

_..

45,170
59
685
833
63,151
2

59,702
68
685
1,136
87,584
2

72,476
72
1,235
1,377
101,629
2

109,900

149,177

176,791

15,388
734
34,143
3,609
829
147,602
11,108

16,138
665
46,297
3,950
1,064
248,260
29,400

13,358
696
61,109
6,215
1,636
350,652
40,000

213,413

345,774

483,666

28,778

2,800
34,488

6,500
56,546

28,778

37,288

63,046

1,352,755

1,973,601

2,320,533

Rehabilitation of offenders:

The Judiciary
Department of
Department of
Department of
Department of
Department of
Department of

„
Defense—Civil
Health, Education, and Welfare
Housing and Urban Development
the Interior
Justice
Labor____

Program total
Planning and coordination of crime reduction programs:

Executive Office of the President
Department of Justice
Program total..__
Total Federal outlays
1

Does not include Department of Defense—Military.

SPECIAL ANALYSES

235

Table 0-4. SELECTED CRIME REDUCTION DATA (dollars in thousands)

Federal outlays for crime reduction:
Federal crime reduction outlays assisting States and localities—..
.
.
Federal crime reduction outlays for reduction of Federal
crimes
Total Federal outlays for reduction of crime

1969

1970

$103,739

$177,251

$414,773

554,614

679,665

937,982

658,353

856,916

1,352, 755

Federal personnel:
Full-time Federal criminal investigators 1
12,818
14,610
U.S. attorneys and assistant attorneys (man-years on criminal workload)
560
630
Attorneys—Criminal Division (man-years)
168
190
U.S. district court judgeships
341
402
2
State and local crimes:
Serious crimes recorded (UCR—table 2)
5,001,400 5,568,200
Violent crimes recorded (UCR-table 2)
655, 100
731,400
Rate of serious crimes per 100,000 inhabitants (UCR—
table 2)
2,477
2,740
Rate of violent crimes per 100,000 inhabitants (UCR—
table 2)
324
360
Percent index crimes cleared by arrest (UCR—table 13) _ _ _ _20.6
21.0
Percent found guilty of persons charged by police (UCR—
table 15)
65.5
66.8
Federal investigations:
FBI, investigative matters received
859,666
882,254
Immigration and Naturalization Service (investigations
completed)
11,394
12,794
Postal Service, criminal caseload
200,812
211,166
IRS, tax fraud investigations
8,135
7,711
Bureau of Customs (cases closed)
28,175
32,040
Secret Service (cases closed)
79,892
99,390
Disposition of Federal criminal matters:
Investigative matters presented for prosecutive decision—
prosecution declined
83,608
89,139
Federal criminal cases commenced 5
33,585
38,102
Federal criminal cases terminated 5
30,578
34,962
Federal criminal cases pending 5
17,770
20,910
6
Federal criminal cases pending over 6 months
5,078
5,710
Federal criminal defendants convicted
29,450
29,005
High echelon organized crime figures convicted
29
33
Corrections:
Average Federal jail population
3,866
4,284
Average Federal prison population
20,239
20,687
Court commitments to Federal institutions
11,162
11,060
Average Federal prison sentences (months)
45. 2
46.8
Persons under supervision of Federal probation system (end
of year)
36,985
38,409
Federal paroles granted
_
_
5,445
5,142
Warrants issued for violation of conditions of release from
prison
2,521
2,369
Executive clemency petitions granted. _
_
96
1
2
3
4

1971

15,489
712
239
402
(3)
(3)
(3)
(3)
(3)
(3)
828,059
4

12,618
510,220
6,866
37,995
104,743
94,032
41,290
37,715
24,485
6,202
34,579
61
4,733
20,949
13,327
47.0
42,549
5,851
2,044
173

CSC jobs classified in series 1811 as of October 31.
From FBI uniform crime report, calendar year 1970.
Not available.
Represents a new workload reporting system which reflects individual complaints in a specific

5 Excludes transfers.
Excludes pending cases of fugitives.

PART 3

SPECIALIZED ASPECTS AND
VIEWS OF FEDERAL PROGRAMS

237

INTRODUCTION
Part S discusses trends and developments in selected areas of
Government activity—aid to State and local governments, public
works, research and development, and environmental quality. It
groups four special analyses, those designated P through S.
Special Analysis P summarizes Federal grants to State and local
governments as well as loans and indirect assistance. It traces the
development of Federal aids over time and relates them to the finances
of both the Federal Government and State and local governments.
This analysis also provides a profile of Federal grants by region, and
that portion benefiting metropolitan areas.
Special Analysis Q brings together information on Federal construction and federally aided State and local public works. It also includes
information on major Federal programs affecting construction by
private cooperative and nonprofit groups.
Special Analysis R identifies Federal programs for the conduct of
research and development, and for facilities related to such activities.
Special Anayl&is S identifies Federal funding for selected environmental activities, including pollution control and abatement, environmental protection and enhancement, sewer and water programs,
and understanding, describing and predicting the environment.

238

SPECIAL ANALYSIS P
FEDERAL AID TO STATE AND LOCAL GOVERNMENTS
Federal Aid to State and Local Governments

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

Fiscal Years

1973
Estimate

HIGHLIGHTS OF THE 1973 AID PROGRAM

In 1973, Federal aid to State and local governments will total
$43.8 billion. This amount will be $4.4 billion more than in 1972—
a 12% increase in 1 year, and five times the amount in 1963. Since
1968, major progress has been made in restructuring Federal aid
programs to increase their flexibility and effectiveness. Proposals
in the President's 1973 legislative program call for even greater
changes :
• Sharing Federal revenues with State and local governments in
the form of unrestricted General Revenue Sharing, and six
broad purpose special revenue sharing programs without matching
requirements.

239

240

THE BUDGET FOR FISCAL YEAR

1973

• Reforming the welfare system to provide national eligibility
standards, improved work incentives, broadened coverage to the
working poor, and eventual fiscal relief to the States.
• Strengthening the grant-in-aid delivery system through the
Federal Assistance Review program (FAR), including: decentralizing decisionmaking to Federal field offices; and expanding the
Integrated Grant Administration program from four to 24 major
projects, thus enabling State and local governments to apply for
several related grants through a single application.
The fastest growing major Federal aid programs in 1973, as in each
of the years since 1969, are those related to law enforcement, income
support, services for the poor, and environmental protection.
HISTORICAL PERSPECTIVES

Federal aid to State and local governments has been a part of the
American federal system since the country's earliest days. Under the
Articles of Confederation, Congress provided grants of Federal land
in 1785 to support education in the Northwest Territory.
Although Federal grants have a long history, the major growth in
the number of grant programs and amounts of money provided has
occurred only in the past two decades. The composition of the total
grant program has changed significantly since 1960, as shown in
table P - l . The functions comprising human resource programs—
education and manpower, health, and income security—show a
rapid growth during the 1960-73 period, rising from 47% of Federal
aid in 1960 to an expected 55% in 1973. On the other hand, commerce
and transportation programs declined from 43% of the total in 1960 to
14% in 1973.
Table P-l.

PERCENTAGE DISTRIBUTION OF FEDERAL AIDS TO STATE
AND LOCAL GOVERNMENTS BY FUNCTION
Function

1950
actual

Agriculture and rural development
Natural resources and environment
Commerce and transportation
Community development and housing.
Education and manpower
Health
Income security
General revenue sharing
Other
Total

_._

1955
actual

5
2
21
(*)
11
5
55
1
100

8
3
19
3
14
4
47
2

1960
actual

1965
actual

4
2
43
3
10
4
33
1

100

5
2
40
5
10
7
29
2

1970
actual

1973
estimate

3
3
21
11
18
15
26
3

100

2
4
14
10
17
11
27
11
4
100

i Less than 0.5%.

While Federal grants have been growing, State and local governments presently raise from their own sources about four times the
amount of aid they receive from the Federal Government.

241

SPECIAL ANALYSES

Table P-2.

STATE AND LOCAL GOVERNMENT FINANCES,
YEARS 1951 AND 1971

Source

In billions of dollars
1951

Revenue:
Own revenue
Federal aid
Total
Expenditures

CALENDAR

1971

^"ui"
P

incTc^

18.8
2.3

114.8
26.9

9.5
13.1

21.1

141.7

10.0

22.3

141.7

9.7

This table is based on the National Income Accounts to permit comparison between levels of
government, and differs slightly from the measure of aid used in other parts of this analysis. For a
more complete discussion of different measures of aid, see the section on definitions in this analysis.
STATE AND LOCAL FISCAL PROBLEMS

State and local governments have been faced with critical financial
problems in recent years. An imbalance has existed between the need
for higher levels of public services and funds available to finance these
services. State and local government receipts from their own sources
(excluding Federal grants) rose from a war-time low of 4.8% of GNP
in 1944 to 11% in 1971, but the need for expanded services and the
cost of providing these services rose even faster.
State and local governments rely principally on consumer and
property taxes, which have not grown at a rate sufficient to keep up
with the growth in demand for public services. Thus, States have been
forced to raise tax rates frequently—instituting new taxes or raising
tax rates in more than 514 instances since 1959, and 64 instances in
1971 alone. These latter actions will augment tax receipts b \ about $5
billion. This is significantly larger than the $1.3 billion and $2.5
billion added to State tax receipts in 1965 and 1967, and the record
$4 billion in 1969. It was only through drastic budget cutting, and tax
increases, that State and local governments achieved an estimated
surplus of $25 million in 1971.
The response of the Federal Government to the fiscal problems of
State and local governments has been to increase Federal grants from
71 programs and $2 billion in 1950 to 530 programs and $24 billion in
1970. The results have been that while Federal grants have paid for
several services previously paid for from State and local revenues,
such as a highway network, this rapid growth has been accompanied
by many problems, including:
• Overlapping programs at the State and local level;
• Program delays and uncertainty caused by unnecessarily detailed
and costly application requirements;
• Unnecessary limitations on the authority and responsibilities of
Governors, mayors, county executives, and city managers;
• The creation of competitive State and local governmental institutions; and
• Rigid funding arrangements which are unable to adjust to changes
in priorities over time, such as matching fund requirements.

480-700 O—72

242

THE BUDGET FOR FISCAL YEAR

1973

While Federal grant programs were aimed at problems deemed by
their sponsors to be of national interest, they often ignored their
impact on the strength and ability of the State and local governments
to carry out their own particular responsibilities.
REFORM OF THE GRANT SYSTEM

In recognition of these problems, the administration has proposed
basic reforms in Federal Government programs an,d institutions, and
in the structure of Federal aid to State and local governments. These
changes embrace three basic concepts: sorting out appropriate governmental roles, improving the basic programs, and modernizing
management.
Basic reform is being undertaken in such major functional areas as
welfare, pollution control, unemployment insurance, and mass transit.
The proposed welfare reform should help to alleviate the financial
pressures on State and local governments after it is enacted and
should provide substantial savings in the long run. It will also be
a major step toward reducing poverty in America. An Environmental Financing Authority has been proposed which will assist
financing expanded pollution control facilities for those communities
which are unable to borrow for this purpose at reasonable interest
rates. The administration has also designed the first fundamental
reform of the unemployment compensation system since the 1930's.
A long-needed overhaul of management processes in Federal aid
and other programs is being carried out. The regional boundaries of the
major domestic departments of the Federal Government have been
modified so that their headquarter cities and the regions that they
cover conform. This facilitates cooperation between Federal agencies
and makes it easier for grant recipients since the agencies' regional
offices are in the same cities. A new Office of Intergovernmental
Relations was created in the Office of the Vice President. In order
to foster better decisionmaking on the whole range of domestic
programs, the administration has established a Domestic Council,
which provides a forum for considering all of the various Federal
activities and functions that affect the States and their subdivisions,
and reorganized the Bureau of the Budget into the Office of Management and Budget.
Government operations are being simplified and decentralized in
several ways—through revised grant program procedures, through
a proposed overhaul of the manpower training programs, and, most
importantly, through the introduction of revenue sharing. In the
grant area, the administration has also recommended legislation
that would:
• Authorize the President to consolidate closely related programs;
• Simplify funding of those grant programs that are closely related
and in the same agency;
• Authorize joint funding of projects across agency lines; and
• Offer assistance to Governors and mayors in improving their
policy planning and implementation capacity in social welfare
programs.

SPECIAL ANALYSES

243

REVENUE SHARING

One of the most innovative and far-reaching reforms of the federal
system is the proposal for a program of sharing Federal revenue with
State and local governments. In describing the revenue sharing program, the President stated: "The time has come for a new partnership
between the Federal Government and the States and localities—a
partnership in which we entrust the States and localities with a larger
share of the Nation's responsibilities, and in which we share
our Federal revenues with them so that they can meet those
responsibilities."
The major characteristics of the administration's revenue sharing
plan are:
• A new program of General Revenue Sharing with State and
local governments without any program or project restrictions,
with the amount granted to grow each year as the personal
income tax base of the Federal Government grows;
• Six special revenue sharing programs for State and local governments in special broadly defined areas of national concern,
without any requirement of matching funds or Federal approval
of project plans; and
• Maintenance of those existing grant programs for which there is a
clear, continuing national requirement.
The major features of the General Revenue Sharing proposal are:
• Predictability.—The amounts to be shared will be based on
1.3% of the personal income tax base.
• Expanding scale.—Because of the natural growth in the base,
the absolute amounts are proposed to rise from a budget authority
of $5.3 billion and outlays of $5 billion in 1973 to an estimated $10
billion in outlays for 1980.
• Unconditional.—Revenue sharing funds will not be tied to specific programs because the funds are for use by State and local
governments in accordance with their program priorities. The
allocation of funds will be based on formulas prescribed by law
and linked to data prepared on a regular basis by the Census
Bureau. No costly, time-consuming applications will be required.
• Distribution by need and effort.—The amount to be shared with any
given State will be based on State population, adjusted for combined State and local revenue effort. States with greater relative
revenue effort will get more than they would otherwise.
• Guaranteed funds for cities and counties.—To place a minimum
guarantee on the share of funds that cities, counties, and townships will receive, the administration's bill stipulates that
States must "pass through" to each such local jurisdiction its
appropriate share.
Special revenue sharing will consist of six broad-purpose programs
providing State and local governments with funds for use in the functional area for which they are designated—transportation, education,
urban and rural community development, manpower training, and

244

THE BUDGET FOR FISCAL YEAR 19 73

law enforcement. The proposed effective dates for two of these programs—education and urban community development—is July 1,
1972. These funds will be distributed on the basis of formulas appropriate for each broad program area. Funds for special revenue sharing
will come from the conversion of a set of narrower categorical grants
into the new program, and from additional funds requested by the
President.
Characteristically, the programs recommended for conversion to
special revenue sharing deal with high priority national problems
which require State and local solutions. In these areas, State and local
governments are in a better position to design and implement responsive and effective programs. Eliminating Federal administration of
these programs will relieve State and local governments of many
Federal requirements—including the elimination of matching requirements on the categorical grants converted to special revenue sharing.
Federal civil rights requirements will be retained.
Table P-3. REVENUE SHARING, BUDGET AUTHORITY, FIRST FULL YEAR
Description

Billions

General Revenue Sharing
Special revenue sharing:
Urban community development
Rural community development
Education
Manpower training
Law enforcement
Transportation

$5. 3
2.3
1.1
3.2
2.0
.9
2.8

Total
SIGNIFICANT

17.6
FEATURES

OF FEDERAL

AID

1973

Federal aid expenditures for grants and shared revenues will grow
from $29.8 billion in 1971 to $43.5 billion in 1973. In addition, there
will be an estimated $1.9 billion in loan disbursements resulting in
$309 million of net lending to State and local governments. This does
not include the lending activity that is being encouraged in the nonFederal sector with Federal interest subsidies and guarantees.
In total, Federal aid programs provided about 18% of State and
local revenues in 1971, and will provide an even greater percentage in
1972 and 1973. The largest portion of direct Federal aid is administered by the Department of Health, Education, and Welfare. Due to
extreme fiscal pressures on State and local governments, in 1972 the
department will make an advance payment to these governments of
about $1 billion for welfare payments and services.
Apart from direct Federal aid, many other Federal activities that
are not included in this analysis affect the finances of State and local
governments. For example, the exemption of interest on State and
local bonds from Federal income taxes reduced interest costs to State
and local governments by $2.0 billion in 1971. This exemption results in about $3.0 billion in "lost" revenues to the U.S. Treasury.
Similarly, since taxpayers may deduct State and local taxes from
Federal taxable income, a portion of State and local taxes is offset by a
reduction in the taxpayers' Federal liability. In 1971, the value of this

SPECIAL ANALYSES

245

Table P-4. FEDERAL-AID EXPENDITURES BY AGENCY (in millions of dollars)
Agency

Funds Appropriated to the President
Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Environmental Protection Agency
Veterans Administration
District of Columbia
Other
Total outlays for Federal aid

1971

1972

1973

1,468.2
3,198.3
184.9
34.2
6.9
14,650.9
2,140.2
296.7
195.8
1,866.1
5.4
4,882.5
143.2
520.0
19.0
139.0
94.0

1,286.4
3,916.0
174.6
36.2
5.0
18,511.6
2,573.7
405.8
361.5
2,918.8
5.7
5,143.5
2,409.9
964.6
21.2
180.0
165.0

1,064.3
4,223.2
206.1
45.6
3.0
17,665.4
3,502. 4
441.8
501.7
3,465.4
7.8
5,524.3
5,169.8
1,178.7
24.4
202.0
253.0

29,844.0 39,079.8 43,478.9

Note.— Detail may not add to totals due to rounding.

deduction in terms of tax savings to individuals was approximately
$8.5 billion. In addition, in 1971 the Federal Government donated an
estimated $405 million in excess property to State and local governments for civil defense, public health, and educational purposes. The
Federal Government has also donated Federal land for State and local
recreation uses, such as for parks and beaches. It is estimated that
between 1971 and 1973 the Federal Government will have donated
40,000 acres, worth over $56 million, to State and local governments.
Table P-5. FEDERAL-AID OUTLAYS IN RELATION TO TOTAL FEDERAL
OUTLAYS AND TO STATE-LOCAL REVENUE
Federal aid
As a percent of—

Fiscal year
Amount
(millions)

1959 .
1960
1961
1962
1963 .
1964 .
1965.
1966
1967 _
1968 .
1969..
. _
1970.. . . . .

197L.
._.
1972 estimate __
1973 estimate..
1
2

$6,669
7,040
7,112
7,893
8,634
10,141
10,904
12,960
15,240
18,599
20,255
23,954
29,844
39,080
43,479

Total
Federal
outlays

7.2
7.6
7.3
7.4
7.8
8.6
9.2
9.7
9.6
10.4
11.0
12.2
14.1
16.5
17.6

Excluding outlays for defense, space, and international programs.
"Governmental Finances in 1969-70," Bureau of the Census.

Domestic
Federal
outlays 1

15.9
16.4
15.4
15.8
16.5
17.9
18.4
19.2
19.5
20.9
21.3
21.9
23.5
25.8
27.0

State-local
revenue 2

12.3
11.6
11.0
11.3
11.6
12.4
12.4
13.2
14.2
15.8
15.3
15.9
17.9
21.1
21.1

246

THE BUDGET FOR FISCAL YEAR 19 73
THE IMPACT OF FEDERAL AID

The rapid increase in Federal aid has become an increasingly important factor in the finances of all levels of government. Federal aid
has risen from 7.8% of total Federal outlays in 1963 to an estimated
17.6% in 1973. In terms of civilian domestic programs, 27.0% of
Federal outlays will take the form of aids to State and local governments in 1973. Because State and local revenues from their own
sources have increased at a much more rapid rate than Federal
outlays, the impact of the relative increase in Federal aid has not
been quite as marked on their budgets as it has been on the Federal
budget. Nevertheless, Federal aid has risen as a proportion of State
and local revenues, from 12% in 1960 to an estimated 18% in 1971.
The pattern of State and local spending has been influenced by those
Federal grants that require the recipient government to match Federal aid funds with its own resources. In 1966, State and local governments provided an estimated $5.5 billion of their own funds to match
the $13 billion of Federal grants spent in that year. In the last few
years, State and local government matching funds have accounted for
about 10% of general expenditures out of their own revenue sources.
This could amount to an estimated $11 to $13 billion in 1971, and an
estimated $13 to $16 billion in 1973. The elimination of matching
requirements for the programs absorbed by special revenue sharing
will save State and local governments about $4.2 billion and allow
them greater freedom in the use of their resources.
In 1970, the distribution of Federal aids on a regional basis ranged
from a high of more than $5 billion in the Southeast and Mideast,
to a low of $0.77 billion in the Rocky Mountain area. On a per capita
basis, however, the Rocky Mountain area ranked highest with grant
payments of $154 per capita, while the Great Lakes with $82 and
Plains region with $104 per capita were lowest. Population density and
per capita income are the two major factors that accounted for this
wide variation. Generally, the level of per capita aid is inversely related to population density primarily because of aid for highway construction and shared revenues to thinly populated Western States.
The population densit}^ of the Rocky Mountain area is the lowest of
the regions, the holdings of Federal lands are extensive and per capita
aid is the highest. At the other end of the scale, per capita aid is lower
in the regions where population density is greatest, and Federal land
holdings are small.

SPECIAL ANALYSES

247

Table P-6. REGIONAL DISTRIBUTION OF FEDERAL AID, FISCAL 1970

Region

New England
Mideast
Great Lakes
Plains
Southeast
Southwest
Rocky Mountain
Far West
United States

Total
(in millions
of dollars)

Per capita

Percent of
State and
local government general
revenue

1,406

118.65

18.4

5,180
3,329
1,707
5,299
2,013
770
4,013

122.22
82.70
104.55
120.96
121.68
153.92
148.55

16.7
13.5
17.1
23.8
22.1
23.1
17.3

117.89

18.6

23,954

Sources: "Federal Aid to States—Fiscal year 1970," Department of the Treasury, and "Governmental
Finances in 1969—70." Bureau of the Census. These reports provide additional information concerning
State distribution of Federal grants.

Per capita aid is also inversely related to per capita income. There
are two reasons for this relationship. Some grant programs require
lower matching ratios for the relatively poorer States. Other programs
such as those for public assistance and elementary and secondary
education, are designed as aids to the disadvantaged and tend to flow
to States having proportionately more individuals with lower incomes.
This reflects the growing impact of fiscal equalization provisions
characteristic of a number of the more recent grant programs. For a
State-by-State, program-by-program accounting of Federal grants,
see the forthcoming Treasury Department publication "Federal Aid
to States—Fiscal Year 1971".
Within the rising total of Federal assistance to State and local
governments, another important qualitative shift is taking place—the
increasing emphasis on urban areas. Between 1960 and 1970, the
major population growth in America occurred in the metropolitan
complexes. Today, about 70% of the population lives in 268 metropolitan areas. In 1973, approximately $31.5 billion of the $43.5 billion
of total Federal grants will be spent in, or directly affect, standard
metropolitan statistical areas (SMSA's). This is an increase of about
$27 billion, or nearly 700% over the amount of aid provided to these
urban areas in 1961, and $17.4 billion in the last 4 years. The major
increases in Federal grants for urban areas occurred in law enforcement and public assistance.
SMSA areas include the bulk of that urban population which places
heavy pressure on public service requirements—areas where population growth and population density are high. The amounts shown in
table P-7 are estimates based on the best information available.

248

THE BUDGET FOR FISCAL YEAR 1973

Table P-7. FEDERAL-AID OUTLAYS IN SMSA AREAS (in millions of dollars)
Function and program

National defense
Agriculture and rural development:
Donation of surplus commodities
Other
Natural resources and environment:
Environmental protection
Other
Commerce and transportation:
Economic development
Highways
Airports
.
Urban mass transportation
Other
Community development and housing:
Urban community development revenue sharing
Community action and related programs
Urban renewal
Public housing
Water and sewer facilities
Model Cities
Other
Education and manpower:
Education revenue sharing
Head Start and Follow Through
Elementary and secondary
Higher education
Vocational education
Employment security
_
Emergency employment assistance
Manpower activities
Other
Health: 2
Health services and planning
Health services delivery
Mental health
Preventive health services
Medical assistance
Health manpower
Other
_°_
Income security:
Vocational rehabilitation
Public assistance.
Child nutrition, special milk and food stamps
Other
General government:
Law enforcement
National Capital region
Other
Other functions
General Revenue Sharing
Total, aids to urban areas

1961
actual

1964
actual

1969
actual

1973
estimate

128
27

231
40

313
104

446
115

24
30

8
10

79
101

884
200

1,398
36

158
1,948
36

152
2,842
160
351

104
2,225
83
122
5

450
531
750
770
98
590
567

106
105

559
136
36

432
786
257
52
8
75

222
5
28
303

264
14
29
344

256
1,262
210
179
449

64
7

530
77

48
47
4

66
82
8

109
219
77

140
4

1,731
107
54

37
1,170
131
3

61
1,450
168
16

247
3,022
482
148

521
5,985
1,983
77

38
9
2

17
85
27

440
202
216
14
3,500

3,893

5,588

l
77
270
1,520
81
480
745
1,082
1,115
879

252
437
254
35
2,104
256

14,045

31,468

1
Tentative estimate; excludes outlays in 1973 from programs planned for conversion to special
revenues
haring.
2
See
footnote 5 to table P-9.
3
Tentative estimated impact calculated on the basis of population includes both direct passthrough and discretionary State allocations.

SPECIAL ANALYSES

249

TYPES OF GRANTS

Federal aid to State and local governments, as reflected in budget
outlays, take several forms: grants; shared revenues, usually counted
as grants; and loans. Shared revenues (not to be confused with the
President's revenue sharing programs) are payments of a share of
Federal revenues from a particular source—such as receipts from
timber sales—which are paid to State and local governments. These
payments are frequently in lieu of taxes which would be paid if the
Federal land were privately held. Grants are nonrepayable resources
provided by the Federal Government in support of a State or local
program of service to the public.
In practice, there are two types of grants—those with "strings"
attached, or conditional grants, and those with "no strings" attached,
or unconditional grants. Only the former type is presently in use in the
United States, but the President's revenue sharing proposal is designed
to change this.
Conditional grants may be divided into project grants and formula
grants. Project grants are a relatively recent development in the
United States and are designed to meet specific problems. That is, a
project grant is given for a specific program need, such as demonstration grants for education. The recipient must take the initiative in
applying for the grant, and it is up to the discretion of the granting
agency whether or not the particular project merits funding. Project
grants accounted for an estimated $9.4 billion in 1969 and $11.7
billion in 1970 of total Federal aid.
In contrast, formula grants are allocated to all eligible jurisdictions
for selected functions on the basis of some formula. The formula
criteria may include the fiscal capacity of the recipient government,
total or relevant population in the area, such as the number of poor
people, or both. Hospital construction grants, and special revenue
sharing programs are examples of formula grants.
Matching requirements on Federal grants specify the portion of the
project or program cost that the recipient is required to provide in
order to receive the Federal grant. Matching requirements vary widely
depending on the program. For some programs, the matching rates
are uniform for recipient governments. In other cases, differential
rates have been established so that governments with lower fiscal
capacity are required to meet lower matching requirements than those
with higher fiscal capacity.
Revenue sharing, a third type of grant, has been discussed in another
part of this analysis.
Three different statistical series showing Federal aid to State and
local governments are produced by the Federal Government. Table
P-8 shows the principal differences between these three series over a
6-year period.
As the table indicates, there is a growing divergence between the
series shown in this analysis and the other series. The principal cause
of this divergence over these years was the treatment of payments
by the Office of Economic Opportunity, research payments, and the
distribution of surplus agricultural commodities. Although these
payments will be relatively stable in the years 1970-72, the continued
growth of food stamps will continue to widen this gap.

250

THE BUDGET FOR FISCAL YEAR

1973

Table P-8. THREE MEASURES OF FEDERAL AID TO STATE AND LOCAL
GOVERNMENTS 1965-1970 (in billions of dollars)
1965

1966

1967

1968

1969

1970

Budget (Special Analysis P)
Principal exclusions:
Agricultural commodities
Food stamps
Certain OEO payments
Add payments for research
All other (net)

10.9

13.0

15.2

18.6

20.3

24.0

—.5
(i)
(»)
.9
-.2

—.3
-.1
-.2
.9
-.2

—.3
-.1
-.5
1.0
-.3

—.5
-.2
-.8
1.1
-.1

—.7
-.2
-.8
1.1
-.3

—.5
-.6
-.8
1.2
(*)

Federal payments (Census)
Exclude low-rent public housing
All other (net)

11.1
—.2
(i)

13.1
—.2
-.2

15.0
—.2
0)

18.1
—.3
-.1

19.4
—.3
.3

23.3
—.4
-.4

Grants-in-aid (National Income Accounts) __ _

10.9

12.7

14.8

17.8

19.4

22.5

1
Less than $50 million.
(See: Special Analysis A.)

The series used in this analysis is focused on showing Federal aid
for programs either operated directly by State or local governments
or coordinated through or approved by State agencies. It includes
outlays whether cash payments or in-kind, and includes aid to Governments of Puerto Rico and the Virgin Islands. The basic focus is on
programs aimed to serve the public but not directly administered
by the Federal Government. Therefore, it excludes payments for
purchases of services to the Federal Government, such as research
conducted by public universities.
Both the census and the national income accounts (NIA) definitions
of grants are designed to match their other definitions for data encompassing the entire economy. They exclude payments to private,
nonprofit agencies even if coordinated under a State plan, since this
money is reported in the private sector. The principal example of
this is OEO, where a considerable amount of money the budget
includes as grants goes to private nonprofit entities.
Both the census and the NIA definitions exclude payments in-kind
from grants—such as commodities donated under the school lunch
program—and also exclude payments to territories or possessions.
However, they focus on cash payments, so payments for research
conducted by public universities are included in their data, as the
universities are included as part of the State/local sector in their
various tabulations. These payments are not considered grants in
this analysis.
There are various other—relatively minor—differences between
the three series. The one major outlay included in the budget and
census series but excluded from the NIA series is payments for
low-rent public housing, which the NIA counts as purchases by the
Federal Government rather than grants.
Further information on the NIA series may be found in Special
Analysis A.

SPECIAL ANALYSES

251

Table P-9. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS l
(expenditures in millions of dollars)
Agency and program

National defense:
Department of Defense—Military:
Civil defense shelters and financial assistance
Construction of Army National Guard centers
Atomic Energy Commission

Functional
code

051
051
058

37.3
8.3
4.7

41.7

40.9

50.3

5.4

5.7

7.1
.7

5.4

5.7

7.8

387.4
35.9
.1
3.5
11.7
28.9
133.6
1.3
67.3

638.2
53.2
2.5
4.0
15.7
30.6
149.7
1.9
1.4
74.8

714.9
48.8
3.0
3.0
19.7
32.6
154.6
2.9
1.4
79.9

...

659.7

972.0

1,060.9

401

73.7

87.3

96.2

402

20.8

27.2

25.7

402
402

73.2
.7

57.5
.8

86.8
.8

401

4.2

2.2

401

2.7

2.8

3.0

402
401
403
405

85.1
*
44.9

90.7
.8
.2
62.3

97.9
.9
.3
62.1

405
405
401

62.0
1.3
8.3

110.0
6.2
8.5

129.9
7.7
8.7

Total, international affairs and finance
Agriculture and rural development:
Department of Agriculture:
Commodity Credit Corporation and Consumer and
Marketing Service: Removal of surplus agricultural
commodities and value of commodities donated _ _ _ 351
Rural water and waste disposal facilities
352
Mutual and self-help housing
352
Rural housing for domestic farm labor
352
Resource conservation and development
354
Consumer protective programs
355
Cooperative agricultural extension service
355
Water Bank Act Program
354
Agricultural Research Service
355
Cooperative State Research Service
355

See footnotes at end of table.

1973
estimate

29.9
6.2
4.8

International affairs and finance:
Department of State:
East-West Cultural and Technical Interchange
Center
153
International Center, Washington, D.C
151

Natural resources:
Department of Agriculture:
Watershed protection and flood prevention
Grants for forest protection, utilization, and basic
scientific research
National forest and grassland funds: payments to
States and counties (shared revenue)
Assistance to States for tree planting
Department of Defense—Civil: Corps of Engineers:
Flood control
Payments to States, Flood Control Act of 1954
(shared revenue)
Department of the Interior:
Payments to States and counties (shared revenue)..
Bureau of Reclamation
Mine drainage and solid waste disposal
Fish and wildlife restoration and management
Outdoor recreational areas (Land and Water Conservation Fund)
Preservation of historic properties
Office of Water Resources Research

1972
estimate

25.7
8.4
7.6

Total, national defense

Total, agriculture and rural development

1971
actual

THE BUDGET FOR FISCAL YEAR 1 9 7 3

252

1
Table P-9. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS —Con.

(expenditures in millions of dollars)
Agency and program

Functional
code

1971
actual

1972
estimate

1973
estimate

Natural resources—Continued

Federal Power Commission: Payments to States (shared
revenue)
Tennessee Valley Authority: Payments in lieu of taxes
(shared revenue)
.
Water Resources Council
Environmental Protection Agency
Total, natural resources

401
401
401
401

20.0
3.5
520.0

25.7
3.6
964.6

29.0
3.4
1,179.0

___

920.4

1,450.4

1,731.7

507
507

.4
229.3

1.7
279.4

285.6

502
507
506
506
506
507
507

.5
2.0

Commerce and transportation:

Funds appropriated to the President:
Public works acceleration
__
Appalachian development
Department of Commerce:
State marine schools
Regional development
Promotion of tourism
National Bureau of Standards
National Oceanic and Atmospheric Administration__
Economic development assistance
Department of the Interior: Resources management.__
Department of Transportation:
Forest and public lands highways
__
Highway beautification
Highway safety
Federal-aid highways (trust fund)
Urban mass transportation facilities
Federal aid for airports and airways 2
Other
Total, commerce and transportation

.5
20.4
1.4

2.2
4.5
175.6
2.0

6.6
.6
.5
4.5
166.5
2.6

4.5
183.8
2.3

503
503
503
503
503
501
503

22.4
9.5
68.9
4,562.8
154.1
61.5
3.6

32.8
28.9
85.0
4,595.5
261.3
131.0
7.4

37.4
38.7
84.0
4,801.3
352.7
200.0
4.0

___

5,299.3

5,604.8

6,016.6

551

714.7

655.9

656.9

551
551
551
551
551
551
551
551
555
552

320.3
1,025.9
38.8

439.2
1,000.0
69.4
2.0
130.0
35.0
49.5
3.0
844.9

622.0
1,000.0
79.9

Community development and housing:

Funds appropriated to the President:
Office of Economic Opportunity: Community Action
programs
Department of Housing and Urban Development:
Model city grants
Urban renewal
Open space land and urban beautification
New community assistance
Grants for basic water and sewer facilities
Grants for neighborhood facilities
Urban planning grants
Community development training programs
Low-rent public housing programs
Urban community development revenue sharing
Total, community development and housing
Seefo

nd of table.

120.6
22.5
49.5

2.8
558.6

3.7
150.0
35.0
91.5

3.0
1,026.4

3 490.0
2,853.8

3,228.9

4,158.4

253

SPECIAL ANALYSES
Table P-9. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS

—Con.

(expenditures in millions of dollars)
Agency and program

Functional
code

1971
actual

1972
estimate

1973
estimate

Education and manpower:

Funds appropriated to the President: Office of Economic Opportunity 4
Department of Health, Education, and Welfare:
Elementary and secondary education
Education revenue sharing
Assistance to schools in federally affected areas
Education of the handicapped
Civil rights education
Higher education activities
(Portion to private institutions)
Vocational education
Libraries and community services
Educational renewal
National Foundation for Higher Education
Work incentive activities
Emergency school assistance
Department of Labor:
Manpower development and training activities
Grants to States for administration of employment
security programs (trust fund)
Emergency employment assistance
Department of Interior: Bureau of Indian Affairs:
Education and welfare services
National Foundation on the Arts and the Humanities..
Corporation for Public Broadcasting
Equal Employment Opportunities Commission
Other
Total, education and manpower
Health:"
Mental health:
Development of health resources
Prevention and control of health problems
Health services planning and development
(Portion to private, nonprofit institutions)
Health services delivery
Preventive health services
Health manpower
Medical assistance
Total, health
Income security:
Funds appropriated to the President: Disaster relief. _
Department of Health, Education, and Welfare:
Income maintenance payments
Social services for welfare recipients
Vocational rehabilitation
_
Department of Agriculture:
Food stamp
Child nutrition program and special milk
Social Security Administration:
Special benefits for miners
Total, income security
See footnotes at end of table.

601

401.5

202.7

601
604
601
601
601
602
602
603
605
605
602
607
601

1,797.9

1,872.4

25.1

122.8
51.4

473.1
40.2
9.1
223.2
(53.3)
507.8
77.4
128.0
1.0
186.7
89.6

1,868.1
M10.0
432.7
37.2
8.8
125.0
(27.3)
545.0
90.8
143.1
30.0
261.6
313.4

607

1,107.1

1,428.8

1,495.8

607
607

759.0

831.7
650.8

887.0
1,082.7

601
608
605
609
___

21.4
4.9
23.0
1.1
1.5

22.7
6.4
35.0
1.3
9.6

24.4
6.9
45.0
2.5
2.7

...

5,721.9

6,797.5

7,537.8

651
652
651
___
652
653
651
652

105.4
60.1
341.5
(156.2)
330.1
5.1
262.5
3,362.3

115.0
109.4
317.3
(133.2)
469.1
7.1
253.2
4,400.9

110.4
211.1
327.9
(107.9)
496.6
49.4
298.4
3,432.5

...

4,467.0

5,672.0

4,926.3

703

122.3

146.8

96.6

702
703
703

5,527.5
743.9
507.5

7,196.9
1,439.5
587.6

6,884.9
1,192.3
694.3

702
702

1.536.5
831.7

2,022.1
749.1

2,274.8
679.1

701

1.7

_..

9,270.3

492.6
29.0
6.9
308.7
(86.3)
409.9
71.4
112.0

12,143.7 11,822.0

254

THE BUDGET FOR FISCAL YEAR

1973

Table P-9. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS i—Con.
(expenditures in millions of dollars)
Agency and program

Functional
code

Veterans benefits and services:
Veterans Administration:
Aid to State homes
Grants for construction of State nursing homes
Administrative expenses

804
804
804

Total, veterans benefits and services

___

General government:
Department of the Interior:
Grants to territories
Internal revenue collections, Virgin Islands (shared
revenue)
Department of Justice: Law enforcement assistance.__
Treasury Department: Tax collections for Puerto Rico
(shared revenue)____
_.._
National Capital region:
Federal payment to District of Columbia
Washington Metropolitan Transit Agency
Other
Total, general government
General revenue sharing
Total, grants and shared revenues

1971
actual

15.5
2.9
.6
19.0

1972
estimate

16.6
4.0
.6
21.2

1973
estimate

18.5
5.3
.6
24.4

909

59.5

85.9

88.8

909
908

13.2
195.8

15.6
361.9

16.7
501.7

909

84.9

90.0

95.0

909
___
___

139.0
34.8
58.3

180.0
89.4
69.9

202.0
163.7
74.8

___

585.5

892.8

1,142.7

940
___

29,844.0

2,250.0

5,000.0

39,079.8

43,478.9

*Less than $100 thousand.
Grants-in-aid unless otherwise specified. Excludes loans which are shown separately in table P-IO.
Federal funds in 1970; trust funds in 1971 and 1972.
Amounts added to categorical programs folded into special revenue sharing.
Manpower programs transferred to Labor Department.
Health services planning and development incorporates health services research and development, regional medical programs, and medical facilities construction. Health services delivery incorporates comprehensive health planning and services, maternal and child health, and patient
care and special health services.
1
2
3
4
5

SPECIAL ANALYSES

255

Table P-10. FEDERAL LOANS TO STATE AND LOCAL GOVERNMENTS
Agency and program

Net outlays

Disbursements
1971
actual

1972

1973

1971
actual

1972

1973

Natural resources:

Department of the Interior: Reclamation loans.__ __
Total, natural resources

6.5

15.7

17.0

5.0

14.0

15.2

6.5

15.7

17.0

5.0

14.0

15.2

Commerce and transportation:

Department of Commerce: Economic
development assistance. _
Department of Transportation:
Mass transportation facilities
Right-of-way revolving fund

16.6

20.7

16.6

13.2

15.7

12.3

32.9

51.0

55.0

-.2
32.9

-.2
51.0

-.2
55.0

Total commerce and transportation... _

49.5

71.7

71.6

45.9

66.5

67.1

710.2

825.0

900.0

-.1

10.0

1.5
576.4

613.6

656.8

1.5
10.1

-1.0
39.0

-7.2
35.1

1,438.6 1,556.8

11.5

48.0

37.9

Community development and housing:

Department of Housing and Urban
Development:
Low-rent public housing fund. _ _
Housing management: Revolving
fund _
Community developmentTotal, community development
and housing

1,288.1

Education and manpower:

Department of Health, Education,
and Welfare: Higher education
activities
._
Department of Housing and Urban
Development: College housing

17.7

11.6

4.1

15.5

9.8

4.5

79.7

55.8

49.5

48.3

23.2

15.9

Total, education and manpower.

97.4

67.4

53.6

63.8

32.0

20.4

-.4

General government:

Department of Defense—Civil
Department of the Interior: Administration of territories
General Services Administration:
General activities. _ _ _ . .
District of Columbia _ _ _ _

2.5

7.0

5.0

2.2

6.5

4.3

91.9

217.8

-8.3
57.5

-1.1
167.3

-1.2
166.0

Total, general government

94.4

224.8

222.8

51.0

172.3

168.7

1,535.9 1,818.2 1,921.8

177.2

332.8

309.3

Total

SPECIAL ANALYSIS Q
FEDERAL PUBLIC WORKS ACTIVITIES

Over the years there has been an interest in identifying the trend
and characteristics of public works programs included in the President's budget. This analysis brings together information on budget
authority and outlays for direct construction and for grants and loans
to assist State and local construction of public works. Some additional
information is provided on grants and loans to aid construction by
private cooperatives and nonprofit groups. Not included are Federal
activities affecting the level of private construction, such as Federal
procurement, leases, loans, loan guarantees, interest subsidies, and
tax concessions.
SUMMARY

Federal outlays for construction of public works are expected to be
$13.7 billion in "l 973, an increase of 5% over 1972, and 64% higher
than the level 10 years earlier. For the civil works programs, outlays
will increase $832 million over 1972. The major increases are $211
million for highway grants, $222 million for water resources projects,
$192 million for sewage treatment facilities, and $165 million for mass
transit facilities, including the Washington Metropolitan Area Transit
Authority. Outlays for national defense public works are estimated at
$1,595 million in 1973, $176 million below the 1972 level. Summary
information on Federal outlays for construction of public works is
provided in the following table Q-l and the accompanying chart.
Table Q-l. FEDERAL O U T L A Y S FOR PUBLIC W O R K S , 1964-73
(in millions of dollars)
Fiscal year

1964
1965
1966
1967
1968
1969
1970
1971_.
1972 estimate _
1973 estimate

Total
Federal
outlays

8,346
8,886
9,428
9,572
9,520
9,683
9,791
10,632
13,021
13,677

Direct Federal construction
Total

4,019
4,152
4,693
4,483
3,972
3,932
3,740
4,001
5,428
5,493

Civil

2,691
2,800
3,014
2,752
2,460
2,186
2,200
2,617
3,668
3,912

Defense

,378
,352
,679
,731
,513
,746
,540
,384
,761
,581

Grants

4,186
4,567
4,446
4,730
5,264
5,479
5,796
6,429
7,259
7,871

Net
lending

142
167
289

359
284
111
255
202
333
312

Note.— In this and the following tables, nonconstruction costs are excluded; proposed legislation
is included for the years 1972 and 1973. Details may not add because of rounding. Net lending in
years prior to 1967 does not reflect those repayments deposited to miscellaneous receipts, which
for 1967 and later years are netted against disbursements.

256

257

SPECIAL ANALYSES

Federal Expenditures for Public Works
S Billions

7.9

8.07.3

_
1 Defense K ^ f l
Direct <

7.0-

( Civil I
Grants

I
6,4

•

6.0-

5.0-

3.9

4.0-

3.7

3.02.6

2.01.4

1.00

1964

1965

Fiscal Years

1966

1967 1968 1969 1970 1971

1972 1973
Estimate

Total budget authority proposed for public works in 1973 will be
$14.5 billion, slightly below the estimate for 1972. However, there
are significant shifts among programs within the total.
Budget authority for construction grants will decline from $9.6
billion in 1972 to $8.7 billion in 1973, in part because:
• Increased use will be made of subsidies instead of matching
grants for schools and hospitals; and
• Balances of prior year appropriations will enable the Department
of Housing and Urban Development to continue the grant program for water and sewer lines in 1973 at the 1972 level without
additional appropriations.
Budget authority requested for direct civil works will decline by
a net amount of $176 million to $3 billion in 1973, primarily because
of the following factors:
• Increases for water resource developments of the Corps of Engineers and Bureau of Reclamation will be more than offset by the
decline in new authority needed for Federal Aviation Administration facilities which will be financed in part from user charges.
• Under pending legislation, the General Services Administration
will shift from a direct construction program to use of privately
financed construction, permitting a substantial reduction in the
$850 million backlog of authorized projects, while reducing the
need for Federal funds in 1973.

http://fraser.stlouisfed.org/
480-700
O—75
Federal Reserve
Bank of
St. Louis

258

THE BUDGET FOR FISCAL YEAR 19 73

Budget authority proposed for direct construction of military and
atomic energy facilities will increase by $850 million to $2.6 billion
in 1973. This increase reflects:
• Added requirements for the Safeguard missile defense system,
pollution abatement facilities at Federal installations, and
housing and other facilities for the all-volunteer armed forces;
• Undertaking of some military construction projects deferred
during the Vietnam war; and
• Construction cost increases.
These increases are partly offset by the decrease in the construction
of facilities related to the Vietnam war.
FEDERAL PUBLIC WORKS IN PERSPECTIVE

Federal public works programs have a significant impact on the
general level of economic activity and are of particular concern to
the construction industry and to the geographical locations where
structures are built. Public and private construction together account
for an important part of the gross national product and the Nation's
employment.
In 1971, construction represented about 10% of the gross national
product. According to Department of Commerce estimates, the value
of total public and private new construction put in place in the calendar
year 1971 was $109 billion, a 16% increase over the $94 billion level
in 1970. Private construction alone increased nearly 20%, to $79
billion from $66 billion in 1970. Most of this increase is for residential
construction, which expanded sharply beginning late in 1970.
Publicly owned construction also increased in 1971, but at a slower
rate. The Department of Commerce estimates that public construction put in place will total $30 billion in 1971, a 7.5% increase from
the $28 billion in 1970. Within the public sector, about 85% of the
construction is built by State and local governments (including
Federal aid) and the remaining 15% is built by the Federal
Government.
From 3 to 3.5 million workers have been employed by the contract
construction industry in recent years. This industry builds most new
private and public structures, and also helps to maintain and repair
existing structures. Payrolls of the contract construction industry
approximated $34 billion in 1970, compared with $25 billion in 1966
and $21 billion in 1964.
In addition to the workers employed at the construction site, offsite
employment is provided through the manufacturing industries that
supply materials and equipment to the construction site. Employment in these supplying industries is affected by changes in the loca-

SPECIAL ANALYSES

259

tion, type, and volume of construction activity. The number of such
industries is large, including such basic industries as cement, lumber,
glass, brick, tile, steel, copper, aluminum, and such manufactures as
plumbing fixtures, heating and cooling systems, electrical equipment
and fixtures, and paints.
Construction costs have risen at a rapid rate for the past 10 years,
but have increased even more sharply in recent years. The Department of Commerce composite construction cost index (1967 = 100)
rose to 125 in January 1971, compared with 118 in January 1970 and
110 in January 1969. By August 1971, the index had reached 134, an
increase of 7% over January 1971, and 22% over January 1969.
In March 1971, as part of the continuing efforts to arrest this trend,
the President issued Executive Order 11588 to provide mechanisms to
help stabilize construction wages and prices, including the Construction Industry Stabilization Committee and craft dispute boards.
Under Executive Order 11627, issued in October 1971, the President
continued these arrangements and integrated them with his new
economic program. Preliminary figures through November 1971
indicate that the construction cost index remained stable at the August
level.
In this special analysis of Federal public works activities, construction is defined as the design and production of fixed works and
structures or substantial alterations to land, including new works and
major additions, alterations, improvements and replacements of
existing works. Detailed planning and the cost of sites for specific
construction projects are included. Preliminary planning and surveys
prior to the selection of a site, general purpose land acquisitions, such
as those for parks and forests, and general maintenance and repair
are excluded.
DIRECT FEDERAL PUBLIC WORKS

Outlays for direct Federal construction are shown by agency in
table Q-2, classified according to civil programs and defense public
works. In 1973, outlays for all direct Federal public works are estimated at $5.5 billion, including $1.6 billion for defense public works.
Direct works for civil programs are estimated at $3.9 billion, compared
with $3.7 billion in 1972. These outlays are predominantly for water
resources and related power generation and transmission facilities
built by a number of agencies, including the Corps of Engineers, the
Bureau of Reclamation, the Bonneville Power Administration, and
the Tennessee Valley Authority. In addition, the Federal Government
builds office, postal service, research, hospital, prison and other
buildings; and roads and visitor facilities in the national forests,
parks, and other public lands.

260

THE BUDGET FOR FISCAL YEAR 19 73

Table Q-2. DIRECT FEDERAL PUBLIC WORKS: OUTLAYS AND 1973
BUDGET AUTHORITY BY AGENCY (in millions of dollars)
Outlays
Program and agency

1971
actual

Civil public works:
Department of Agriculture: Forest Service
Department of the Army: Corps of Engineers—Civil__
Department of Health, Education, and Welfare: Health,
Services and Mental Health Administration
Department of the Interior:
Bureau of Indian Affairs
National Park Service
Bureau of Reclamation
Bonneville Power Administration
Department of Justice: Federal Prison System
Department of Transportation:
Coast Guard
Federal Aviation Administration
General Services Administration
National Aeronautics and Space Administration
Postal Service
Veterans Administration
Smithsonian Institution
Tennessee Valley Authority
Other
Subtotal civil public works
National defense public works:
Department of the Army__
__
Department of the Navy
Department of the Air Force
Interservice activities
Civil defense centers and shelters
Atomic Energy Commission

Budget
authority
1973
estimate

136
952

195
1,119

202
1,246

148
1, 281

50
29
223
102
2

86
81
292
90
11

92
58
378
85
24

48
42
329
86
38

39
160
123
44
87
80
5
481
78

43
246
199
43
276
107
17
654
166

52
241
308
60
258
96
7
529
231

47
247
248
77

2,617
___

1973
1972
estimate estimate

3,668

3,912

155
46
29
164
3,049

438
310
271
120
3
243

564
462
304
193
1
237

540
306
277
221
(*)
237

1,026
570
335
391
1
273

Subtotal national defense public works

1,384

1,761

1,581

2,596

Total direct Federal public works

4,001

5,428

5,493

5,646

iLess than $500,000.

The General Services Administration contracts not only for the
construction of most Federal office buildings, but also for office space in
privately owned structures. Legislation is proposed to permit the
General Services Administration to contract for new buildings to be
financed by private capital, thus reducing the backlog of authorized
projects without increasing budget outlays. The Government would
fund these costs through long-term payments.
GRANTS AND N E T LENDING FOR PUBLIC WORKS

Federal grant and loan programs help State and local governments
build facilities such as roads, mass transit, water, sewer and waste
treatment facilities, airports, and schools. Federal outlays for grants
and loans to aid in construction of State and local works are summarized by agency in table Q-3.

SPECIAL ANALYSES

261

Table Q-3. GRANTS AND NET LENDING FOR PUBLIC W O R K S : O U T LAYS AND 1973 BUDGET AUTHORITY, BY AGENCY (ini millions of dollars)
Program and agency

Grants to State and local governments:
Funds appropriated to the President:
Appalachian regional development programs
Department of Agriculture:
Farmers Home Administration
Soil Conservation Service
Department of Commerce: Economic Development
Administration
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration.
National Institutes of Health
Office of Education
Department of Housing and Urban Development
Department of the Interior:
Bureau of Outdoor Recreation
Office of Territorial Affairs
Department of Justice: Law Enforcement Assistance
Administration
Department of Transportation:
Federal Aviation Administration
Federal Highway Administration
Urban Mass Transportation Administration
Environmental Protection Agency
Washington Metropolitan Transit Authority
Other civil
Subtotal civil grants
Department of Defense
Total grants
Lending to State and local governments:
Department of Commerce: Economic Development
Administration
Department of Health, Education, and Welfare: Office
ofEducation
Department of Housing and Urban Development
Department of the Interior: Bureau of Reclamation
Department of Transportation:
Federal Highway Administration
Urban Mass Transportation Administration
District of Columbia
Other agencies
Subtotal lending
Repayments
Total net lending
Total grants and net lending

Outlays
1971
actual

Budget
authority
1973
estimate

1972
estimate

1973
estimate

202

237

230

238

24
85

57
103

52
116

2
110

152

157

174

143

120
101
222
143

105
99
161
167

82
79
100
189

34
1
16
45

36
20

65
40

76
36

121
23

61
4,567
153
478
35
9

124

184

4,622

4,833

260
908
89
15

351

-55

1,100

2,000

5,707

164
11

183
37

6,418
11

7,249
11

7,857
14

8,698
19

6,429

7,259

7,871

8,717

17
838
7

10
925
16

5
987
17

8
17

51
2

51
57
177
7

Ml
5

149
4

965
-763

1,263
-930

1,261
-949

195
-16

202

333

312

179

6,631

7,592

8,183

8,896

Federal grant disbursements are generally supplemented by State
and local funds. The matching requirements differ considerably among
programs. The Federal share of the total cost may be a uniform percentage for all eligible projects, or the share may vary in accordance
with factors such as population or relative financial ability of the

262

THE BUDGET FOR FISCAL YEAR 19 73

State and local governments. Federal aid disbursements represent
advances or reimbursements to the State and local authorities for the
Federal share of construction put in place. Grants which indirectly
support State and local construction activities, such as interest subsidies and contributions for purposes such as public housing and
hospital care, are not included in this analysis.
Outlays for construction programs administered by the Department of Transportation reflect changed program priorities from 1971
to 1973. Federal highway grant outlays will increase 6%, while airport
grant outlays will triple and urban mass transportation construction
grant outlays will more than double over the period.
Nevertheless, about three-fifths of all construction grant outlays will
be for the Federal-aid highway program of the Federal Highway Administration. About 85% of the $4.8 billion outlays in 1973 are payments for work completed under contracts awarded in prior years.
A large share of these outlays apply to the Interstate Highway
System, a 42,500-mile network begun in 1956 and now 76% completed. Of the $68.3 billion estimated Federal share of the System's
total cost, about $41.2 billion has been obligated.
Under the Airport and Airway Development and Revenue Acts of
1970, the Federal Aviation Administration helps finance airport development and improvement with matching grants for eligible projects.
Outlays for such grants are estimated at $184 million in 1973.
The Urban Mass Transportation Administration will make capital
grants of $841 million with outlays of $351 million in 1973 for construction of mass transit facilities such as subways, commuter railroads, and busways. These grants represent the construction part of
the overall urban mass transit program, which will be at a billiondollar level in 1973.
With the exception of the Interstate System, the grant programs
for highways, airports, and urban mass transportation are proposed
to be included in the revenue sharing program for transportation
beginning in 1974 to provide State and local governments with greater
freedom of choice without the requirement to match Federal funds.
Federal grants to help State and local agencies construct hospitals
and health centers are expected to decline from $105 million in 1972
to $82 million in 1973. These programs, administered by the Health
Services and Mental Health Administration, will be supplemented by
loan guarantees and interest subsidies (not included in this analysis).
In addition, programs such as Medicare and Medicaid indirectly support the construction of hospitals and related facilities.
The Department of Health, Education, and Welfare also administers
Federal grants for teaching facilities in the health professions and for
health research facilities through the National Institutes of Health.
The Office of Education grants for educational facilities are expected to
decline from $161 million in 1972 to $100 million in 1973, as greater use
will be made of interest rate subsidies for these purposes.
The Appalachian Regional Commission provides grants for construction of public facilities in Appalachia, principally for roads; and
the Economic Development Administration in the Department of
Commerce administers grants and loans to help communities to construct public facilities needed for their long-term growth. Both of these
programs are proposed to be included in revenue sharing for rural
community development beginning in July 1973.

SPECIAL ANALYSES

263

Construction of municipal water and sewer facilities will continue to
increase in 1973. Several Federal programs help to reduce the initial
and continuing costs which the State and local jurisdictions must bear
to provide these facilities. Federal grants for rural and, in some cases,
urban sewer and water facilities provide up to 50% of the financing
requirements for eligible projects. Interest costs on such projects are
also reduced, either by direct Federal lending or by the Federal income
tax exemption for State and local bonds.
Because of increasing concern for the qualit}r of our environment and
the need for more effective water pollution control, construction of
municipal waste treatment facilities will also increase in 1973. Federal
grants for sewage treatment plants provide up to 55% of construction
costs.
Although privately financed, industrial construction of treatment
facilities to meet new environmental standards is also expanding
rapidly. With these facilities, the waste gas, fluids, and solids will be
treated and discharged as less harmful products or emissions.
CIVIL PUBLIC WORKS

Additional details on civil direct construction are provided in the
following sections. Before larger projects are undertaken, the responsible agencies conduct preliminary surveys and investigations to
determine the merits of the project and, where necessary, to provide
the basis for authorizing legislation. In the case of water resource
projects, coordinated long-range economic, hydrologic and land-use
projections are employed to help assure economic design of specific
facilities within each comprehensive river basin. The summary tables
in this analysis do not include outlays for such preliminary planning.
New and continuing work.—Table Q-4 provides information on
direct Federal projects underway in 1973, indicating the total cost, the
progress through the budget year, and the estimated cost of completion. The table distinguishes between
projects started in earlier years
and those started in the budget 37ear, and also provides information on
detailed project planning and site acquisitions for projects to be started
after the budget year.
About 87% of the total outlays for direct civil works are for continuing work. An additional $15.7 billion will be required after 1973
to complete these projects. New projects estimated to cost $3.1
billion are recommended for 1973, of which $391 million will be spent
in 1973.
The General Services Administration's program, including a 1972
supplemental appropriation request, provides for completion of four
buildings already under construction, two new border inspection
stations, and improvements in the Federal Triangle in time for the
bicentennial celebration in the Nation's Capital. Construction of other
buildings will be shifted to private investment financing upon enactment of pending legislation.
The Postal Service plans to award about 36 contracts for major
buildings and about 75 for minor projects in 1973 as part of the program to increase the efficiency of the postal system. The total cost of
these new structures is estimated at $660 million.

264

THE BUDGET FOR FISCAL YEAR 19 73

Table Q-4. ESTIMATED COST OF 1973 DIRECT FEDERAL CIVIL PUBLIC
WORKS, BY CONTINUING AND NEW WORK (in millions of dollars)

Program and agency

Total
estimated
Federal
cost

Outlays
Prior to
1973

1973
estimate

Required
to cornplete

240
286

152
195

33
90

16,207

8,585

1,213

6,409

104

1,290
1,694
9,215
469

307
11
4,624
283

78
53
373
77

905
1,564
4,217
109

68
757
78
690
1,197
789
368
2,850
1,299

30
246
17
159
1,085
474
249
1,376
568

27
199
20
269
51
176
62
496
170

11
312
43
263
61
139
57
977
560

37,602

18,470

3,421

15,710

111

429

13
7
8
1

15
256
85
30

Continuing work:

Architect of the Capitol
Department of Agriculture: Forest Service
Department of the Army: Corps of Engineers—
Civil
Department of Health, Education, and Welfare:
Health Services
Department of the Interior:
Bureau of Indian Affairs
National Park Service
Bureau of Reclamation
Bonneville Power Administration
Department of Transportation:
Coast Guard
Federal Aviation Administration
Federal Railroad Administration
General Services Administration
National Aeronautics and Space Administration
Postal Service
Veterans Administration
Tennessee Valley Authority
Other
Total continuing work
New projects and features in 1973:
Department of Agriculture: Forest Service
Department of the Army: Corps of Engineers—
Civil
.
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration
Department of the Interior:
Bureau of Indian Affairs
Bureau of Reclamation.
Bonneville Power Administration
Department of Justice: Federal Prison System
Department of Transportation:
Coast Guard__
-.-; — v
Federal Aviation Administration
General Services Administration
National Aeronautics and Space Administration
PostalService
Veterans Administration
Tennessee Valley Authority
Other
Total new projects and features

183
449

38
28
261
93
35

3
3

247
148
69
660
132
650
101
3,139

1
4
7

42
10
7
74
21
26
29

205
138
62
586
110
620
64

391

2,718

SPECIAL ANALYSES

265

Table Q-4. ESTIMATED COST OF 1973 DIRECT FEDERAL CIVIL PUBLIC
WORKS, BY CONTINUING AND NEW WORK (in millions of dollars)—Continued

Program and agency

Total
estimated
Federal
cost

Outlays
Prior to
1973

1973
estimate

Required
to complete

10
108
8
151
11
39
10
31

3
4
3
87
1
17
1
3

3
2
29
1
13
6
16

4
99
3
35
8
9
3
13

467

161

100

206

3,912

18,634

Advance planning and site acquisition prior to start of
construction:

Department of the Army: Corps of Engineers—
Civil
Department of the Interior:
Bureau of Land Management
National Park Service
Bureau of Reclamation
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Tennessee Valley Authority
Other
Total advance planning
Total direct civil public works

41,207

18,661

The National Aeronautics and Space Administration will build
facilities needed for the space shuttle and for research on increasing
the efficiency of jet engines.
The Tennessee Valley Authority will continue construction of five
large electric power generating plants and related transmission
facilities, and will start two new nuclear fueled generating plants
in 1973.
Appropriations for ^construction of water resources projects by the
Corps of Engineers and Bureau of Reclamation were curtailed in
recent years to help reduce inflationary pressures and budget outlays.
At the same time, major commitments to future spending were made
by congressional approval of funds for starting construction on many
new projects. As a result, disruptions occurred in many ongoing projects because of underfinancing and other delays.
The 1973 budget provides substantial increases in funding for construction of ongoing water resources projects to permit more optimal
construction rates. In addition, the budget provides for 13 new water
resources projects by the Corps of Engineers and two projects by the
Bureau of Reclamation, with a total estimated cost of $710 million.
This policy of a modest number of new project starts must be strictly
adhered to by the executive branch and the Congress in order to
avoid building up construction backlogs and to prevent repetition of
program disruptions.
Advance planning and site acquisition.—After preliminary plans and
necessary legislative authorizations are approved, detailed architectural and engineering plans are prepared and sites are acquired before
on-site construction operations begin. Outlays for detailed architectural and engineering planning and site acquisitions are included in
table Q-4, and separately identified for those projects to be started
after the budget year.

266

THE BUDGET FOR FISCAL YEAR 19 73

Authorized reserve of civil public works.—Many agencies that regularly build civil works projects maintain an authorized reserve to draw
upon as necessan^ to fulfill program needs and budgetar}^ policy. Projects in such reserve status have met the requirements for legislative
authorization, and require only appropriations and detailed planning
for starting. The size and planning status of the authorized reserve is
shown by agency in table Q-5. No reserve is identified for the General
Services Administration since the budget proposes that authorized
projects be shifted to private investment financing.
Table Q-5. RESERVE OF PRESENTLY AUTHORIZED PROJECTS AND
PROGRAMS FOR UNDERTAKING AFTER 1973 (in billions of dollars)

Agency

Estimated
total
Federal
cost

Agriculture: Forest Service
0.7
Army: Corps of Engineers—Civil
12.1
Interior:
Bureau of Land Management. _ _
.3
Bureau of Sport Fisheries and
.4
Wildlife
.9
Bureau of Reclamation
.7
Bonneville Power Administration
.5
Justice: Bureau of Prisons
Transportation: Federal Aviation Administration __
_ _
.9
Veterans Administration._
.3
Tennessee Valley Authority
1.5
.5
Other agencies
_ _ _ __
Total

18.7

Status oiF plans as of
June 30. 1972
Contract
could
be let

In
process

Not
started

0.2
1.3

0.5
6.3

4.4

.2
.5

.2
.2
.7
.5

.2
1.4
.2

.6
.3
.1
.2

9.3

7.4

0)
0)
2.0

Status of plans as of
June 30. 1973
Contract
could
be let

0.2
1.6

In
Not
process started

0.5
6.2

4.2

.2
.3
.1

.2
.2
.6
.5

.3
.2

1.4
.1

.4
.1
.1
.2

4.0

8.1

6.6

Less than $50 million.
Note.— Excludes $0.8 billion of General Services Administration projects which will be privately
financed under proposed legislation.

PUBLIC WORKS BY FUNCTION

Detailed information on budget authority and outlays for public
works programs, grouped according to the major functional categories
used in the budget, is provided in table Q-8 at the end of this analysis.
Outlays for public works construction are reported for each of the
major functions except interest. In 1973, 86% of the outlays for civil
works are in two major functions—commerce and transportation and
natural resources and environment.
The commerce and transportation function includes $6.5 billion for
public works, primarily grants for highways, airports, mass transit, and
other public facilities. The function also includes substantial direct
construction such as for post offices, aviation control systems, and
Coast Guard facilities. In 1973, public works account for more than
half the total outlays in the commerce and transportation function.
In the natural resources and environment function, public works
outlays in 1973 are estimated at $3.9 billion, approximately three

SPECIAL ANALYSES

267

fifths of total gross outlays for the function. The public works in this
function are predominantly water resource projects and sewage treatment plants.
Total construction outlays for all water resources and related developments included in other civil functions as well as the natural
resources and environment function are shown in table Q-6 and the
accompanying chart. The table identifies the facilities and principal
agencies conducting the various programs.
Table Q-6. OUTLAYS FOR WATER RESOURCES AND RELATED DEVELOPMENTS (in millions of dollars)
Program and agency

1971
actual

1972
estimate

1973
estimate

Flood control works:
Agriculture: Soil Conservation Service (mostly grants)
Army: Corps of Engineers—Civil
Interior: Bureau of Reclamation
State: International Boundary and Water Commission
Tennessee Valley Authority

65.5
404.1
2.4
1.8
.4

77.1
505.2
2.2
4.3
1.0

85.0
609.8
3.3
11.6

Total flood control works
Beach erosion control: Army: Corps of Engineers—Civil

474.2
1.7

589.8
6.2

709.7
3.5

10.9

12.6

14.7

6.9
64.6

13.0
100.7

13.0
154.3

82.4

126.3

182.0

220.0
.1
.3

235.6
.5
3.1

261.6
.6
4.1

220.4

239.2

266.3

326.3
119.2
31.9

371.6
174.1
53.6

370.6
194.1
68.7

477.4

599.3

633.4

2.8
364.6

3.1
496.6

3.7
359.3

367.4

499.7

363.0

Irrigation and water conservation works:
Agriculture: Soil Conser vat ion Service (mostly grants)
Interior:
Bureau of Indian Affairs
Bureau of Reclamation
Total irrigation works
Navigation facilities:
Army: Corps of Engineers—Civil
Transportation: Saint Lawrence Seaway Corporation
Tennessee Valley Authority
Total navigation facilities
Multiple-purpose dams and reservoirs with hydroelectric power
facilities:
Army: Corps of Engineers—Civil
Interior: Bureau of Reclamation
....
Tennessee Valley Authority
Total multiple-purpose facilities
Powerplants:
Interior: Bureau of Territorial Affairs (grants)
Tennessee Valley Authority
Total powerplants

Power transmission facilities:
Interior:
Bureau of Reclamation
Bonneville Power Administration
Southwestern Power Administration
Tennessee Valley Authority

10.8
101.9
2.4
72.9

9.3
90.0
3.3
81.8

9.2
85.2
1.3
88.8

Total power transmission facilities

188.0

184.4

184.5

268

THE BUDGET FOR FISCAL YEAR 1973

Table Q-6. OUTLAYS FOR W A T E R RESOURCES A N D RELATED DEVELOPM E N T S (in millions of dollars)—Continued
Program and agency

Water supply and waste disposal facilities:
Agriculture:
Farmers Home Administration (grants)
Forest Service
Commerce: Economic Development Administration (primarily
grants)
Health, Education and Welfare: Health Services and Mental
Health Administration
Housing and Urban Development:
Grants
Loan disbursements
Interior:
National Park Service
Bureau of Reclamation
Environmental Protection Agency (grants)
Other agencies
Total water supply and waste disposal
Total water resources and related developments

1971
actual

1972
estimate

1973
estimate

20.4
8.1

53.2
20.8

48.8
28.7

69.5

70.2

85.2

15.6

29.8

32.1

120.6
42.8

130.0
41.5

150.0
41.7

5.6
29.2
478.4
16.6

16.1
19.9
908.0
22.5

30.0
33.9
1,100.0
16.7

806.8

1,312.0

1,567.1

2,618. 3

3,556.9

3,909.5

Outlays (or Water Resources and Related Developments
$ Billions

4.0

3.0 —

-2.0

-1.0

Flood Control and Beach Erosion

1964

1965 1966 1967 1968 1969 1970 1971 1972

Fiscal Years

Estimate

1973

SPECIAL ANALYSES

269

In the remaining civil functions, public works account for much
smaller proportions of total outlays. In 1973, the outlays for public
works in thse functions range from $8 million in the international
affairs and finance function to $823 million in the general government function. In these functions, the public works outlays relate to
a wide variety of structural needs including, in addition to general
purpose office buildings and research facilities, hospitals, schools,
museums, and housing.
NATIONAL DEFENSE PUBLIC WORKS

Major direct construction programs for the armed services and for
atomic energy development are included in the national defense function. Outlays for construction in this function are estimated at $1.6
billion in 1973.
Department of Defense—Military.—An increase of $782 million in
budget authority for construction by the armed services is proposed for
1973. The $2.3 billion total provides for a wide variety of structures,
including hospitals, troop and family housing, and other improvements.
Included are the planned expansion of the Safeguard missile system,
pollution abatement projects, bachelor and family housing, and community facilities to support the all-volunteer Armed Forces program.
Atomic Energy Commission.—Outlays for construction of atomic
energy facilities are expected to remain at the same level in 1973 as in
1972, $237 million. Work will continue on the world's largest accelerator for research in high energy physics, located near Chicago. An
increase in outlays for major modifications to improve fire prevention
and safety features in existing weapons facilities will be more than
offset by a decline in outlays to provide new weapons capabilities.
Major improvements in the gaseous diffusion plants have been undertaken. Several facilities are being modified to meet more stringent
environmental standards.
AID TO COOPERATIVE AND NONPROFIT GROUPS

In some instances, private nonprofit institutions provide services
similar to those provided by State and local governments and are
eligible for assistance under various Federal-aid programs. Federal
outlays to aid such private institutions are summarized in table Q-7,
but are not included in the totals for public works in other parts of
this analysis.

270

THE BUDGET FOR FISCAL YEAR 19 73

Table Q-7. FEDERAL OUTLAYS FOR CONSTRUCTION B Y COOPERATIVES
AND NONPROFIT G R O U P S (not included in public works) (in millions of dollars)
Program and agency

1971
actual

Expenditures:
Grants for private construction:
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration: Medical facilities construction
National Institutes of Health: Health, educational, research
and library facilities
Office of Education: Higher education facilities
Gallaudet College
Howard University
Model Secondary School for the Deaf
National Technical Institute for the Deaf

1972
estimate

1973
estimate

171

150

119

55
86
2
2

316

56
53
2
11
1
9
282

60
27
3
16
5
10
240

627

576

669

2
38

47
22

101
14

41
-196

29
-111

26
-315

Total net lending

513

447

493

Total Federal outlays

829

729

733

Total expenditures
Lending:
Department of Agriculture: Rural Electrification Administration: Electrification and telephone facilities
Department of Health, Education, and Welfare:
Health Services and Mental Health Administration: Medical
facilities
Office of Education: Higher education facilities
Department of Housing and Urban Development: College housing
Repayments

0
0

i Less than $500 thousand.

Table Q-8. FEDERAL PUBLIC W O R K S ACTIVITIES (in millions of dollars)
By major junction and agency
BUDGET AUTHORITY
Function, agency, and program

1971
actual

1972
estimate

OUTLAYS

1973
estimate

1971
actual

1972
estimate

1973
estimate

CIVIL PUBLIC WORKS
International Affairs
and Finance

Department of State:
Foreign Service buildings____
International Center, Washington. D.C. (grant)
United States
Information
Agency: Radio facilities
Total international affairs
and
finance

3.5

6.7

14.2

2.7

3.5

1.0

6.9
.7

8.8

4.6

3.5

6.7

15.2

11.5

8.1

8.0

26.2

52.7

77.3

43.7

43.0

60.0

Space Research and
Technology

National Aeronautics and Space
Administration: Research and
space flight facilities
See footnotes at end of table.

SPECIAL ANALYSES

271

Table Q-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con.
By major function and agency—Continued
BUDGET AUTHORITY
Function, agency, and program

1971
actual

1972
estimate

1973
estimate

OUTLAYS
1971
actual

1972
estimate

1973
estimate

CIVIL PUBLIC WORKS—Con.
Agriculture and Rural
Development

Department of Agriculture:
Laboratories, research facilities, and library
Cooperative State Research
Service: Grants for research
facilities
Farmers Home Administration:
Grants for rural water and
sewersystems
Grants for farm labor
housing...
Soil Conservation Service:
Grants for resource conservation and development...,
Plant materials center
Total agriculture and
rural development._

5.3

3.2

5.2

8.9

5.3

1.4

20.4

53.2

48.8

100.0

2.5

3.5

4.0

3.0

14.1
.3

19.4

18.3

11.7
0)

15.7
.4

19.7

122.2

122.7

24.0

42.2

82.7

77.2

.6
75.6

.3
102.4

.3
92.0

.5
73.7

.3
87.3

.4
96.1

187.0

212.2

147.5

135.6

195.5

201.6

Natural Resources and
Environment

Department of Agriculture:
Soil Conservation Service:
Flood prevention and
watershed protection:
Direct work
Grants
Forest Service: Roads, research, recreational, and
other facilities2
....
Department of Defense—Civil:
Corps of Engineers—Civil:
Flood control, navigation and
multiple-purpose projects
with power
Trust funds
Grants
Department of the Interior:
Bureau of Land Management:
Roads and other facilities..
Bureau of Outdoor Recreation: Grants for recreation
facilities
Office of Coal Research:
Demonstration plants
Bureau of Sport Fisheries and
Wildlife: Facilities
National Park Service: Parkways, roads, buildings and
utilities 2
Sec footnotes at end of table.

896.7 1,079.8 1,253.9
24.8
26.7
26.7
4.2
2.2
13.7

23.2

12.5

929.1 1,090.8 1,218.6
23.1
27.8
27.0
4.2
2.2
10.1

16.7

14.2

111.0

131.6

121.3

36.4

64.6

76.3

2.4

10.3

20.0

3.9

6.1

21.8

4.2

7.2

6.2

3.9

5.6

7.8

41.0

120.6

42.4

29.1

80.9

58.2

272

THE BUDGET FOR FISCAL YEAR 19 73

Table Q-8. FEDERAL-PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con.
By major function and agency—Continued
BUDGET AUTHORITY
Function, agency, and program

1971
actual

1973
estimate

277.5

329.5

222.8

292.2

377.6

11. 3
-1. 7

17.3
-1.7

-1.6
6.5
-1.5

.1
15l 7
_ l .7

3.7
17.0
-1.7

86. 7

86.3

101.9

90. 0

85.2

1. 0

2.4

3..3

1.3

19.2

10.2

2. 8

5.3

15.9

28.0

1.0

1.4

6.6

2, 000.0

2,000.0

478. 4

908.0

1,100.0

34.8

28.9

481. 3

653.7

528.7

4, 174.0

4,197.5

2,543. 1

3,546.0

3,854.8

202.4

236.6

230.5

1.7

152.5
16.6
-3.4

156.6
20.7
-4.9

CIVIL PUBLIC WORKS-Con.
Natural Resources and Environment—Con.
Department of the Interior—
Continued
Bureau of Reclamation:
Irrigation and multiplepurpose projects with
power 2_._
_
232.6
Small irrigation projects:
Grants
8.5
Loans
Repayments
-1.5
Power transmission facilities:
Bonneville Power Administration
89.1
Southwestern Power Administration
1.0
Office of Saline Water: Facilities
.3
Department of State: Internaternational Boundary and
Water Commission: Water resources projects and Chamizal
settlement
4.2
Environmental Protection Agency:
Bu ildings and facilities
Grants for waste treatment
and other facilities
. . . 1,000.0
Tennessee Valley Authority:
Power, water resources, and
chemical facilities
3,278.9
Total natural resources._

5,974.2

OUTLAYS

1972
estimate

1971
actual

1972
estimate

1973
estimate

Commerce and Transportation

Funds appropriated to the President:
Appalachian regional development programs: Grants for
highways, education, and
health facilities
Public works acceleration:
Grants
Department of Commerce:
Economic Development Administration:
Development facilities:
Grants.
_ __ . . .
5_._
Loans_ ._
avments
_
Repa,
Regional Action Planning Commissions: Grants for regional development facilities.
National Oceanic and Atmospheric Administration: Structures
See footnotes at end of table.

261.7

291.7

173.4
16.6

149.2
10.8

238.1

143. 4
16. 6

.
21.7
1.2

22.4

24.1

173.8
15.6
-3.2

5.3

19.1

SPECIAL ANALYSES

273

Table Q-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con.
By major function and agency—Continued
BUDGET AUTHORITY
Function, agency, and program

1971
actual

OUTLAYS

1972
estimate

1973
estimate

2.0

1971
actual

1972
estimate

1973
estimate

CIVIL PUBLIC WORKS-Con.
Commerce and Transportation—Con.
Department of Commerce—
Continued
National Bureau of Standards:
Buildings
.2
Maritime Administration: Improvements
Department of Defense—Civil:
Panama Canal Company: Canal and harbor improvements.
Department of the Interior: Bureau of Indian Affairs: Roads _.
30.0
Department of Transportation:
Coast Guard: Shore facilities,
bridges, and navigation aids.
13.2
Federal Aviation Administration:
National Capital Airports
and Aeronautical Exposition
6.8
Facilities and equipment
3
594.3
(trust funds)
183.2
Airport grants (trust funds) _
Federal Highway Administration:
Federal-aid Highways:
Grants (trust funds)
5,474.7
Right-of-way revolving fund:
100.0
Loans (trust funds)
Forest and public lands high3
45.1
way grants (trust funds) .
Grants for highway safety,
rail-highway crossings, territorial, Chamizal highways, and other special
purposes2
36.0
National Highway Traffic Safety
Administration: Compliance
testfacility
Federal Railroad Administration:
Research facilities
3.2
Urban Mass Transportation Administration: Transportation
facilities:
Research facilities
4.0
Grants
3,016.0
Loans
49.0
Repayments
St. Lawrence Seaway Development Corporation: Alterations
Postal Service: Post offices, im- 10,000.0
provements and alterations..
See footnotes at end of table.

http://fraser.stlouisfed.org/
480-700 0—72
18
Federal Reserve Bank of St. Louis

2.2

1.3
.2

30.0

5.2

12.6

10.8

17.7

41.8

45.0

44.1

47.0

39.0

42.9

51.5

7.1

3.6

1.6

14.7

6.4

454.6

243.4

157.9
61.5

231.7
124.5

235.0
184.0

5,569.0

5,616.5

4,539.6

4,570.6

4,771.2

33.0

51.0

55.0

45.1

22.3

32.8

37.4

47.5

45.0

5.1

18.9

24.5

3.0

9.6
9.6

25.2

4.4

11.2

19.5

5.0
-43.0

7.5
-54.9

2.4
152.6

6.0
350.6

—.2

4.9
259.6
57.0
—57.2

.1
87.2

.5
275.7

.6
257.6

—.2

274

THE BUDGET FOR FISCAL YEAR 19 73

Table Q-8. FEDERAL PUBLIC W O R K S A C T I V I T I E S (in millions of dollars)-Con.
By major function and agency—Continued

Function, agency, and program

CIVIL PUBLIC WORKS—Con.
Commerce and Transportation—Continued
Federal Communications Commission: Facilities

BUDGET AUTHORITY
1971
1972
1973
actual
estimate estimate

Total commerce and
transportation
20,000.3

6,685.2

6,401.5

OUTLAYS
1971
actual

1972
estimate

1973
estimate

5,498.9

6,112.7

6,496.1

710.2
-710.3

825.0
-815.0

900.0
-890.0

2.0

3.7

Community Development
and Housing

Department of Housing and
Urban Development:
Low-rent public housing:
Loans
Repayments
New community assistance
grants __ _ _ _ _ _
Grants for neighborhood facilities
.
Grants for water and sewer
facilities
Public facility loans
Repayments
Liquidating programs:
Loans
Repayments
Federal Home Loan Bank
Board: Headquarters
__
Total community development and housing _
Education and Manpower
Department of Health, Education, and Welfare: Office of
Education:
Schools in federally affected
areas:
At Federal installations
Grants _
Higher education facilities:
Grants _
Loans
Repayments
Libraries and educational facilities (grants)
_
Department of Housing and
Urban Development:
College housing loans
Repayments
See footnotes at end of table

5.0

40.0

22.5

35.0

350.0
4.9
-5.9

500.0
7.5
-7.0

120.6
42.8
-5.9

130.0
41.5
-7.0

150. D

8.2
-8.0

41.7
-8.0

2.0
-.5

-.6
-.5

-6.7
_ 5

3.0

393.9

545.5

45.2

181.4

213.5

228.2

10.9
3.0

8.3
11.0

15.9

2.8
16.6

5.6
15.7

7.6
17.6

43.0

29.9

192.7
17.4
-1.9

134.9

74.8

7.1

9.5

9.6

4.8

-2.0

-2.2

12.8

10.5

8.0

79.8
-31.6

55.9
-32.7

49.5
-33.6

SPECIAL ANALYSES

275

Table Q-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)-Con.
By major function and agency—Continued
BUDGET AUTHORITY
1972

1971

OUTLAYS

1973

1971
actual

1972

1973

CIVIL PUBLIC WORKS-Con.
Education and Manpower—
Continued
Department of the Interior:
Bureau of Indian Affairs:
Schools and other facilities:
Direct work
Grants
Bureau of Mines: Mine health
and safety academy
National Science Foundation:
Research facilities
Smithsonian Institution:
Museums and the Kennedy
Center _
Total education and manpower.

19.8

42.6
.5 .

47.6

32.4

43.7
.5

47.4
7.0

13.0
7.0

6.1

6.3

5.2

4.0

5.2

2.7

3.4

46.4

5.0

17.0

7.2

93.6

111.3

129.2

331.2

262.7

193.2

5.0

4.0

9.0

Health
Department of Health, Education, and Welfare:
Food and Drug Administration: Buildings
Health Services and Mental
Health Administration:
Grants for mental health
centers
Grants for medical facilitiesLoans for medical facilities.
Indian health facilities:
Direct work
Grants. : : ___.___.___Other facilities, including
St. Elizabeths Hospital 2.
National Institutes of Health:
Grants for health, educational research, and library facilities .
Buildings and facilities,..Social Security Administration: Buildings and district
offices (trustfunds)

Total health
See footnotes at end of table.

70.9
30.0

91.8
30 0

34.0

15.4
104.1

15.1
88.8

10.1
71.9

18.7

30.2
.3

43.7

19.6

33.3
1.4

34.3
.4

20.4

6.4

9.4

11.0

98.9

114.0
3.6

1.4
8.5

101.5
3.1

99.1
5.5

78.7
7.0

4.0

1.5

4.0

1.7

219.4

281.9

114.4

250.6

260.6

224.1

7.2

276

THE BUDGET FOR FISCAL YEAR 19 73

Table Q-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con.
By major function and agency—Continued
BUDGET AUTHORITY
Function, agency, and program

1971
actual

1972
estimate

OUTLAYS

1973
estimate

1971
actual

1972
estimate

1973
estimate

CIVIL PUBLIC WORKS—Continued
I n c o m e Security

Social Security Administration:
Buildings and district offices
(trustfunds)

2.5

18.7

10.8

2.5

18.7

11.0

1. 5

3.3
.1

9.1
.2

1. 0

2.5
.4

5.0
.2

59. 0

93.4

155.0

80. 2

107.4

96.0

7. 5

8.0

8.7

4.0

5.3

Veterans Benefits and
Services

Department of Defense—Civil:
Army: Cemeteries
Soldiers' Home (trust fund) _.
Veterans Administration:
Medical care facilities
Grants fcr construction of
State extended care facilities
___
Corregidor-Bataan Memorial.
Total veterans benefits
and services

2. 9

0)
68. 1

104.8

16.2

72.6

173.0

84. 4

114.3

106.5

3.1

10.8

32.9

4.2

4.5

General Government

Legislative branch:
Architect of the Capitol:
Buildings and James Madison Memorial Library
United States Tax Court:
Court building
Department of Defense—Civil:
Army: Power and water systems, Ryukyu Islands:
Loan repayments
Panama Canal: Improvements
Department of the Interior:
Office of Territorial Affairs:
Public facilities in Samoa,
Guam, and the Trust
Territory of the Pacific
Islands:
Grants
Loans
Repayments
Alaska public works: Loan
repayments....
Department of Justice:
Immigration and Naturalization Service: Border facilities
Federal Prison System: Prison
facilities
Law Enforcement Assistance
Administration: Grants for
police stations, correctional
institutions, and court
buildings
See footnotes at end of table.

18.7

—.4

-.4

1.0

3.0

4.3

1.5

3.1

5.0

31.2
4.5
—.4

28.3
5.4
—.5

23.4
3.9
-.7

19.6
2.5
-.4

40. 3
7. 0
5

36.2
5.0
-.7

-~p

- «

1.6

18.4

47.6

49.1

79.3

1. 3

38.5

1.9

11. 1

24.3

92.8

10.2

40.3

63.7

SPECIAL ANALYSES

277

Table Q-8. FEDERAL-PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con.
By major function and agency—Continued

BUDGET AUTHORITY

OUTLAYS

Function, agency, and program
1971
.ctual

1972
estimate

1973
estimate

1971
actual

1972
estimate

1973
estimate

CIVIL PUBLIC WORKS-Continued

General Government—Con.

Treasury Department:
Federal Law Enforcement
Training Center
Bureau of Customs: Border
facilities
Bureau of Engraving and
Printing: Air conditioning.
Bureau of the Mint: Philadelphia and Denver Mints.
Secret Service: Training facilities
General Services Administration: Construction of public
buildings, sites and planningCentral Intelligence Agency:
Headquarters
District of Columbia: Loans...
Repayments
Grant to Washington Metropolitan Area Transit Authority
Total general government

5.0

21.0

1.5

2.0

7.5

6.0

2.2

1.1

2.7

225.4

294.4

247.9

122.6

199.1

308.2

-4.0

102.1
-4.9

149.2
-5.9

51.2
-4.0

0)
177.0
-4.9

177.0
-5.9

180.0

188.0

182.8

34.8

89.4

163.7

527.8

856.7

738.1

247.1

587.0

822.6

12,960.2 H, 926.2

9,236.5

Total civil public works. _ 27,431.7

NATIONAL DEFENSE
PUBLIC WORKS
Department of Defense—Military:
Inter service activities:
Construction, Defense agencies
Family housing
Civil defense:
Grants for emergency centers
Civil defense facilities.
Army:
Construction
Construction, Army Reserve
Construction, Army National Guard:
Grants
Direct work
Navy:
Construction
_ _
Construction, Naval Reserve.. _ _ _
See footnotes at end of table.

12.4
107.6

16.2
177.0

25.6
195.0

6.0

3.0

4.5

2.8

5.5
.5

46.1
217.8

14.1
311.8

48.2
342.7

3.2

4.5

11, 249.3 12,081.7

590.9

489.8

961.2

428.1

545.0

502.0

10.0

33.5

38.2

4.8

11.2

23.5

7.9
7.1

8.9
20.1

13.2
26.8

8.4
4.8

6.3
8.3

14.7

305.1

359.3

554.2

308.5

453.4

296.7

5.0

10.9

16.0

1.8

8.2

8.9

8.3

278

THE BUDGET FOR FISCAL YEAR

19 73

Table Q-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con.
By major function and agency —Continued

BUDGET AUTHORITY
Function, agency, and program

1971
actual

1972
estimate

1973
estimate

OUTLAYS
1971
actual

1972
estimate

1973
estimate

NATIONAL DEFENSE
PUBLIC WORKS—Con.

Department of Defense—Military—Continued
Air Force:
Construction. __
Construction, Air Force Reserve...
___.
Construction, Air National
Guard

284.3

289.9

317.2

251.9

290.0

261.0

4.0

6.6

7.0

3.5

5.0

5.7

8.0

10.6

15.2

9.1

10.6

Total, Department of
Defense-Military. _
Atomic Energy Commission:
Facilities

1,489.9

1,560.0

2,342.2

1,152.9

1,534.7

1,358.0

206.1

200.0

273.2

242.9

236.6

236.9

1,760.0

2,615.5

1,395.8

1,771.3

1,594.9

10,632.3 13,020.6

13,676.6

Total national defense
public works

1,696.0

Total civil and defense
public works
29,127.7
1
2
3

14,720.2 14,541.6

Less than $50 thousand.
Includes amounts from trust funds.
Includes amounts from predecessor program financed from general funds.

SPECIAL ANALYSIS R
FEDERAL RESEARCH AND DEVELOPMENT PROGRAMS

The 1973 budget reflects the understanding that research and
development make significant contributions to economic growth
and the quality of American life. On the basis of this understanding
it is clear that a long-range strategy is needed to strengthen the
overall national effort in science and technology. This has been
and will continue to be a key objective of this Administration. Investment in research and development since 1969 by the Federal Government, and the increases proposed for 1973, bear this out.
Total Federal obligations for the conduct of research and development will increase from $16.4 billion in 1972 to $17.8 billion m 1973.
In addition, $0.8 billion will be obligated for research and development
facilities in 1973.
The 1973 budget accelerates efforts to:
—Turn science and technology to the service of man in such key
problem areas as health, transportation, energy, and the environment;
—Strengthen the Nation's defense capabilities;
—Increase emphasis on useful applications in the space program;
and
—Strengthen support of basic research on which the future of the
Nation's science and technology ultimately depends.
Beyond this, provision is made in the 1973 budget for:
—Experimental programs to strengthen further the partnership between government and industry through Federal cost sharing in
research and development efforts in industrial laboratories,
industrial research associations, and cooperative efforts among
universities, industry and government laboratories. These experimental efforts will be supported by additional funds provided to
the National Science Foundation and the National Bureau of
Standards.
—Special efforts to expand research and development to meet
long-range goals, including projects that draw on the technical
capabilities of the Atomic Energy Commission and the National
Aeronautics and Space Administration.
These new beginnings to a more strategic approach to the Nation's
research and development should not only improve the ability to
deal with a wide-range of civilian problems but also lead to the creation
of new markets, new jobs, and improvement in this country's world
trade position.

279

280

THE BUDGET FOR FISCAL YEAR

1973

CONDUCT OF RESEARCH AND DEVELOPMENT
Conduct of Research and Development — Oblations

1964

1965

Fiscal Years

1966

1967

1968

1969

1970

1971

1972

1973

Estimate

The 1973 budget includes funds for substantial increases in several
programs which have been initiated in the last 3 years, as well as for
new efforts to focus scientific and technological capabilities on specific
problems of concern to the Nation. Examples of some of the more
significant program expansions or new directions include:
• An increase of $88 million for research and development to help
meet the Nation's needs for electrical energy without damage to
the environment.
• An additional $43 million for research and development on natural
hazards to improve capabilities to control, predict, or reduce
destruction from fires, earthquakes, floods, hurricanes, and severe
storms.
• Expansion by nearly $100 million for research on cancer.
• An increase of $90 million in research and development by Transportation and Commerce to provide fast, safe, and pollution-free
transportation.
• Growth of $73 million in NASA's research and development
programs which have greater direct benefits to society, such as
weather prediction, communications, and aeronautics.
• Significant expansion of problem-related research programs by
the National Science Foundation to permit an increase of more
than 40% in research on problems such as preventing environ

SPECIAL ANALYSES

281

mental degradation through better land use, improving municipal
services through the application of science and technology, and
improving materials and manufacturing processes to advance
economic productivity.
• An additional $40 million to explore ways of stimulating the overall national investment in and use of science and technology.
The increase of $767 million in the Defense budget for research and
development and related facilities in 1973 will:
• Strengthen our sea-based retaliatory capabilities in order to
assure the continued effectiveness of our strategic deterrent.
• Provide new capabilities and increased effectiveness for our
general purpose forces.
• Provide for additional efforts in the test and evaluation of
systems before commitment to production.
• Expand the scientific and technological base that underlies
future military strength.
The 1973 budget continues the trend of the past 3 years of substantial increases in research and development funding by the civilian
agencies. The preceding chart shows the increase of about 65%
since 1969 in obligations for research and development for purposes
other than defense and space. Obligations for these civilian purposes
have increased by $2,111 million, from $3,295 million in 1969 to $5,406
million in 1973.
Table R-1. CONDUCT OF RESEARCH AND DEVELOPMENT * (in millions of dollars)
Obligations
Department or agency

Defense—Military functions
National Aeronautics and Space
Administration
Health, Education, and Welfare
Atomic Energy Commission
National Science Foundation
Transportation
Agriculture
Interior
Commerce
Environmental Protection Agency
Veterans Administration
Office of Economic Opportunity
Postal Service
Housing and Urban Development
Justice
Labor....
Smithsonian Institution
All other
Total

1971
actual

Expenditures

1972
1973
estimate estimate

1971
actual

1972
1973
estimate estimate

7,423

8,013

8,756

7,541

8,031

8.177

3,284
3.284
1,466
1,303
337
220
318
185
143
137
64
84
40
48
10
23
17
42

3,327
1,769
1,308
453
296
356
216
169
176
70
50
68
53
27
11
23
48

3,302
2,012
1,375
525
380
370
250
229
186
78
78
74
63
30
31
29
52

3,337
1,288
1,303
335
198
315
175
114
101
61
75
34
40
9
22
17
40

3,137
1,450
1,308
409
233
349
212
146
157
66
70
39
56
20
26
22
48

3,131
1,708
1,375

17,819

15,005

15,779

16,480

15,143

16,447

455

282
359
238
192
174
73
65
64
54
26
30
28
49

1
Detail in all tables may not add to totals due to rounding. In this table and tables R-3, R-4,
and R-5 "obligations" and "expenditures" for AEC are both accrued costs which approximate

cost in the conduct and support of research and development by Federal agencies. In some cases this
analysis
ysis excludes
excluc
demonstration activities which elsewhere may be considered as part of research and
development.
develo

282

THE BUDGET FOR FISCAL YEAR 1973

RESEARCH AND DEVELOPMENT FACILITIES
Obligations for the construction or renovation of facilities or acquisition of major items of equipment for the conduct of research and
development will increase by $128 million, from $661 million in 1972
to $789 million in 1973.
The estimated obligations for research and development facilities by
the Atomic Energy Commission include $43 million for continued
construction of the 200 Bev accelerator for high energy physics research near Chicago, and $21 million for continued construction of the
fast flux test facility at Hanford, Wash., which will support the liquid
metal fast breeder reactor development program.
The increase for the National Science Foundation includes funds to
begin construction of a very large array (VLA) antenna system which
will be the most advanced radio astronomy facility in the world.
The 1973 construction funds for NASA will provide for development
and production facilities for the space shuttle, and modification of a
facility for research on increasing efficiency and reducing pollution from
jet engines.
The increase for the Environmental Protection Agency includes
funds to initiate construction of a major research laboratory at
Cincinnati, Ohio.
Table R-2. RESEARCH AND DEVELOPMENT FACILITIES (in millions of dollars)
Obligations
Department or agency

Atomic Energy Commission
Defense—Military functions
National Aeronautics and Space Administration
Transportation
Environmental Protection Agency
National Science Foundation
Interior

All other
Total

1971
actual

Expenditures

1972
1973
estimate estimate

1971
actual

1972
1973
estimate estimate

312
153

276
176

287
199

302
144

274
157

247
180

40
1!
1
31
12

84
31
3
33
18

91
49
36
38
24

44
10
0
39
7

43
28
1
31
12

60
38
7
35
25

599

661

789

607

622 675

RESEARCH AND DEVELOPMENT IN COLLEGES AND
UNIVERSITIES
An important indicator of the extent of Federal support to assure
the continued progress of science is the level of contract and grant
funds to universities for research and development activities. The
1973 budget will once again provide a substantial growth in the total
Federal support for the conduct of research and development at
universities. Total obligations for this purpose will increase by 12%,
from $2,020 million in 1972 to $2,257 million in 1973.
Of even greater significance than the 1973 increase, is the increase in
Federal support for research and development at universities since
1969. The chart on the next page graphically displays the increase of
$785 million, or more than 53%, over 1969.

283

SPECIAL ANALYSES

Conduct of Research and Development at Colleges and Universities
$ Billions

2.5

.5 —

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

Estimate

Fiscal Years

The 1973 budget continues the efforts of the past 2 years to encourage educational institutions to undertake more research focused on
important national problems, including the problems of industry in
improving economic productivity and introducing technological
advances. The increase in research also will provide for the training of
a greater number of science and engineering graduate students through
employment on the research projects.
Table R-3. CONDUCT OF RESEARCH AND DEVELOPMENT IN COLLEGES
AND UNIVERSITIES » (in millions of dollars)
Department or agency

Health, Education, and Welfare
National Science Foundation
Defense—Military functions
National Aeronautics and Space Administration
Agriculture
...
Atomic Energy Commission
Commerce
Mother
Total
1

Obligations
1971
actual

Expenditures
1971
actual

•
1972
1973
estimate estimate

1972
estimate

1973
estimate

852
290
194

1,010
391
196

1,167
446
199

753
294
196

827
364
192

942
388
197

134
74
94
16
93

132
85
86
21
98

130
90
87
29
109

123
72
94
16
77

128
79
86
21
94

135
84
87
28
103

1,747

2,020

2,257

1,624

1,791

1,964

Amounts reported in this table are included in the totals for conduct of research and development in table R-l.

284

THE BUDGET FOR FISCAL YEAR

1973

CONDUCT OF RESEARCH
This section and the following section cover separately the conduct
of research and the conduct of development, which are treated together
in the sections above.
The research programs supported or conducted by the Federal
Government range from very fundamental research in such areas as
astronomy and high energy physics, to research focused on specific
problems such as reducing damage from hurricanes, or reducing noise
from truck tires.
The 1973 budget provides for increases in both the fundamental
research efforts and the more applied or problem-focused efforts. For
example, fundamental research support by the National Science
Foundation will increase by more than 10% in 1973. At the same time,
substantial increases are provided for research efforts focused on
finding cures for cancer, improving disease prevention, exploring new
means of providing needed energy, improving municipal services, and
preventing environmental degradation.
The 1973 budget clearly reflects the widening range of research
efforts being supported or conducted by the Federal Government, as
well as the overall increase in the level of support. Total obligations for
research will increase from $6,631 million in 1972 to $7,133 million in
1973. Expenditures will increase from $6,049 million in 1972 to $6,436
million in 1973.
The increase in Federal support for research since 1969 demonstrates
the efforts made to assure the continued progress of science in this
country and to focus more of our scientific resources on dealing with
serious civilian problems. Total obligations for research in 1973 will be
$1,935 million higher than the $5,198 million obligated in 1969, for an
increase of 37%.
Table R-4. CONDUCT OF RESEARCH (in millions of dollars)
Obligations
Department or agency

Health, Education, and Welfare
Defense—Military functions
National Aeronautics and Space Adistration
National Science Foundation
Atomic Energy Commission
Agriculture
Commerce
Interior
Transportation
Veterans Administration
Environmental Protection Agency
Office of Economic Opportunity
Smithsonian
Housing and Urban Development
Labor
Justice
AH other
Total

Expenditures

1972
estimate

1973
estimate

1,282
1,544

1,488
1,628

1,644
1,751

1.511

1,689

1,647

J97J
actual

1972
estimate

1973
estimate

1,137
1,559

1,240
1,582

1,422
1,639

1,462

1,490

1,473

1971
actual

317
429
308
94
132
65
62
54
26
17
19
14
6
38

425
427
344
108
146
99
68
67
22
23
23
14
8
51

495
454
359
164
164
111
75
76
58
29
25
18
10
54

308
429
305
88
126
64
59
40
20
17
16
13
5
36

378
427
338
95
142
87
64
61
30
22
23
14
9
47

422
454
347
128
156
95
70
69
35
28
21
18
10
49

5,917

6,631

7,133

5,685

6,049

6,436

SPECIAL ANALYSES

285

CONDUCT OF DEVELOPMENT
Development draws on knowledge gained from research for the
design, testing, and evaluation of new and improved materials, processes, and systems. Federal funding for development has been mainly
in support of defense, space, and atomic energy programs where the
Government is the primary consumer of the products developed.
The substantial increase in funding for development in 1973 includes
an increase to meet defense requirements for new and improved
weapons systems and equipment. There is an important increase in
the Atomic Energy Commission's program to develop an economic
and safe liquid metal fast breeder reactor to help meet this country's
long range needs for electrical energy. There is also a significant
increase for development by the Department of Transportation,
particularly for improved air traffic control systems, improved highway safety, advanced rail systems, and innovative urban mass
transportation systems.
Although NASA's total obligations for development will increase
only slightly in 1973, there will be a major change in program direction
as the Apollo program is completed and development of a manned
reusable space shuttle system is initiated.
Total obligations for development will increase from $9,816 million
in 1972 to $10,687 million in 1973; and expenditures will increase from
$9,732 million in 1972 to $10,046 million in 1973.
Table R-5. CONDUCT OF DEVELOPMENT (in millions of dollars)
Obligations
D nartm nt or

Expenditures

a nrv
1971
actual

Defense—Military functions
National Aeronautics and Space Administration
Atomic Energy Commission
Health, Education, and Welfare
Transportation
Environmental Protection Agency
Interior
Commerce
Postal Service
Housing and Urban Development
National Science Foundation
Justice
Office of Economic Opportunity
All other
Total

1971
actual

•
1972
1973
estimate estimate

1972
estimate

1973
estimate

5,879

6,385

7,005

5,982

6,449

6,538

1,773
874
184
155
83
53
49
39
29
19
5
58
27

1,637
881
281
197
109
70
61
59
30
28
18
28
32

1,654
921
368
269
110
86
65
64
38
31
20
20
36

1,876
874
151
134
60
49
26
32
24
27
5
55
26

1,648
881
210
147
96
70
50
33
34
32
11
40
32

1,660
921
286
188
105
82
65
56
32
33
15
30
35

9,227

9,816

10,687

9,321

9,732

10,046

286

THE BUDGET FOR FISCAL YEAR 197 3

PROGRAMS OF AGENCIES WITH MAJOR RESEARCH AND
DEVELOPMENT ACTIVITIES
DEPARTMENT OF DEFENSE—MILITARY

The total Department of Defense budget plan for research and development, including facilities, will increase by $767 million over the
1972 level, reaching a total of $8,955 million.
For the conduct of research, 1973 funding is estimated to increase by
$123 million to a level of $1,751 million, thus strengthening the technology base essential to the development of new military systems.
Areas of emphasis will include oceanography, biomedical research,
atmospheric sciences, electronics, and materials research.
The budget plan for development programs and operation of test
and evaluation facilities will rise to $7,005 million in 1973, an increase
of $620 million above the 1972 level. Major increases will be provided
for programs in the strategic area in order to assure the continued
effectiveness of our deterrent capability. In particular, additional funds
will be provided for improvement of our sea-based strategic deterrent.
Other strategic programs that will undergo continued development include the B-l aircraft, the subsonic cruise armed decoy (SCAD) for
bomber penetration, the airborne warning and control system
(AWACS) for air defense, and the Safeguard and prototype Hardsite
antiballistic missile defense systems.
Increases will also be provided for systems to improve the capabilities of our general purpose forces. These include: for the Air Force,
the F-15 air superiority fighter, and the A-X close air support fighter;
for the Navy, the F-14B fleet air defense fighter/interceptor, the
Aegis fleet air defense missile system, surface effects ship prototypes,
antiship cruise missile systems, and undersea surveillance systems for
antisubmarine warfare; for the Army, the SAM-D air defense missileT
system, the utility tactical transport aircraft system (UTTAS), a new
prototype main battle tank, the mechanized infantry combat vehicle
(MICV), and the armored reconnaissance scout vehicle (ARSV). The
joint service heavy lift helicopter program will be accelerated.
In addition, increases will be provided for new programs including
prototype lightweight fighters, vertical/short takeoff and landing
aircraft, and accurate terminal-homing missiles. Electronic warfare,
defense suppression, and target acquisition systems will also receive
more emphasis in order to improve our combat effectiveness against
sophisticated air defenses. Support of operational testing and evaluation of weapons systems will increase in order to provide assurance
of effective systems performance prior to a production commitment.
Partially offsetting these increases are decreases for programs
phasing down or completing development. These include the Minuteman intercontinental ballistic missile system, the Poseidon fleet
ballistic missile system, the F-14A fighter/interceptor, the Army
Dragon antitank missile system, the S-3A antisubmarine warfare
aircraft, and the F-5E international fighter. In addition, funding for
support of the satellite control facility will be transferred in 1973 from

SPECIAL ANALYSES

287

the Air Force research, development, test, and evaluation appropriation to the Air Force operations and maintenance appropriation and,
therefore, is not included in the 1973 development total. A more
detailed explanation of research and development trends is given in
the budget appendix on pages 311-319.
Table R-6. DEPARTMENT OF DEFENSE—MILITARY RESEARCH AND
DEVELOPMENT (in millions of dollars)
Purpose and budget title

Conduct of research and development:
Research, development, test, and evaluation:
Military sciences
Aircraft and related equipment
Missiles and related equipment
Military astronautics and related equipment
Ships, small craft, and related equipment
Ordnance, combat vehicles, and related equipment
Other equipment
Programwide management and support
Emergency fund
Other appropriations
Total, conduct of research and development

1971
actual

498

1972
estimate

527

1973
estimate

563

1,707
2.043

1,984
1,946

1,948
2,383

462
278
296

404
411
337

454
429
331

1.346

1,515

1,692

341

478
50
360

548
50
358

7,423

8,013

8,756

451

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

All activities of the National Aeronautics and Space Administration are classified as research and development and are included in
this analysis.
With the completion of the Apollo program in calendar year 1972
and Skylab in calendar year 1973, the development of a manned
reusable space shuttle system will give the space program new direction by providing a more economical means for transporting men and
equipment to and from space. By about 1979 the space shuttle will
begin to reduce the cost of space operations in earth orbit by recovering satellites for refurbishment and reuse, repairing satellites onorbit, and reusing launch vehicles. The two remaining Apollo missions,
which will provide over 50% of the lunar exploration time in the
Apollo program, are designed to obtain maximum scientific return
since they represent the last U.S. exploration of the moon for this
decade. The Skylab experimental space station will test man's ability
to live and work in space for up to 56 days, conduct an extensive
study of the sun, and survey earth resources.
Funding for the planetary program will support Mariner or Pioneer
class spacecraft for the exploration of Jupiter and Saturn in the late
1970's. Development will be continued on two Viking unmanned
orbiter/lander spacecraft scheduled to be launched to Mars in 1975. An
increase will occur in space astronomy for development of^the high
energy astronomy observatory which will study celestial X-ray and
gamma-ray sources and cosmic rays. The first experimental earth
resources technology satellite will test spacecraft and sensors able to

288

THE BUDGET FOR FISCAL YEAR 19 73

survey the earth's resources from space. Work will continue on advancing satellite capabilities in communications, navigation, geodesy,
and meteorology. A program to define alternative advanced propulsion
systems, including a small nuclear rocket, will be conducted. The current NERVA nuclear rocket program will be terminated. Development
will be accelerated on a short takeoff and landing (STOL) aircraft to
provide technology for improved short haul transportation systems. In
addition, increased emphasis will be placed on technology for quieting
jet engines.
NASA's capabilities will also be used, where appropriate, to assist
other agencies in solving civilian problems, such as developing new
modes of transportation.
Table R-7. NATIONAL AERONAUTICS AND SPACE ADMINISTRATIONRESEARCH AND DEVELOPMENT (in millions of dollars)
Program and type of activity

Conduct of research:
Manned space flight
Space sciences
Space applications
Space research and technology
Aeronautical research and technology
Nuclear power and propulsion
Supporting activities
Research and program management

1971
actual

1972

1973

202
312
163
107
100
23
158
412

192
446
184
75
110
22
146
414

109
554
201
66
163
10
141
403

Total, research plan
Conduct of development:
Manned space flight
Space sciences
Space applications
Nuclear power and propulsion
Supporting activities
Research and program management

1,477

1,589

1,647

1,220
75
14
32
136
310

1,093
91
20
6
123
312

1,116
85
23
11
122
298

Total, development plan

1,787

1,645

1,65

HEALTH, EDUCATION, AND WELFARE

Obligations for research and development by the Department of
Health, Education, and Welfare will increase by $243 million, from
$1,769 million in 1972 to $2,012 million in 1973.
Biomedical research and development will continue to grow in 1973.
These funds support a broad range of activities, from basic research
to understand fundamental biological life processes, to accelerated
efforts focused on bringing about more rapid advances in the prevention and treatment of a wide range of disease. Areas to receive continued emphasis include research on heart and lung disease, sickle
cell anemia, dental caries, family planning, infant and child health,
environmental pollution, drug abuse, and alcoholism.
Funding for cancer research will increase to $430 million in 1973,
from $337 million in 1972.
Further details about Federal biomedical programs may be found in
Special Analysis K of this volume.

SPECIAL ANALYSES

289

In the education area, the proposed National Institute of Education
is to serve as the national focal point for educational research and
development. With a budget of $125 million in 1973, the Institute
will assume responsibility for Office of Education research programs
and support new ventures as well. The Institute will work to produce,
develop, and test new educational products and practices to meet
priority needs.
Table R-8. HEALTH, EDUCATION, AND WELFARE—RESEARCH AND
DEVELOPMENT A N D RELATED FACILITIES (in millions of dollars)
Activity

Conduct of research and development:
National Institutes of Health
Health Services and Mental Health Administration
Education programs
Social and Rehabilitation Service
Food and Drug Administration
Allother
Subtotal, research and development
Research and development facilities
Total obligations..-

1971
actual

1972
estimate

1973
estimate

1,018
212
131
60
22
23

1,246
240
142
73
38
30

1,395
257
197
74
56
33

1,466
1

1,769
14

2,012
14

1,467

1,783

2,026

ATOMIC ENERGY COMMISSION

Operating costs of the Atomic Energy Commission for conduct of
research and development will increase from $1,308 million in 1972 to
$1,375 million in 1973, and obligations for related construction and
equipment will total $287 million in 1973, as compared to $276
million in 1972.
AEC's basic and applied research programs include investigations
in the physical sciences in order to develop a fundamental understanding of the properties and behavior of both matter and energy, studies
in the biomedical sciences on the effect of radiation on living systems
in order to assess, evaluate, and control radiation exposure to man and
the environment, and research related to weapons technology and
detection techniques. Funds for research programs will increase by
approximately $27 million from the 1972 level.
Emphasis will be placed on the controlled thermonuclear fusion
research program, which seeks to develop another source of clean
energy for the long term future. AEC will intensify its environmental research in 1973 to gain a fuller understanding of the effects
of radiation upon the environment. Outlays for research in high
energy physics will increase.
AEC's development programs include design and testing of nuclear
weapons, process development in support of nuclear material production activities, development of techniques and facilities for long-term
storage of radioactive wastes, development of advanced reactors for
power and propulsion, and development of peaceful uses of radioisotopes
and nuclear explosives. Funds for development programs will increase
by about $40 million from the 1972 level.

480-700 O—72

290

THE BUDGET FOR FISCAL YEAR

1973

AEC's top priority civilian program is the development of an
economic liquid-metal fast-breeder power reactor. This program will
be further accelerated in 1973 in order to demonstrate the large scale
technical feasibility of this concept by 1980. The fast breeder is
expected to play an important part in meeting the growing national
needs for clean energy.
Partially offsetting the increase in development programs are the
reductions due to the decision to reduce the level of the space propulsion reactor program, and to the phase-out of a special underground
nuclear weapons test activity at Amchitka Island, Alaska.
The AEC budget for research and development facilities in 1973
provides for obligations of $287 million, which is $11 million more
than the 1972 level. Included in the 1973 amount is $43 million of
obligations for continuation of construction of the 200 Bev accelerator
for high-energy physics near Chicago, and $21 million of obligations
for continued construction of the fast flux test facility at Hanford,
Wash., which will support the liquid metal fast breeder reactor development program.
Table R-9. ATOMIC ENERGY COMMISSION—RESEARCH AND DEVELOPMENT AND RELATED FACILITIES (in Bullions of dollars)
Activity

Conduct of research:
Physical research....
Biomedical research
Weapons research
Other programs.
__

____

Total, conduct of research, obligations
Conduct of development:
Reactor development
Weapons development and testing
Special nuclear materials (production)
Plowshare
Other programs
Total, conduct of development, obligations
Research and development facilities, obligations
Total obligations

1971
actual

1972
estimate

1973
estimate

271
86
71
1

268
89
69
1

283
92
78
1

429

427

454

428
398
26
7
15

452
377
30
7
15

874

881

485
377
34
7
18
921

312

276

287

1,615

1,584

1,662

NATIONAL SCIENCE FOUNDATION

N ational Science Foundation obligations for research, development,
and related facilities will increase by $77 million, from $486
million in 1972 to $563 million in 1973. This increase will permit:
(1) Expanded and strengthened fundamental research efforts in such
fields as chemistry, biology, astronomy, and the environmental
sciences; (2) a substantial growth in problem-focused research efforts
to help provide the science and technology needed to enhance environmental quality, improve economic growth and productivity,
and more effectively deal with significant social problems; and (3)

SPECIAL ANALYSES

291

exploration of new ways to encourage the application of science and
technology to the needs of industry, States, and local government.
The significant expansion of problem-related research activities
will permit more intensive and comprehensive research efforts on
problems such as improving municipal services, preventing environmental degradation, improving availability of energy through solar
power, developing advanced tunneling technology, and designing
earthquake resistant buildings.
A significant new program will be initiated in 1973 to explore ways
of increasing industrial and other non-Federal investment in research
and development, speed up the application of research and development results to improve products and services, and increase productivity through the application of science and technology. Also, a new
national research and development assessment program will be
initiated with the principal objective of improving our knowledge of
how research and development can improve economic growth and
productivity and enhance our international trade position.
The Foundation's scientific research project support will be increased substantially again in 1973 to permit continued growth in the
fundamental research efforts supported by this program. There will be
a substantially stronger role for NSF in supporting fundamental
materials and engineering research, to help assure a strong U.S.
capability in these areas which are vital in bringing about technological innovation.
DEPARTMENT OF TRANSPORTATION

Obligations for the Department of Transportation for research and
development, including facilities, will increase from $327 million in
1972 to $428 million in 1973.
For ground transportation obligations will increase by over 50%,
from $156 million in 1972 to $235 million in 1973. An increase of
$14 million in the highway safety program will be allocated for
research on the effects of alcohol on driving, experimental safety
vehicles, and crash survival for motor vehicles. In addition, funds will
be used for improved highway design and operation, reduction of
traffic congestion, and highway and bridge structural safety. In the
case of railroads, obligations will increase by $33 million in 1973.
Major program increases are for advanced systems such as a 300
m.p.h. tracked air cushion research vehicle, Metroliner improvements,
and construction and operations at the High Speed Ground Test
Center near Pueblo, Colo. Urban mass transit research and development, which will increase by $17 million, will stress improved bus
design, bus pollution control, bus priority systems, and research on
new technology transit systems.
Air transportation obligations will increase to $112 million in 1973,
permitting an increase of $24 million for air traffic control and navigation systems and aircraft noise reduction. The major emphasis
will be on the development of new, automated air traffic control
systems which will increase the safety and efficiency of the Nation's
airports and airways. Activities will also continue to improve and
expand the capacity of existing air traffic and navigation systems.

292

THE BUDGET FOR FISCAL YEAR 1973

In cooperation with NASA, efforts will be accelerated to investigate the feasibility of achieving significant aircraft engine noise
reduction through improved design features.
Water transportation obligations will total $40 million in 1973. The
major concentration of effort will be devoted to maritime pollution
control systems development, all-weather marine traffic and related
aids to navigation systems, and increased search effectiveness.
In all of the Department's research and development projects,
increased effort will be given to the environmental effects of transportation and to the study of multi- and inter-modal transportation
systems and technology.
DEPARTMENT OF AGRICULTURE

Obligations for the Department of Agriculture for research and
development, excluding related facilities, will increase from $356
million in 1972 to $370 million in 1973.
The cooperative relationships with the State Agricultural Experiment Stations and schools of forestry will be further strengthened in
1973 by provision of additional funds for Federal sharing of increased
costs of research.
Additional funding is provided for research relating to rural development, analysis of the comparative advantage of the United States
in world agricultural trade, and on the cost of controlling and adapting
agricultural production to meet environmental standards. Increases
are also provided for: (1) Accelerating development and pilot testing of
safer means of pest control, (2) developing safer, more effective and
efficient means of suppressing forest fires, and (3) expanding overseas
research of value to U.S. agriculture and forestry.
DEPARTMENT OF THE INTERIOR

Research and development obligations by the Department of the
Interior will increase from $216 million in 1972 to $250 million in 1973.
Increases in 1973 provide for funding promising projects to reduce
or control mineral pollutants, to expand efforts to meet future requirements for adequate supplies of clean fuels, and for implementation of
a mined area protection program under proposed legislation.
There will be a major increase in efforts to understand the causes of
earthquakes, and to study means of controlling or limiting the size
of earthquakes. This will require an improved understanding of
geologic principles and processes.
Research and development efforts also will be expanded to provide:
(1) a more accurate appraisal of the Nation's mineral resources,
including the outer Continental Shelf; (2) new or improved methods,
techniques and instruments for mineral exploration; (3) a better
understanding of basic principles of hydrology necessary for the
appraisal and evaluation of the Nation's water resources, including
the effects of underground waste disposal; (4) improved application of
environmental resource data in urban decision making processes; and
(5) improved application of satellite acquired data in the earth
science and marine resources fields.
Research is continuing on health and safety problems in coal and
metal nonmetallic mining. A program to develop criteria for Federal

SPECIAL ANALYSES

293

schedules to regulate the approval and certification of mining machines, equipment and devices also is continuing.
DEPARTMENT OF COMMERCE

Research and development by the Department of Commerce will
increase by $60 million to $229 million in 1973. The primary agencies
conducting research in the Department are the National Oceanic and
Atmospheric Administration (NO A A), the National Bureau of
Standards (NBS) and the Maritime Administration (MARAD).
Obligations for research and development by NOAA will increase
by nearly 25%, from $100 million in 1972, to $124 million in 1973.
Since it was established in 1970, NOAA's research and development
programs have emphasized improving the scientific knowledge base
necessary to attain national goals such as improved weather prediction, reduced losses from natural disasters, and better utilization of
our marine resources.
In 1973 NOAA will significantly expand its efforts to develop the
capability to modify hurricanes to reduce the loss of life and property
from these storms. It will also increase research to improve understanding of earthquakes and to help develop a capability to predict
potentially disastrous quakes.
Oceanic research and development efforts will be increased to
improve our knowledge of ocean processes to permit more effective
use, development and conservation of our marine resources. There
will be increased activities in mapping of the Continental Shelf to
identify energy and mineral resources. (Further details regarding
Federal marine science activities will be contained in the annual
report of the Interagency Committee on Marine Science and
Engineering.)
The National Bureau of Standards' research and development
program will increase by nearly 80%, from $35 million in 1972 to
$62 million in 1973. NBS will initiate a new program in 1973 to
explore ways of stimulating more research in the private sector of
the economy, to produce new and better quality goods and services,
increase national productivity, and improve our international trade
position. Research efforts to reduce loss of life and property from fires
will be expanded.
NBS will expand its research programs to develop standards and
measurements to contribute to the national goals of improving our
environment, health, and safety. Pollution measurement standards
and standardization in computer technology will also be emphasized.
In response to the Administration's interest and concern in the
shipbuilding industry, MARAD will emphasize research to serve the
maritime industry by increasing industry competitiveness. Concentration will be on shipboard automation, new propulsion, and new
ship systems such as the advanced tug-barge concept.

294

THE BUDGET FOR FISCAL YEAR 1973
ENVIRONMENTAL PROTECTION AGENCY

Obligations for the conduct of research and development by the
Environmental Protection Agency are expected to increase to $186
million in 1973.
Research and development relating to pollution sources and effects
will be continued and expanded, particularly in determining the
health effects of air pollutants and tracing the relationship between
air pollution emissions and ambient air quality so that the most
beneficial and cost effective control measures can be adopted.
EPA will continue a substantial program in the development of
pollution control technology. It will also develop and implement a
new strategy to encourage greater private sector involvement in the
development, demonstration, and application of equipment and processes for the abatement and control of pollution. The new strategy
reflects the growing market for pollution control technology, the
potential industrial capability in this area, and the strong desirability
of involving non-Federal sectors to a far greater extent than in the
past.
EPA is redirecting its solid waste management program to focus
research on environmental effects of solid waste disposal activities
and on economic and institutional factors relating to solid waste
management.
VETERANS ADMINISTRATION

Obligations for research and development activities of the Veterans
Administration will increase from $70 million ia 1972 to $78 million
in 1973. As part of the effort to upgrade the quality of medical care
provided to veterans, VA is expanding research in such areas as
pulmonary, coronary and kidney disease, drug dependency and alcoholism. Efforts to develop new or improved prosthetic and sensor}7"
aids will also be increased.
OFFICE OF ECONOMIC OPPORTUNITY

The Office of Economic Opportunity will continue a substantial
research and development effort with 1973 obligations of $77.8 million,
compared to $50 million in 1972. The Office will continue to emphasize
experiments designed to test the effectiveness of private market
mechanisms for delivering social services to the poor. Other research
and development efforts will include analysis of the causes of poverty,
identification of needs, and the design, conduct, and evaluation of
social experiment projects with the objective of alleviating poverty
and promoting equality of opportunity.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

The Department of Housing and Urban Development will expand
its basic Research and Technology program by $15 million in 1973, a
33% increase over 1972. This increase will result in obligations of $63
million for research and development in 1973. In 1973, Federal dollar
support for Operation Breakthrough will be phasing out as this major
demonstration is completed and emphasis is shifted to encouraging
volume production and marketing of the housing systems.

SPECIAL ANALYSES

295

Major experiments in the areas of housing allowances and improved
management of public housing will move into full field implementation
in 1973, based on planning, development and initiation work underway
in 1972. Efforts which have the objective of increasing the capabilities
of all levels of government to understand and deal with the processes
of community development will be continued. Such efforts include
developing municipal and regional information systems, gathering and
evaluating data on housing and mortgage markets, applying university
resources to urban problems, and improving community facilities and
services.

SPECIAL ANALYSIS S
FEDERAL ENVIRONMENTAL PROGRAMS

This analysis identifies Federal funding for selected environmental
activities in three selected categories:
• Pollution control and abatement activities;
• Selected activities to protect and enhance the environment; and
• Activities to understand, describe and predict environmental
conditions.
Information is also included on Federal assistance for sewer and
water system construction.
POLLUTION CONTROL AND ABATEMENT

The Federal Government's commitment for programs to control
and abate pollution has grown dramatically over the past few years.
[In millions of dollars]

Budget authority
Obligations
Outlays

1969
estimate

1970
actual

1971
actual

1972
estimate

1973
estimate

775
830
685

1,432
1,071
751

1,823
2,017
1,149

3,258
3,288
1,975

3,419
3,612
2,440

Budget authority being requested in 1973 is more than four times
that appropriated in 1969. Obligations also reflect more than a
fourfold increase and outlays more than a threefold increase over the
same 4-year period.
The largest portion of funding is for grants to State and local
governments for construction of municipal sewage treatment facilities.
The number of individuals served by secondary sewage treatment
facilities has grown from 91 million in 1969 to 103 million in 1971
and is expected to reach 115 million by 1973, 130 million by 1975
and 146 million by 1977. Largely because of construction backlog,
there currently is about $7 billion worth of waste treatment facilities
for which Federal assistance has been committed for which construction is incomplete or not yet under contract. This backlog does not
include funds becoming available for obligation in 1972 or those
requested for 1973.
Grants also provide support for pollution control agency operations
and for planning. Outlays for all grants will increase by 23% over
1972, from $1,014 million to $1,250 million.
296

SPECIAL ANALYSES

297

Table S-l. POLLUTION CONTROL AND ABATEMENT ACTIVITIES
(in millions of dollars)
Type of activity

Financial aid to State and local
governments
Research and development
Federal abatement and control
operations
Manpower development
Reduce pollution from Federal
facilities
Other pollution control and
abatement activities
Separate transmittal 1
Total

Budget authority
1971
actual

1972
estimate

Outlays

1973
estimate

1971
actual

1972
estimate

1973
estimate

1,082
442

2,121
516

2,123
599

554
366

1,014
474

1,250
561

136
19

198
18

219
15

92
17

189
18

206
14

116

280

315

186

272

124

113
35

115
22

1,823

3,258

3,419

1,149

1,975

2,440

1
Not reflected in preceding activity lines are proposals that will be transmitted subsequently
for an estimated $35 million in budget authority and $22 million in outlays in 1973 for EPA for
implementing legislation proposed by the administration.

Outlays will also increase by 18%, from $474 million to $561
million, for research and development activities, which include efforts
to determine and describe pollution sources and effects and to develop
and demonstrate technology for monitoring and controlling pollution.
Outlays for direct Federal pollution control operations will increase
by 9%, from $189 million to $206 million. This includes planning;
monitoring and surveillance; standard setting and enforcement; and
technical assistance. Funding for manpower development activities
will decline somewhat, reflecting the steady growth in the number of
people interested in and available for positions in environmental
activities.
Outlays will increase by 46% in 1973, from $186 million to $272
million, primarily in the Departments of Defense and Agriculture for
remedial projects to reduce pollution from Federal facilities.
Agencies involved.—Major Federal activities to control and abate
pollution were consolidated in the Environmental Protection Agency
(EPA) on December 2, 1970. However, a number of other agencies
carry on important pollution control activities, as indicated in table
S-2."

298

THE BUDGET FOR FISCAL YEAR

1973

Table S-2. POLLUTION CONTROL AND ABATEMENT
AGENCY (in millions of dollars)

ACTIVITIES—BY

Budget authority
Agency

Environmental
Protection
Agency1
Defense-Military
Atomic Energy Commission.. __
Transportation
Agriculture
Defense-Civil
Interior
Commerce
General Services Administration
National Aeronautics and Space
Administration
National Science Foundation. __
Other agencies
Total

1971
actual

1972
estimate

Outlays

1973
estimate

1971
actual

1972
estimate

1973
estimate

1,303
134
124
52
71
8
46
25
4

2,448
214
139
66
108
50
104
30
18

2,481
314
158
91
106
56
87
34

718
82
122
22
67
7
45
20
2

1,287
130
136
56
107
50
87
26
2

1,544
235
154
79
139
56
82
30
5

25
10
22

33
12
37

29
16
46

25
9
31

30
11
53

29
15
72

1,823

3,258

3,419

1,149

1,975

2,440

1
Funding shown above for EPA has been adjusted to include activities actually carried on by the
Departments of HEW, Agriculture, and Interior; AEC and Federal Radiation Council prior to
December 2, 1970. The budget authority adjustment is $14 million in 1971 and the outlay adjustment is $17 million.

Outlays for EPA will increase by 20% in 1973, from $1,287 million
to $1,544 million. Continued emphasis will be placed on EPA's program
of grants for sewage treatment facilities to assist State and localities
in reducing the Nation's backlog of municipal treatment facility
needs. Grants up to 55% of total eligible project costs are made to
construct municipal sewage treatment facilities. Appropriations for
this program were $214 million in 1969, $800 million in 1970, $1
billion in 1971, and $2 billion in 1972. Another $2 billion is being
requested for 1973.
Several new efforts will be undertaken by EPA to define pollution
control objectives and determine the most cost-effective solutions.
Research will be expanded in health effects of air pollution to determine more accurately the concentrations of pollutants that are dangerous to human health, and in urban-regional scale modeling of
relationships among air pollution emissions, atmospheric conditions,
and air to which segments of the population are exposed. EPA is
reorienting its solid waste activities to focus upon economic and institutional constraints, with less attention to areas where the private
sector is focusing its efforts—the development of hardware for recycling and other waste management activities. In addition, funding will
be increased for State and local pollution control agency grants,
enforcement activities, air pollution monitoring, and economic studies.
The Congress has yet to complete action on legislation proposed for
EPA by the administration on noise control, toxic substances, ocean
dumping, pesticides, and water quality.
Other agencies also carry out important pollution control and abatement activities. For example, the Department of Defense will continue
to expand its R. & D. and action programs to reduce pollution from

SPECIAL ANALYSES

299

its industrial production facilities, military bases, naval vessels, aircraft, and jet engine test facilities. Accomplishments include development of a new process for disposal of deteriorated explosives, development of biodegradable metal cleaners, reduction of smoke levels in
propellants, and the development of a low pollution engine that is now
being tested for use in automobiles.
The Atomic Energy Commission will continue its major program of
research, development, and monitoring relating to effects of ionizing
radiation. Increases in 1973 are largely for research on the effects of
thermal alteration of lakes, streams, and estuaries and to provide
information on the amount and nature of radioactivity and other
potential pollutants released to the environment.
The Department of Agriculture makes grants and loans for waste
treatment facilities in smaller localities and conducts research on
agriculturally related pollution such as pesticides, an mal and crop
processing wastes and fertilizer and plant nutrients. Progress has been
made in reducing pollution from facilities n National forests by a
minimization of stream pollution and sediment, and prevention of
logging residue disposition in stream channels.
The Department of the Interior will continue research relating to
pollution sources and effects, will expand activities to reduce pollution
from facilities in the national parks, and will increase research under
pilot plant programs to develop methods of converting coal to fuel gas
with less pollution.
The Corps of Engineers will cont nue construction of dikes for the
containment of polluted material dredged from Great Lakes harbors.
The Department of Transportation will increase funding for work
on reducing aircraft engine noise, studying environmental effects
of aircraft, and reducing pollution from Coast Guard facilities.
The Department of Commerce provides grants for waste treatment
facilities from the Economic Development Administration. The
National Oceanic and Atmospheric Administration conducts environmental monitoring and prediction activities related to air and water
pollution. The National Bureau of Standards defines and tests environmental standards and measurements.
The General Services Administration will continue work on pollution
reduction at Federal installations us ng funds appropriated in previous
years.
The National Aeronautics and Space Administration activities consist
primarily of research and development on reduction of aircraft noise.
Media polluted and pollutants.—Pollution control and abatement
activities are generally focused on reducing a variety of pollutants in
air or water or particular classes of pollutants such as pesticides or
radiation. Table S-3 summarizes the total Federal effort in terms of
media polluted and also identifies funding associated with selected
pollutants. Among the media, water pollution currently receives the
greatest share—75%—of total Federal pollution control obligations.
This large share is a result of grants and loans for construction of
municipal waste treatment facilities.

300

THE BUDGET FOR FISCAL YEAR

1973

Air pollution control efforts account for 14% of the total. Federal
efforts in 1973 include research and development, grants to State and
local air pollution control agencies, and direct Federal operations such
as monitoring, standard setting, and enforcement. Increased emphasis
will be given in 1973 to improving knowledge of the health related
effects of various concentrations of pollutants; and quantifying the
health benefits that would result from their control. Activities relating
to pollution of land are for research and other activities concerned
with effects of acid mine drainage, nutrients, pesticides, and other
substances.
Federal pollution control activities relating to radiation, pesticides,
solid wastes, and noise are largely confined to research relating to
effects, control technology, and standard setting and enforcement.
Table S-3. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
MEDIA OR POLLUTANT (in millions of dollars)
Media or pollutant

Media polluted:
Water:
Construction grants and loans
Other__
_
__
__.
Air
.
___
Land
Other (e.g.. living things, materials)
Multimedia (i.e., more than one of above)
Total i
Selected pollutants: 2
Solid wastes
Pesticides
Radiation
Noise

Obligations
1971
actual

1972
estimate

1973
estimate

1,285
248
245
49
136
53

2,052
487
433
60
194
63

2,176
510
506
64
246
74

2,017

3,288

3,577

46
36
137
41

61
48
144
57

64
51
152
61

1
Excludes $35 million in 1973 for EPA which will be proposed in a separate transmittal (see footnote
for table S—1).
2
Funds for selected pollutants are included in the "media" breakdown above.

Excluded from funding shown above for pollution control and
abatement activities are:
• Activities to reduce or avoid the use of pesticides funding for
such activity is expected to be approximately $66 million in 1973,
up from $57 million in 1972 for both research and education
programs largely carried out by the Department of Agriculture;
and
• Activities that are carried on for some other primary purpose
but which also contribute to the reduction of pollution. For
example, extensive activities to hold soil in place to preserve soil
productivity, such as those financed by the Department of
Agriculture, and erosion control activities by Corps of Engineers
and Department of Transportation (highways), have been excluded from this analysis even though these activities also serve
to reduce sediment pollution of water.

SPECIAL ANALYSES

301

RECREATION, PARKS, HISTORIC SITES, FISHERIES AND WILDLIFE
PRESERVATION, AND ENHANCEMENT ACTIVITIES *

Federal funding will increase for environmental protection and
enhancement activities such as providing recreational areas, parks,
historic sites, and fish and wildlife preservation.
[In millions of dollars]

Budget authority.
Obligations.. __
Outlays

_
__

__
...

1971
actual

1972
estimate

870
752
674

1,056
1,061
887

1973
estimate

962
1,017
898

Protection and enhancement activities.—The Federal Government
provides grants to State and local governments for acquiring land for
recreational purposes, for preserving open space and historic properties,
and for fish and wildlife refuges. Aid is also provided for research
and planning, construction and maintenance of recreational facilities
and wildlife refuges. Outlays for aid to State and local governments
will increase by 10% from $272 million in 1972 to $299 million in 1973.
The Federal Government also performs directly such activities as
acquiring lands for the preservation of unique natural areas and for
recreation, supporting sport fisheries and wildlife preservation
activities, preserving historic properties, and conducting related
functions.
Environmental protection and enhancement activities include:
• City recreation, which covers all federally assisted or direct Federal projects or activities (including historic preservation) which
are located within incorporated places of 25,000 or more
population.
• Unique natural areas and endangered species, which covers all
national parks, monuments, scenic rivers, trails, wilderness seashore and refuges for endangered species and similar non-Federal
areas.
• Noncity general recreation, which covers all national recreation
areas, recreation programs in national forests, separable recreation costs for Federal water projects, and federally assisted State
and local areas located outside incorporated places of 25,000 or
more population.
• Sport fish and wildlife, which covers all national wildlife refuges,
national fish hatcheries and federally assisted projects serving
similar purposes including rare and endangered species.
• Historic preservation and rehabilitation, which covers all national
historic sites, military parks, battlefields, and similar areas and
federally assisted historic preservation and rehabilitation.
• All other activities, which includes all Federal aid and direct Federal costs for general administration, planning, studies and
similar activities not otherwise allocated.
1
The content of this category
gy
g y entitled
t t e d "Selected environmenta
rmenta
differs from that of the category
nhancement activities" in the 1972 budget special analysis.
analysis The principal differences are exclusion
enhancement
beautific
off the highway beautification
program under DOT and exclusion of the grants made by EDA in
ommerce for recreation development projects. Funding data are not available for 1969-70 in areas
Commerce
comparable
bl to 1971-73.
197173

302

THE BUDGET FOR FISCAL YEAR 19 73

Table S-4. SELECTED ENVIRONMENTAL PROTECTION AND ENHANCEMENT
ACTIVITIES (in millions of dollars)
Budget authority
1971
actual

Financial aid to State and local
governments:
Purchase, development, and
operations:
City recreation
Preserve unique natural
areas and protect endangered species
None ity general recreation.
Sport fish and wildlife
Historic preservation and
rehabilitation
All other State and local
aid

1972
estimate

Outlays

1973
estimate

1971
actual

1972
estimate

1973
estimate

114

151

133

104

27
139
51

36
188
56

36
147
63

14
52
45

23
86
62

25
101
57

1
339

3
442

4
392

1
168

2
111

3
299

96
231
100

93
279
110

134
189
111

78
227
100

118
259
104

137
198
123

Subtotal

531

614

570

506

615

599

Total

870

1,056

962

674

887

898

Subtotal.
Direct Federal activities:
Purchase, development, and
operations:
City recreation
Preserve unique natural
areas and protect endangered species
Noncity general recreation.
Sport fish and wildlife
Historic preservation and
rehabilitation
All other direct Federal
activity

Agencies involved.—The Department of the Interior accounts for approximately 70% of the environmental protection and enhancement
activities described in this section.
The Bureau of Outdoor Recreation promotes coordination of Federal outdoor recreation programs, and administers the land and water
conservation fund which provide grants for planning, acquisition and
development of State and local recreation areas and Federal purchases
of nationally important lands. The 1973 budget for the land and water
conservation fund continues the President's Legacy of Parks initiative
by providing $197 million for grants to State and local governments
to help them meet the increasing demand for local recreation areas,
especially those located in or near major cities. The amount for grants
in 1972, to launch the Legacy of Parks initiative, includes appropriation of unused prior year authorization and, therefore, is $58
million higher than the amount in 1973. In 1973, a total of $98 million
is provided for Federal land purchases made by several agencies to

SPECIAL ANALYSES

303

preserve nationally important natural and historic areas, including
endangered species habitats. Newly authorized areas for which funds
are provided to continue acquisition in 1973 are Sleeping Bear Dunes
National Lakeshore, Voyageurs National Park, Gulf Islands National
Seashore, and Chesapeake and Ohio Canal Historic Park. Emphasis
will also be placed on acquisition of lands in older natural preservation areas and parks such as Everglades National Park.
The Bureau of Sport Fisheries and Wildlife provides assistance to
State and local governments for fish and wildlife restoration, management and research. The Bureau adminisisters 97 hatcheries, which
help to support inland fisheries resources, and 329 units in the National
Wildlife Refuge System which includes about 28 million acres, of
which nearly 20 million acres are in Alaska. Endangered species,
including nine mammals, 15 birds, and the alligator, are protected on 82
of the national wildlife refuges. The Bureau manages 256 wildlife
refuges with 3.9 million acres for migratory waterfowl and 51 other
areas with 4 million acres for other migratory birds.
The National Park Service administers 284 areas comprising about
29 million acres located in 47 States, the District of Columbia, Puerto
Rico, and the Virgin Islands. These include national parks, monuments, historic sites, and national recreation areas which have been
established to preserve the Nation's natural and historic heritage. In
1973 the Park Service will commence planning and design work for
visitor facilities in the Nation's Capital and elsewhere for the American
Revolution bicentennial. The Park Service also encourages the preservation of additional historic properties throughout the Nation by
assisting the States and territories to conduct statewide historic
preservation surveys and by making matching grants for individual
preservation projects.
The Bureau of Land Management protects and manages over 450
million acres—mainly in the Western States and Alaska. This land
area represents 60% of all federally owned lands and 20% of America's
total land base. Legislation proposed by this administration would
establish a national policy that these national resource lands be
managed under principles of multiple use and sustained yield in such
a way as to protect the quality of the environment. An important ongoing program the bureau administers is the Johnny Horizon antilitter
campaign on the public lands. The Bureau of Reclamation provides
recreation facilities on some of the reservoir projects which it
constructs.
The Department of Housing and Urban Development provides grants
to help States and localities acquire and develop open space lands.
In 1973, the open space program will be folded into the new urban
community development revenue sharing program, upon enactment
of pending legislation. Consequently, the $100 million requested in
1973 for the open space program, which is the same as the 1972 appropriation, will be transferred to the revenue sharing program upon
its enactment. This will allow increased flexibility for communities
to meet recreational needs in their areas.
The Department of Agriculture carries out a variety of environmental
enhancement activities, particularly through the Forest Service.
The 187 million acres of National Forest System lands are managed
in accordance with the provisions of The Multiple Use-Sustained

304

THE BUDGET FOR FISCAL YEAR 1973

Yield Act to provide outdoor recreation, range, timber, watershed
and wildlife values in combinations that will best meet the needs of
the Nation without impairing the productivity of the land. A review
of all existing primitive areas for possible designation as wilderness
is underway in accordance with the provision of the Wilderness Act
and a new program in cooperative law enforcement is proposed for
implementation in 1972 and 1973. Other activities include research to
develop more attractive and durable plants, shrubs, flowers, and
and trees to improve natural beauty.
The Corps of Engineers provides facilities for water-based recreation
at reservoirs and other public works. As of January 1971, these
facilities included 3,284 recreation areas providing 2,666 designated
day-use areas, 1,391 designated camping areas with over 50,000
campsites.
Donations and bargain sales of Federal property.—Assistance to State
and local governments for parks, recreation, and historic preservation
also is provided in the form of donations of Federal surplus properties
and the sale at $2.50 per acre of public domain lands. In 1973, an
estimated 20,000 acres of Federal surplus property valued at $120
million will be donated and 15,000 acres of public domain lands will
be sold at $2.50 per acre for these purposes.
Table S-5. RECREATION, PARKS, HISTORIC SITES, FISHERIES, AND
WILDLIFE ACTIVITIES (in millions of dollars)
Outlays

Budget authority

Total

UNDERSTANDING,

1973
estimate

642
96

787
108

673
105

485
92

651
105

626
107

75
39
12
3
3

100
41
12
4
4

100
65
12
3
4

40
39
12
3
4

70
41
12
4
4

79
65
12
3
4

870

1,056

962

674

887

898

1971
actual
Interior
Agriculture
Housing and Urban Development- _
__
Defense—Civil
Labor
Tennessee Valley Authority
Other agencies-

1972
estimate

1971
actual

DESCRIBING, AND PREDICTING THE ENVIRONMENT 12

Federal agencies conduct a wide variety of activities to understand,
describe, and predict environmental conditions. Objectives range from
the provision of routine weather forecasts to the scientific understanding of complex ecological systems. Funding for these activities
will increase in 1973.
[In millions of dollarsl

Budget authority
Obligations
Outlays
1
2

1970
actual

1971
actual

1972
estimate

1973
estimate

719
710
702

914
914
856

1,031
1,050
951

1,101
1,117
1,051

This section excludes activities reported under pollution control and abatement.
Funding data are not available for 1969 on a basis comparable to 1970-73.

SPECIAL ANALYSES

305

Activities.—Over half of the funding for this category supports
environmental observation and measurement to describe and predict
weather and ocean conditions and to develop methods of prediction
and control of earthquakes.
Outlays will increase by 10%, from $484 million in 1972 to $531
million in 1973 for research, development, and operational activities
in this category. Funding will also be increased, but less sharply for:
• Survey activities to describe the physical environment for the
purpose of preparing maps and charts; and
• Weather modification.
Table S-6.

UNDERSTANDING, DESCRIBING, AND PREDICTING
ENVIRONMENT (in millions of dollars)
Budget authority

Type of activity

Observe and predict weather
and ocean conditions, disturbances:
Research and development __
Operations
Locating and describing natural
resources:
Research and development. __
Operations
Physical environmental surveys:
Research and development
Operations
Weather modification
Research on environmental impact on man
Ecological and other basic environmental research
Total

1971
ictu&l

1972
cstiro&tc

THE

Outlays

1973
estimate

1971
&.ctu&l

1972
cstim&tc

1973
cstim&tc

193
284

210
297

253
313

163
287

194
290

223
308

172
70

172
79

149
81

156
66

152
77

148
81

6
81
17

8
99
19

14
102
24

6
76
17

8
87
18

14
102
22

105

114

106

914

1,031

1,101

856

951

1,051

Additional emphasis will be placed upon research to develop a better
understanding of the impact of the environment on man, for which
outlays will be increased by 21%, from $38 million in 1972 to $47
million in 1973; and on ecological and other basic environmental
research, for which outlays will be increased by 22%, from $87 million
in 1972 to $106 million in 1973.
Agencies involved.—In this overall category, the Department of
Commerce accounts for about 27% of all Federal activities. NOAA
carries on a wide range of environmental observation and prediction
activities, weather modification experiments, mapping and charting,
development of instrumentation, data dissemination services, and
related research. Outlays will increase from $264 million in 1972 to
$309 million in 1973 for improved weather services; hurricane and
severe storm warnings; weather modification research; earthquake and
seismic research; environmental satellite system procurement;
monitoring, prediction, and assessment of marine resources; and in the
sea grant program with universities and with industries.

306

THE BUDGET FOR FISCAL YEAR 1973

The Department of Defense conducts activities in environmental
observation and measurement to describe and predict weather and
ocean conditions and disturbances important to military operations.
Research is conducted in oceanographic instrumentation development
and operational systems for observing and forecasting the ocean environment. Research and development is also conducted in weather
modification by nuclear and nucleation process, cloud physics, numerical modeling of warm fog and cumulous cloud situations, and fog dispersal field experiments.
The National Science Foundation supports research activities related
to improving the quality of the environment, such as the regional
environmental systems and weather modification, programs of research applied to national needs (RANN), the international decade
of ocean exploration (IDOE), and other environmentally related
research programs. Outlays will increase by 17% from $136 million in
1972 to $159 million in 1973. Increases are due to intensified largescale RANN support of activities including: finding ways to modify
weather for man's benefit, measuring trace contaminants in the
environment, and identifying and analyzing the problems of regional
environmental systems such as the Chesapeake Bay, Delaware Basin,
and the Gallatin Canyon in the Rockies. In 1973 the IDOE program
will support large field programs to make shipboard measurements
and to collect water samples in the major oceans. Also IDOE will
support comprehensive studies of the living resources of the ocean
including the biological aspects of coastal upwelling.
The Department of the Interior carries out such activities as geologic
investigations, topographic mapping, weather modification, and water
resources research. Increases in 1973 will provide principally for
further research on the prediction and control of earthquakes, increased mapping of the Outer Continental Shelf, and expansion of
Interior's work on application of remote sensing data from aircraft
and spacecraft to earth resource measurement and analysis.
The National Aeronautics and Space Administration conducts activities concerned with the application of satellite technology to atmospheric sciences and measurement of earth resources. Currently
under study is an assessment of the capabilities of remote sensing systems to gather data on air, land, and water pollution with the objective
of demonstrating the feasibility of remote sensing systems to detect,
identify, measure, and monitor the environmental effects of various
pollutants.
The Department of Agriculture conducts research on such activities as
remote sensing from aircraft of soil properties and uses, water salinity,
and plant stress effects. A variety of activities are conducted to develop better materials and methods nccessar}^ to the establishment of
replacement vegetation and proper land management. Several types of
environmental analysis and monitoring systems have been established
in national forest and in State and private forest programs. Extensive
climatological monitoring and forecasting is carried out in connection
with fire control programs. Emphasis will continue on basic ecological
research.

SPECIAL ANALYSES

307

Table S-7. UNDERSTANDING, DESCRIBING, AND PREDICTING THE ENVIRONMENT, BY AGENCY (in millions of dollars)
Budget authority
Agency

1971
actual

Commerce1
Defense-Military
National Science Foundation. __
Interior
National Aeronautics and Space
Administration
Agriculture
Health, Education, and Welfare.
Transportation
Smithsonian Institution
Other agencies
Total

1972
estimate

Outlays

1973
estimate

1971
actual

1972
estimate

1973
estimate

248
176
94
116

280
174
166
131

332
165
169
153

237
161
83
115

264
164
136
128

309
167
159
148

171
56
20
14
11
8

158
57
26
19
14
6

145
56
28
21
20
12

157
57
19
10
11
6

141
57
22
19
13
7

135
57
27
21
18
10

914

1,031

1,101

856

951

1,051

1
Funding shown above for Commerce has been adjusted to include activities actually carried out
by the Departments of Defense, Interior, and Transportation and National Science Foundation
prior to Oct. 3, 1970. The budget authority adjustment is $9 million in 1971, and the related outlay
adjustment is $14 million and $7 million in 1972.

The Department of Health, Education, and Welfare conducts a
variety of activities relating to environmental impact of man, principally research at the Department's National Institute of Environmental Health Sciences.
The Department of Transportation conducts oceanographic and
meterological research and surveys largely through the Coast Guard.
The Smithsonian Institution conducts a variety of programs dealing
with environmental impact on man and is developing environmental
baseline data on the abundance of plants and animals in relation to
modification of the environment by man. Biological and physical data
are being assembled and analyzed on specific important ecosystems
to predict the consequences of environmental change.
SEWER AND WATER PROGRAMS

Assistance for the construction of sewer and water systems is provided through Federal grants, direct loans and insured loans. The
primary objective of Federal sewer and water programs is not pollution control, but rather urban or rural development. To the extent
assisted sewer projects provide environmental benefits, they do so as
a result of their association with waste treatment and other abatement
programs.
(In millions of dollars]

Budget authority
Obligations
Outlays

1969
est.
295
420
300

1970
actual
252
409
364

1971
actual
573
546
331

1972 1973
est. est.
765
150
622
610
465
550

Grants to finance water system and sewerline construction are made
by five Federal agencies. The Department of Housing and Urban
Development provides assistance for basic sewer and water facilities
as part of its community development efforts. Approximately 400
grant reservations will be made in both 1972 and 1973. In addition,

308

THE BUDGET FOR FISCAL YEAR 19 73

some public facility loans will be made to finance sewer and water
facilities construction in each of these years. Outlays will increase in
1973 by 15%, from $155 million to $177 million. Grant reservations
under HUD's water and sewer program will continue at the $200
million level in 1973. Unused balances are sufficient to fund the program
in 1973, so no additional appropriation is necessary. Increases in this
program have been limited, as Federal funds have been considered
more important to expand the waste treatment construction program.
The Department of Agriculture provides grants and loans for basic
water and waste facilities in rural communities with population not in
excess of 5,500 people. The total program level—grants and loans—
ncreased from $306 million in 1971 to $342 million in 1972 and 1973.
Loans total $300 million in 1973. The number of rural families benefiting from the program increases from 266 thousand in 1970 to 500
thousand in 1973. Outlays (after deducting the repayment of prior
year loans) will increase by 24% in 1973, from $231 million to $287
million.
The Department of Commerce provides assistance to municipalities
as a part of its economic development efforts. Outlays will increase by
9% from $66 million in 1972 to $72 million in 1973. Other agencies
providing sewer and water system grants are the Appalachian Regional
Commission and the Department of the Interior (for the trust
territory).
Grants and loans made by the Environmental Protection Agency,
Agriculture, Commerce, and Housing and Urban Development for
waste treatment plants and interceptor sewers are included in the
section on pollution control and abatement.
Table S-8. SEWER A N D WATER P R O G R A M S (in millions of dollars) »
Outlays

Budget authority

1972
estimate

1973
estimate

88
31
116
97

113
55
140
158

118
113
143
177

150

331

466

550

500
165

148
117

155
231

177
287

80
18

83
17

84
12

54
11

66
15

72
14

573

765

150

331

466

550

1972
estimate

1973
estimate

243
19
292
19

312
34
375
45

39
30
47
34

573

765

125
140

1971
actual
Purpose:
Sewer grants.
Sewer loans
Water system grants
Water system loans
Total
Agencies:
Housing and Urban Development
Agriculture
_ __
Commerce (economic development)
Other agencies
Total

1971
actual

1
Funds provided by the above agencies which are for construction of waste treatment facilities
or interceptor sewers, often counted as part of "sewer and water programs," are included in the section
on pollution control and abatement for purposes of this analysis. Funds shown in above table are for
water supply systems and collecting sewers. They are not included in tables S-l, 2, or 3.

SPECIAL ANALYSES

309

ENVIRONMENTAL RESEARCH AND DEVELOPMENT ACTIVITIES

Sections of this analysis include funding for environmental research
and development activities for convenience of reference. Funding for
R. & D. included in the three sections is summarized in table S-9.
Table S-9. ENVIRONMENTAL RESEARCH AND DEVELOPMENT ACTIVITIES
(in millions of dollars)
Budget authority
Category

1971
actual

Pollution control and abatement.
Selected environmental protection and enhancement activities
Understanding, describing, and
predicting
Total

1972
estimate

Outlays

1973
estimate

1971
actual

1972
estimate

1973
estimate

422

516

599

366

474

561

479

556

605

427

497

559

921

1,093

1,226

812

1,003

1,142

OTHER ENVIRONMENTAL ACTIVITIES

The meaning of the term "environment" is still subject to widely
varying definitions. This special analysis of Federal funding for environmental activities has been limited to selected areas. Among the
areas of federally funded activity important to environmental understanding and environmental quality not included in this analysis are:
Environmental education;
Preventing or correcting environmental degradation resulting
from public works or natural resource exploitation;
Management of public lands;
Population control and population distribution;
Federal activities conducted outside the United States (except
that scientific activities financed under the special foreign currency program are included);
Activities to reduce or avoid the use of pesticides; and
Increased cost of new facilities and low polluting fuels (e.g., low
sulfur coal) to meet pollution control standards;
Highway beautification program.

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET