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JUNE 15, 1961

Printed for the use of the Committee on Ways and Means



WILBUR D. MILLS, Arkansas, Chairman
CECIL R. KING, California
HALE BOGGS, Louisiana
A. S. HERLONG, JR., Florida
FRANK I K A R D , Texas
JAMES B. FRAZIER. JR., Tennessee
WILLIAM J. GREEN, JR., Pennsylvania
JOHN C. WATTS, Kentucky
JAMES A. BURKE, Massachusetts

NOAH M. MASON, Illinois
JOHN W. BYRNES, Wisconsin
H O W A R D H. BAKER, Tennessee
VICTOR A. K N O X , Michigan
JAMES B. UTT, California
H E R M A N T. SCHNEEBELI. Pennsylvania

LEO H . IRWIN, Chief Counsel
JOHN M . MARTIN, Jr., Assistant Chief Counsel


GERARD M . BRANNON, Professional Staff
RAYMOND F . CONKLINC, Professional Staff
ALFRED R . MCCAULEY, Professional Staff

C O N T E N T S



'Bell, Hon. David E., Director, Bureau of the Budget
Dillon, Hon. Douglas, Secretary of the Treasury



Bell, Hon. David E., Director, Bureau of the Budget:
Budget expenditures by major agency, fiscal year 1961
Estimated budget expenditures in fiscal 1962 dependent upon new
authorizing legislation (as well as new obligational authority)
excluding Department of Defense, military
Dillon, Hon. Douglas, Secretary of the Treasury:
Table I. Forecast of public debt outstanding, fiscal year 1962, based
on constant operating cash balance of $3.5 billion (excluding free
Table II. Actual cash balance and public debt outstanding July 1960May 1961





Washington, D.C.
The committee met at 10:30 a.m., pursuant to call, in the committee room, New House Office Building, Hon. Wilbur D . Mills
(chairman of the committee) presiding.
The CHAIRMAN. The committee will please be in order.
Mr. Secretary, we are always glad to have you with us, but we are
awfully sorry that you have to come on this occasion on this particular measure. I know it is a source of regret if not embarrassment
to you and it is to us.
Mr. Director, we appreciate having you here, too.
You are recognized, sir.
Secretary DILLON. Thank you, Mr. Chairman.
I am here this morning in support of a new temporary limit of $298
billion on the public debt for the fiscal year 1962.
The current temporary debt ceiling of $293 billion will revert to the
present permanent ceiling of $285 billion at the end of this month.
On that date—June 30, 1961—our projections indicate that the public
debt subject to limitation will be about $289 billion. This will include a cash balance of approximately $5.5 billion.
During the fiscal year 1962, we expect revenues to fall short of
expenditures. Assuming that we are able to close out the year with a
minimum working cash balance of $3.5 billion, we presently estimate
a total public debt subject to limitation of about $290 billion on June
30, 1962.
Because of seasonal factors the end-of-June debt position is generally
well below the high point of the fiscal year. Based on programs already enacted or recommended by the administration, and our current
estimate of tax receipts, the debt is projected to reach a high point of
about $295 billion next winter, before dropping again to around $290
billion at the close of the fiscal year.
In addition, prudence indicates that the debt limit should be set at
a level that makes a reasonable allowance for errors in the estimates
as well as other unforeseen contingencies, and permits sufficient
flexibility in debt management so that the efficiency of day-to-day
operations is not impaired. T o provide this leeway, I believe that
the same allowance of $3 billion that has been made in previous years




should be added to the estimated high point of $295 billion in fiscal
year 1962. This clearly indicates the need for a temporary ceiling of
$298 billion.
This projected need is based on the latest budget estimates, including an allowance for the new or expanded programs recommended
by the President on May 25. Budget expenditures for fiscal 1962
are now estimated at $85,100 million. The $800 million increase
from the $84,300 million reported by the Budget Director on March
27 largely represents additional funds for space exploration, defense
and military assistance, expanded loans to small business, and programs designed to alleviate structural unemployment. Budget revenues are still projected at $81,400 million, the same as reported in
late March. These spending and revenue estimates assume that the
Congress will act favorably on the President's requests to put the
highway-building program on a self-sustaining basis, to eliminate the
postal deficit by raising postal rates, and to maintain various tax rates
that are otherwise scheduled for reduction or termination.
I might add that the projected budget deficit of $3,700 million for
the fiscal year 1962 compares wTith the deficits of $4,200 million and
$12,400 million in the fiscal years following the two previous business
recessions (the fiscal years 1955 and 1959).
It may seem incongruous to some that, with recovery already
underway, we nonetheless still must expect a deficit next year. The
reason for this, however, is not far to seek. Corporate revenues, as
you know, are exceedingly important in our overall revenue system.
And the corporate tax revenues which will be available to us in fiscal
1962 will be based on the corporate profits earned during the present
calendar year which includes the lowest point of the recession. This
means that our corporate tax revenues during the coming fiscal year
will be recession revenues. The same applies to a somewhat lesser
extent to individual income tax collections above the standard withholding rates which are also largely dependent on profits during
calendar year 1961. Therefore, our revenue prospects next year are
for a continuation of recession revenues.
We can and do, however, look forward to a sharp increase in
revenues in fiscal year 1963. This follows the same pattern as in
the preceding recovery during the fiscal years 1959 and 1960. In
fiscal year 1960 revenues increased by about $10 billion over fiscal
year 1959. While naturally we cannot at this point make any firm
prediction, I believe it is a reasonable expectation that there will be
a balanced budget, if not a surplus, in fiscal year 1963.
For as the President stated in his message on budget and fiscal
policy of March 24, 1961—
Federal revenues and expenditures—should, apart from any threat to national
security, be in balance over the years of the business cycle—running a deficit in
years of recession—and running a surplus in years of prosperity * * *.



Our estimates of the public debt at semimonthly intervals over the
fiscal year 1962 are shown in the first table attached to this statement.
One important assumption in compiling that table is that the Treasury's operating balance at the Federal Reserve and private commercial
banks would hold steady throughout the period at $3,500 million.
That is actually a rather low working balance for an operation as large
and as subject to sharp fluctuations in receipts and expenditures as is
involved in the management of the Treasury's cash position. A
balance of $3,500 million would cover only a little over half of an
average month's budget expenditures, which is a much lower ratio
of cash holdings to expenditures than is maintained by most business
In fact, as sliowu in the second attached table, the operating balance
lias been more often above than below $3,500 million during the fiscal
year now ending. On a daily average basis it has been closer to $5
billion than to $3,500 million, and this has provided an important
degree of flexibility in the efficient conduct of day-to-day Treasury
It is because of this need for flexibility in the management of cash
balauces and because of the inescapable uncertainties of revenue and
expenditure predictions that the $3 billion margin has been added to
our calculations.
As you can see from table I, our debt projections, plus the $3
billion allowance for flexibility, will reach a $298 billion peak during
the winter. A temporary limit of that amount should give us sufficient elbowrooni for maximum efficiency of operations and yet not
impair any disciplinary function which may be served by the public
debt limitation.
The intended function of the debt limit is but poorly served, I
think, when a specific limit fits so closely that the Treasury is obliged
to improvise unusual payment arrangements, or is forced to obtain
additional funds—at higher cost—through the market borrowings of
Federal agencies not subject to the statutory debt limit. Indeed,
the Government was forced to take such steps a few years ago when
the debt ceiling imposed too tight a limit on Government fiscal
In conclusion, I believe that a temporary increase in the debt limit
to $298 billion is essential to the orderly and economical management
of the Government's finances, and I earnestly recommend its approval
by this committee.
Thank j~ou.






(Tables I and II referred to follow:)
TABLE I.—Forecast of public debt outstanding, fiscal year 1962, based on constant
operating cash balance of $3.5 billion (excluding free gold)—Based on assumed
budget deficit of $3.7 billion 1
[In billions)
Federal Reserve banks
and depositaries (excluding free
1961—June 30
July 15
July 31
Aug. 15_
Aug. 31
Sept. 15
Sept. 30
Oct. 15
Oct. 31
Nov. 15
Nov. 30
Dec. 15
Dec. 31
1962—Jan. 15
Jan. 31
Feb. 15
Feb. 28
Mar. 15
Mar. 31
Apr. 15
Apr. 30
May 15.
May 31.
June 15
June 30

Public debt
subject to



allowance to
provide flexibility in
public debt
and for
required *


1 Incorporates estimated budget revenues of $81,400,000,000 and estimated expenditures of $85,100,000,000.
2 From July 1,1960, to June 30,1961, the statutory debt limit is $293,000,000,000. Thereafter it will revert
to $285,000,000,000.
3 Because the actual operating balance on June 30, 1961, is expected to be considerably larger than
$3,500,000,000, the public debt subject to limitation will be about $289,000,000,000 on that date.

TABLE II.—Actual cash balance and public debt outstanding, July 1960-May


[In billions]
banks and
free gold)
1960-July 15...
July 31...
Aug. 15...
Aug. 31...
Sept. 15..
Sept. 30..
Oct. 15...
Oct. 31..,
Nov. 15..
Nov. 30..
Dec. 15...
Dec. 31...
1961—Jan. 15...
Jan. 31...
Feb. 15..
Feb. 28..
Mar. 15..
Mar. 31..
Apr. 15..
Apr. 30..
May 15..
May 31..


Public debt
subject to


NOTE .—From July 1, 1960, to June 30, 1961, the statutory debt limit is $293,000,000,000. Thereafter it
will revert to $285,000,000,000.



The CHAIRMAN. It might be more beneficial to the members of the
committee to permit members to hear both statements before questions.
Mr. BELL. Mr. Chairman, I have no formal statement.
The CHAIRMAN. All right. If you have no formal statement, members of the committee will bring out points with questions.
Are there any questions? Mr. Curtis.
Mr. CURTIS. Mr. Secretary, the statement that you quote of the
President on page 6 on balancing the budget over a cycle, in my judgment, does not coincide with what the President has proposed, particularly in his May 25 address to the Congress. This coming fiscal
year is an anticipated year of prosperity, is it not?
Secretary DILLON. Mr. Curtis, that is why I pointed out this question of the revenue lag that we have. I think that, while one uses in
general terms the term "period of prosperity," what we really mean
is a period of prosperity in the Government revenues, and the fiscal
year 1962 will be, as far as Government revenue is concerned, a recession year.
Mr. CURTIS. But as far as the economy is concerned, and that is
what we are talking about, a business cycle is not the Government
cycle. It is a business cycle. I am taking the actual words:
* * * apart from any threat to national security, be in balance over the years
of the business cycle—running a deficit in years of recession—and running a surplus in years of prosperity * * *.

This fiscal year beginning in July of 1961, according to most economic predictions, is going to be a year of prosperity. In other
words, what I am getting at, too, I might state, is the President's
Council of Economic Advisors in their testimony before the Joint
Economic Committee this year, I think, clearly abandoned that thesis,
and have adopted a new one, which is that we balance the budget out
of anticipated economic growth. I think that is the theory of this
The only reason I am bringing it out is I happen to funadmentally
disagree with it. For years, I went along with the theory that the
President has stated, that we should balance over a cycle, only to find
that wre never have.
In years of prosperity, we did not show the discipline necessary,
which leads me to only one conclusion. With our limited tools and
the way Congress operates, maybe the only way we can get discipline
in this is an annual balance and maybe the only technique the Congress
has to bring about this discipline is through this debt limitation
bill. Each time it has come up, I have always gone along with it on
the theory that we have already voted the appropriations, and this is
simply a matter of how we are going to finance what we are doing.
But it could be used the other way. It could put the discipline
on the executive department to figure out where they are going to
cut back. I am about at the point, disagreeing, as I do, with the
economic philosophy of deficit spending, of trying to figure out where
I can, from a practical standpoint, join in political debate with those
who disagree and who do believe in deficit financing.
I think this administration, in spite of its words, is pretty much on
record as adopting the Keynesian philosophy of deficit financing.
I want to challenge that as a politician. I want those who disagree




with that to be able to conduct national debate on the subject. It
looks like to me that we are forced into only one spot where we can
join it and that is possibly by refusing to go along with the debt
You will have it. I think you have the votes. But I am trying
to figure out how we can start conducting a national debate on this
Secretary DILLON. Mr. Curtis, I think certainly you can have a
national debate. This is a simple subject, and you can use this as a
debating forum. I would not agree with your statement that the
administration is on record as favoring deficit spending. If you read
the quotation of the President, that is clearly not so, and the administration is the President and whatever anyone else says, if it is ever
in conflict with what the President says, the President's statement
Mr. CURTIS. Mr. Dillon, I am trying to match actions with words.
I am fed up with the words that I have read that have come out and
I am trying to relate them to action, and that is what I called your
attention to. The fiscal year beginning in 1961 is a year predicted
to be a year of prosperity, which means that there should be some
surpluses in this coming fiscal year, and there could be if the administration will present a balanced budget which will show a surplus. Yet,
this administration indeed does not match its words. That is what
I am calling attention to.
Secretary DILLON. Because of the timelag, I do not agree with your
particular thesis. But assuming that we did and we accepted it, the
only end result we could say is that this administration is twice as
fiscally, or three times as fiscally responsible as the preceding administration which in the first year of prosperity, a full year of prosperity,
ran a deficit of $12.5 billion.
Mr. CURTIS. The fact that the other administration made errors,
too, and I think they did, is not the point.
Secretary DILLON. There is no comparison between the $ 1 2 . 5 billion error, if this is an error, and a $4 billion error.
Mr. CURTIS. If they were wrong previous^, I was opposed to that
error, too. What we are trying to do, I hope, is to plot a course for
our country that is in the best interest of our country, and that is the
point here. I do not see how you can get away from the words.
The President's statement, as you quoted it, refers to a business
cycle. Nothing was said about this lag. This is talking about a
business cycle.
Secretary DILLON. The lag works both ways, Mr. Curtis. When
you start down in the business cycle our revenues stay up for the
first year, so the revenue cycle just happens to be timed about 1 year
apart from the business cycle, but it is the same cycle, and in the first
year of the downturn, we still have good revenues.
Mr. CURTIS. The only thing I am pointing out here, and this is
about all I guess that is necessary too, is that the President's words
do not describe the actions, and this is a new theory. You are
arguing, as I see it, that it is just an amendment of a previous theory.
Your argument, I take it, is that the administration has not espoused
deficit financing. I think its actions indicate it clearly has. I am
searching for debate, I might say, not as you described it, idle debate.
I am talking about debate that will result in political action of a differ-



out nature than this political action and the economic philosophy, as
1 understand it, of this administration.
I find there is a great adeptness in avoiding what I think would be
straightforward debate. I would much prefer if this administration
would come out with words that match its actions, and say that it
believes in deficit financing.
Take the theories of Lord Keynes and try to persuade the people
that those are correct, so that we who disagree with it, can come out
and express our viewpoint. In that way, our country can reach a
proper conclusion through the democratic process.
As it is now, this lias been a very difficult thing to pin down so that
we can have a forthright debate 011 it.
Secretary DILLON. Whether we believe in deficit financing or
Kevnesian financing, I am not an economist so I do not know what
Keynesian financing is.
Sir. CURTIS. This is it. The proposals of this administration are a
good definition.
Secretary DILLON. What I do know is that you can have two
sides, and this is perfectly logical. I think you can have a good
debate about it, as to whether you wish the Government expenditures
to be governed each year by the revenues of that year, and that
fluctuates up and down with the various substantial fluctuations
which take place in our revenue system based on the prosperity of
the Nation.
Our revenues in this fiscal year, for instance, have declined about
$5 billion from the original expectations of President Eisenhower in
1960 before it was possible to foresee a recession. I mean it was natural then that we foresaw good times. There was a decline of $5 billion.
That would mean that we would have to, in times like that, in order
to balance the budget, reduce expenditures to match that, which certainly would mean cutting back on Government employment, which
would just add to the recession.
I do not think that that is the way to proceed, but that would be
a subject for debate. I quite agree with you.
Mr. CURTIS. That is the theory that I frankly had agreed with and
still do, but the overbalancing factor is the lack of discipline resulting
to a large degree from a failure of proper procedures in the Congress
itself to have a look at the entire budget each time. It is due to our
committee systems and other problems. This is not to direct criticism
against individuals, or groups, or even political parties, but it is to
observe what has happened as a result of it.
In seeking a way to bring about this discipline, I have suggested that
maybe this debt limitation bill is what is necessary.
I would prefer, and I think this is why I press the point here, to see
whether or not this committee each time we have the subject of debt
limitation extension up, and I said this in my minority views a couple
of years ago, could not turn this particular bill into this kind of discipline. We can call before us the Appropriations Committee and
say, "Look, you have to cut back about a billion dollars or $2 billion.
The Ways and Means Committee is not in the business of handling
appropriations, but somewhere this has to be done, in our judgment,
and this is as far as we will go in permitting Federal Government to
market bonds."
This is really a limitation on your ability to market bonds.




Secretary DILLON. That is correct.
Mr. CURTIS. I just wanted that for the record, Mr. Chairman,
thank you.
The CHAIRMAN. Mr. Secretary, let me direct your attention to
table I just for purposes of questions to you.
As we know, the permanent debt ceiling is $285 billion. You could
actually be within that debt ceiling on June 30 next by reducing our
operating balance by $1,400 million under the $3.5 billion that you
project in your first column?
Secretary DILLON. I think that is theoretically possible, Mr.
Chairman, but if you will look at the next table, I think there is only
one time where for just a day or two during this fiscal year we have
had an operating balance that low, and that was on April 15, when it
was down to $1,700 million. That would be an entirely unsatisfactory operating balance. Artificially, you could reduce it a day or
two. You could not hold it at that low a balance.
The CHAIRMAN. I understand, but on that particular day you could
theoretically do it. However, the next day or the day following you
would be above it. Now, because of the way we collect our revenues,
in that we do not collect the same amount each day, but revenues
come in large amounts on certain days, and in very small amounts on
some days, we find ourselves always in the position of having to have
more bonds outstanding at particular times than we do at other
You point out here in your table that on December 15, counting
your $3 billion reserve, and having a $3.5 billion operating balance
we would need a debt limit of almost $295 billion.
Secretary D I L L O N . That is right. We would be there on December
15 and at the same figure we estimate on January 15, and then again,
finally, on March 15, we will be just $200 million lower.
The CHAIRMAN. What I am getting at is this, Mr. Secretary. In
order to stay within the $285 billion ceiling at all times during the
year, the Congress would have to reduce the rate of spending by such
a figure as would reduce this $294.9 on December 15 and on January
15 to $285 billion?

possibly mean a
u ch, Mr. Bell?
Secretary D I L L O N . $10 billion.
The CHAIRMAN. Would it be $10 billion?
Mr. B E L L . Something like that, yes.
Secretary D I L L O N . That is spending within a 6-month period, not
within an annual basis.
The CHAIRMAN. That is what I am getting at, but also I am trying
to lead to this point. This administration has not recommended an
increase over the previous administration for fiscal 1962 of $10 billion,
has it?
Secretary D I L L O N . N O , sir; about $3.5 billion.
The CHAIRMAN. SO actually we would have to forego all of that
$3.5 billion and cut back on the budget submitted by President
Eisenhower in January
M r . BELL. Y e s , sir.

The CHAIRMAN (continuing). B y approximately $6.5 billion in order
to avoid during this coming fiscal year some additional temporary
debt over and above the $285 billion permanent ceiling?




Secretary D I L L O N . Yes, sir. President Eisenhower, I guess, in his
budget message, did state that it would be necessary to reenact a
temporary debt ceiling this year over and above the $285 billion
ceiling. He did not oner a figure. He said that depended on later
revenue estimates and expenditures.
The CHAIRMAN. I remember that, but what I am trying to get to,
Mr. Secretary, is this. As usual, we face a set of facts here. The
Appropriations Committee has authorized appropriations, and I agree
with much of what Mr. Curtis has said. We have not done as good
a job here and I do not think as good a job has been done downtown
over the years, as all of us would like to have had. Between us, the
executive department and the Congress have created the situation
that we have here. I ask you what I asked Secretary Anderson one
time. What would be the result of us just doing away with this
situation and saying that we would not grant you the authority to
issue any Government bonds in excess of the $285 billion ceiling?
Of course, you could not pay your bills.
Secretary D I L L O N . The United States would have to default on its
bills, or if this was going to be a permanent thing, there would have
to be a wholesale dismissal of Federal employees. It could not operate
the Post Office Department. All sorts of things of that nature would
cease operating, at least in the way that they are presently operating.
The CHAIRMAN. Of course, the Government would have to take
action to reduce these obligations of the Government to this level,
around $10 billion. Where would you cut it, Mr. Director?
Mr. B E L L . I must say, Mr. Milk, that is a question I have asked
myself, only in terms of smaller figures.
The CHAIRMAN. I am very serious about this. I want to know if
it can be done.
Mr. B E L L . I do not think there is any reason, sir, to think that it
could, not be done, if we faced the national necessity for doing so. I
take it that it would mean a drastic curtailment in various activities.
I suppose one would start with those things which might conceivably
be deferred for some years.
The CHAIRMAN. Are there enough of them?
Mr. B E L L . N O , I do not think so.
The CHAIRMAN. Can we do it without cutting into the defense
Mr. B E L L . I would not think so; no, sir.
The CHAIRMAN. Y O U would have to cut into that?
Mr. B E L L . I would think so; yes.
The CHAIRMAN. I do not see how you could avoid it.
Mr. B E L L . That is right.
Secretary D I L L O N . Over half our expenditure is in defense, so
certamly that would have to take a major cut.
Mr. B E L L . You will have to give us some assumptions, Mr. Mills.
For example, we spend over $5 billion a year of the regular budget for
veterans' benefits and services of various kinds. These are contractual obligations of the U.S. Government. If the Congress were
to authorize a cutback in those services and benefits, that would
permit us to trim the expenditures in that area.
Otherwise, presumably those expenditures would have to be untouched and we would, therefore, not be able to take a proportionate
reduction of your $10 billion in parts of the budget like that which



represent ongoing commitments. The interest on the debt is another
illustration. If you take the parts of the budget which are relatively
firm commitments of that kiiid, the remaining parts 6i the budget
would have to take the brunt of your entire $10 billion, and this is
the reason why I am sure you could not do it without cutting very
deeply into the Defense Establishment.
Secretary DILLON. Mr. Mills, there is one other point in this specific
question you posed about the $285 billion ceiling at the end of this
month. If we did not have an increase in that, the Government
revenues that flow in flow in rather slowly and even with drastic reductions in expenditures we would be faced with the fact that we
would not have the funds to pay off the obligations of the United
States that would come due in the month of July and probably in
the month of August, because we would not be able to refund them
because of the ceiling. So the United States would have to default at
least for a period on its own Government obligations.
The CHAIRMAN. None of us is an economist, but I think I can find
some economists, at least, that would say that if these things we are
talking about actually occurred, we would experience, as a result, a
very material drop in the revenues that we are anticipating for fiscal
1962 as well.
Secretary DILLON. That is right. This is cumulative. As you
reduce expenditures you alsb reduce revenues.
The CHAIRMAN. If the Federal Government is not in a position to
pay its bills either through revenues or borrowings, I do not know
what happens then to the confidence of our people. I do not know
what happens to the confidence of the world in our stability and in the
maintenance of government here.
We do have a fact- that faces us. It is not our creation in this committee. It is here. I cannot see anything else to do except to give
you this temporary authority. I said in the beginning that I did
not like to have you here for the purpose you are here. I do not like
it any more than anybody else does.
Mr. HARRISON. Mr. Chairman, might I ask whether or not this
increase is enough? Do you think this is enough?
Secretary DILLON. I would like to make one statement about that.
Under ordinary circumstances, this increase provides the same
amount of flexibility and should be adequate. It does assume enactment of postal revenue increases. If that should not be enacted,
expenditures would increase by about another $750 million, which
would bring our deficit up to about $4.5 billion and would bring our
flexibility down from $3 billion to $2.25 billion.
The one other thing I would like to mention, and this is particularly
important to this committee, because it is the responsibility of this
committee right at the present time. That is the end result of congressional action on the tax proposals that are presently before the
Congress. If the Congress should enact a substantially larger amount
of reductions than are compensated for by additional revenues, it
would create a situation which might cause us difficulty. If that
went too far, I am sure the President would not be able to accept the
bill and it would be vetoed, but there is an area in between that is a
reasonable compromise.




It might cause us some trouble there, but we are assuming here that
we will come out of this tax bill exercise reasonably whole. In other
words, that we will not lose much revenue.
Mr. HARRISON. What would be the effect on this situation if the
current effort to take out of the extension of the Korean war taxes
certain taxes on transportation were successful?
Secretary DILLON. The tax on transportation yields $280 million
a year, roughly, and if that were successful this would merely increase
our deficit by $280 million and would again cut down our flexibility
Fortunately, the House has approved that measure and the Senate
Finance Committee approved it unchanged from the House bill
yesterday, so 1 am hopeful that the Congress will vote that extension.
Mr. HARRISON. Would you say that failure of the Congress to
make such an extension would be somewhat irresponsible?
Secretary DILLON. Certainly on the major taxes before the Congress I would say that it would be, but I do not think that is up for
question. The only matter that is up for question is this transportation tax, and I would hesitate to attach any words to the action that
the Congress might choose to take on that.
Mr. HARRISON. YOU are not advocating that, are you?
Secretary DILLON. N O , sir.
Mr. HARRISON. Thank you, sir.
The CHAIRMAN. Mr. Bell, you have a very distasteful job in the
Government and I hope that, as you continue in your job as Director
of the Bureau of the Budget, you will not endeavor to win any popularity contests with the departments of Government, but that you
will make them face up to the facts. As we see them, and as I am
sure you see them, these are the requirements for some degree of priorities in their operations and not merely the addition of a new expenditure on top of the existing expenditures.
The only way in the world we will ever get to stability in Government spending is to do away with some spending that we presently
think we have to incur that perhaps has outlived, so far as the program is concerned, its usefulness to the American people. I had
talked to the previous Director of the Bureau of the Budget on different occasions about the Bureau itself conducting a long-range study
of the trends of Government spending to let people know just a little
bit more about where we are headed, because I think our people are
becoming increasingly concerned over Govermnent spending. Maybe
they are also concerned over spending at all levels of Government,
but certainly my mail indicates that they are becoming more and
more concerned at all times about Government spending here.
We have not analyzed, in mjT opinion, fully all of the programs and
we have to find places within existing programs where reductions can
be made. I hope in the preparation of the next year's budget it may
be found that some of these things, as other expenditures of necessity
will rise, can be reduced so that we are not just faced with a constantly rising total of Federal expenditures. Priorities have to be, I
think, established in Government spending to a greater extent than
they have ever been, and I know how difficult it will be for you to do
it. I know how unpopular you will become with the departments of
Government if you insist upon it, but $298 billion of debt is within
$2 billion of the maximum of the debt ceiling fixed by the Congress



at the end of World War II. It was $300 billion then. Now we are
16 years from that war and we are coming right back in this fiscal
year to within almost $2 billion of that maximum ceiling.
I know we have these cold war expenses. I know we have a lot of
expenditures that still are with us because of the World War II and
the Korean war. I realize all that, but some way or other you and
the Congress must find means of reducing some of these expenditures
that we have been incurring rather than merely continuing them and
adding to them further expenditures that from time to time will have
to be made for programs that the Congress will decide to enact.
You cannot be very popular doing that, but I hope you will do it
to a greater extent than it has been done in the past, t know efforts
have been made in the past, but areas can be found. I know that.
We all know that. But apparently we are not in the best position
here in the Congress to know where those areas are, and I think you
are in a better position to find them for us and point them out to the
President and to the Congress.
Mr. BELL. Mr. Chairman, I see my job the same way you do. I
do not regard this job as one that leads to much popularity. Perhaps
you heard the President on a recent television broadcast refer to my
job as that of the " n o " man of the administration, which is exactly
right. We are in the position you describe. We regard it as our
business to be skeptical, to be tough minded, to make sure that, if
the President does decide to recommend increased programs of any
kind, he is thoroughly aware of any questions that might be raised
about them, that he has thought through the questions of cost, and
that we have advised with the agencies involved and have tried to
figure out the most efficient way to carry out whatever must be done
in the national interest.
We also regard it as part of our job to do exactly what you say ;
namely, to consider the necessity for continuing programs and outlays.
Each year's budget process is in large part a searching reviewT of the
programs which agencies present to us. The first question always
asked is: "Why is it necessary to continue this effort at all? Can
we not phase it out?"
The long-range trend of Federal expenditures, as you have indicated, has been upward. M y predecessor, Mr. Stans, Mr. Eisenhower's last Budget Director, did prepare a projection of Government
expenditures on into the future. That was published in January
shortly before the preceding administration left office. It did show
that under varying assumptions expenditures would rise to varying
amounts, but they would rise even under the most conservative
assumptions. Mr. Stans concluded that the trend of Federal expenditures would be upward as the population of the country grows, as its
income grows. The services which Government provides will in all
probability cost somewhat more 10 years from today than they do
today. I regard this myself as a conclusion that seems reasonable,
although we have ourselves not reviewed this particular set of figures,,
and I am not prepared to stand on them.
I think, however, there is an underlying premise which is extremely
significant. Those proiections that were made by the previous
administration assumed defense outlays at least as large as those in
recent years. As the Secretary pointed out, a few minutes ago, more
than half of the Government expenditures at the present time are




those of the Department of Defense. Consequently, the most important single element that will determine the course of Federal
outlays in the future is what happens to the necessities for the national
defense. If it is possible to foresee a leveling off of defense expenditures, then the Federal budget presents an entirely different kind of a
problem than if it is necessary for us to foresee, to look forward to,
to expect, an increase in defense expenditures over the next several
The answer to that question is not at all clear today. The Defense
Department is still engaged in a number of reviews which the President
has requested.
For this year and next year, the President has recommended to the
Congress, as you know, some increases in defense outlays. Beyond
that, the answer is not yet clear, but the level of defense spending
will be the most important single issue before the President and the
Congress which will affect the Federal budget over the next several
The CHAIRMAN. Mr. Director, you and I, of course, are aware of
the fact that it is not possible for us to make any reasonable predictions about defense spending in the future. We know that because
factors beyond our control, perhaps, will determine the amounts that
we will have to devote to those areas.
I have been increasingly concerned, myself, over the rapid rise that
has taken place since World War II in those expenditures that we
say are not defense expenditures. The increase in that area is the
type of expenditure that I am thinking about, where priorities must
be established if we are to have any tapering off and to avoid further
Mr. BELL. I thoroughly agree, Mr. Chairman
The CHAIRMAN. That is where I think we must make a more concerted effort than we have been able to make at any time in the past.
It is going to make some folks mad, and perhaps you will make me
mad by turning me down on something that my people want, but if
you turn enough of us down on enough things that we want, we can
get control of it in time. We sympathize with you in your position
and the responsibilities you have and the job that lies before you.
Hard as it is, I am sure you will do the best you can with it.
Mr. Byrnes.
Mr. BYRNES. Mr. Secretary, are you asking that we keep the permanent ceiling at $285 billion and that we have a temporary extension
of $13 billion? Is that the basic proposal?
Secretary DILLON. We have felt at this time it was probably
advisable to take the simplest approach, which was just to ask for a
temporary extension, rather than to ask for a specific increase in the
permanent ceiling. We are not requesting that now. If the committee felt that it was more advisable and better to increase the
permanent ceiling at the same time, we would have no objection to
that because, as this table clearly shows, by the end of the year there
is no possibility of getting back under the permanent ceiling. While
we could get under it, at this June 30 by reducing our cash balances
to unreasonably low levels, even that will not be open to us a year
from now. So if Congress felt that that situation was not right, that
they wanted to make part of this increase a permanent one, we would
agree to it, but we felt that that would be a subject that might lead to





considerable debate, and the time is short here and the effective thing
that we need now is to have a temporary ceiling that will allow us to
operate through the year. So that is all we have asked for.
Mr. BYRNES. I did not get this from your statement exactly.
You said that we had to get up to $298 billion.
Secretary DILLON. I said temporary in my statement.
Mr. BYRNES. I did not see in your statement just what you were
recommending, in terms of permanent or temporary, to get to the
total of $298 billion.
Secretary D I L L O N . The very first line of my statement said "in
support of the new temporary limit."
Mr. BYRNES. The question is, How much is to be temporary? That
is your total.
Secretary DILLON. New temporary limit of that, yes. I had not
suggested anything about the permanent.
Mr. B Y R N E S . Reallv, what you are recommending is that we
provide a temporary increase of $13 billion. For how long?
Secretary DILLON. For 1 year, as has been the usual way, so that
this can be considered again next year in due course.
Mr. B Y R N E S . Probably the Director of the Bureau of Budget
would be more helpful on this. What do you estimate will be the
picture for fiscal 1961 as to revenues, ancl expenditures, and the
Mr. BELL. The revenue estimate for the fiscal year 1961 is $78.5
billion. I believe that is the latest.
The Secretary informs me that it is about $78.2 billion at this point.
Mr. BYRNES? $78.2 billion?
M r . BELL. Y e s , s i r .
Mr. BOGGS. Excuse

me. How much is that down from the estimate in January?
Mr. BELL. The January estimate was $ 7 9 billion. That is the
Eisenhower budget estimate. Is that the one you mean?
Secretary DILLON. I would add that is really $ 1 , 3 0 0 million down
because there has been a receipt of $ 5 0 0 million from advanced
repayment from Germany that was not budgeted and which is a
fortuitous occurrence that came in during that 6 months and reduced
the total amount of the decrease.
Mr. CURTIS. Were there not other items balancing back and forth?
Secretary DILLON. N O ; not in revenue. This German payment
certainly can only be looked on as sort of a one-time, very special
operation. They are paying off a 35-year debt at once.
Mr. CURTIS. All I am observing is that estimates are made up of
knowledge on a number of items, that differences develop in a lot of
these estimates. You pick out one item that has changed without
regarding some of the items that have been estimated as to the
revenues that did not come about.
Secretary DILLON. I do not intend to enter into an argument. I
am just stating the fact and you can draw any conclusions you wish.
Mr. CURTIS. And I am suggesting you are taking it out of context.
Secretary DILLON. All right. If you feel that way, that is all
right. I do not feel so.
Mr. CURTIS. It is just a matter for the record.
Secretary DILLON. It is not criticism of anyone who made the
estimate. It was just impossible to know whether the Germans
were going to make a repayment, so that was left out.





Mr. CURTIS. I just notice that each time you can make an observation to degrade the previous administration, you seem capable of
coming forward with it, and I just wanted to get it into context.
Secretary DILLON. That was not the intention at all.
Just to prove this to you, Mr. Curtis, the $500 million German payment was not included in our own estimates that we put out in March
and our own estimates were also that much out, so it is not a question
of administrations on this estimate business. It is just a fact.
Mr. CURTIS. I know. I will let the record stand.
Mr. BOGGS. Mr. Secretary, just from my own point of view, I had
no desire to make any political issue out of the fact that revenues were
down from the January estimate. The only observation that I
sought to make was that business conditions were not as good as were
anticipated and, as a matter of fact, this has been under a Democratic
administration, so if you want to draw any political conclusions you
can blame the Democrats.
Mr. B Y R N E S . Mr. Chairman, I thought I had the floor, and I was
only trying to get some figures.
The CHAIRMAN. Mr. Byrnes, I am sure that all the committee will
absolve you completely of seeking to engage in any political discussion.
Mr. BYRNES. Thank you.
Your revenues you now estimate at $ 7 8 . 2 ; is that correct?
Mr. B E L L . Yes, sir. The Treasury estimates them, of course.
We report them. On the expenditure side for the present fiscal year,
the estimate is $ 8 0 . 7 billion. It looks to us as though we may end up
a bit different from that, but not very much, and that would give us a
deficit of $2
Mr. BYRNES. Five?
Mr. B E L L . Yes, sir, $2.5 billion. I am giving you rounded figures,
of course.
Mr. BYRNES. In view of the fact that you went back to January
to see what our revenue estimates were, what was the January
expenditure estimate?
Mr. B E L L . The expenditure estimate for 1 9 6 1 was $ 7 8 . 9 billion in
Mr. BYRNES. Do you have a breakdown as to where that $ 1 . 8
billion increase came from?
Mr. B E L L . Yes; I do. I could read it to you agency by agency or,
alternatively, I can provide it for the record. There is a series of
things, some up and some down, but the largest single item is that we
now estimate expenditures for the Department of Defense at $1 billion
more than they were estimated in January.
Mr. BYRNES. In this 6-month period?
M r . BELL.


Mr. BYRNES. A billion dollars more?
Mr. B E L L . That is right. To a small extent this represents
deliberate changes in the program which President Kennedy has
directed the Defense Department to undertake; the placement of some
advanced contracts, for example.
Mr. BYRNES. I just wanted to understand those advanced contracts, I am surprised that it is that high. This is an expenditure,
a cash outflow.
Mr. BELL. That is right.



Mr. BYRNES. In advanced contracts, you do not have to pay for
a tank until you get it or an airplane until you get it. Advance
orders would affect your appropriations picture and authorization
picture, but I am trying to figure out the actual expenditures.
Mr. BELL. T O a small extent, Mr. B3?rnes, as I started to say, the
increase in expenditures for the Defense Department for the current
fiscal year is as a result of actions which President Kennedy directed.
Even if we let a contract in February, which would otherwise not
have been let until July, we might get some expenditures made during
the fiscal year 1961. It is that kind of thing; some rebuilding of
inventories, for illustration. These expenditures were directed in an
effort to time the Government's outlays better from the standpoint of
the economic recovery that we have all been trying to promote.
There were expenditures which would have been made, anyway,
which the Congress had authorized, but their timing was affected.
However, the bulk of this billion dollars reflects simply the fact
that the expenditures of the Defense Department have been running
at a higher rate during the spring than was anticipated last November
and December when the Eisenhower budget was put together. You
will recall that during last summer and early fall a considerable step-up
in defense outlays was authorized by the previous Congress and the
previous administration.
It was not certain through the fall just how much effect those increased commitments would have on the spending during the present
fiscal year. It is now much clearer and we estimate today that Defense Department spending will be in the neighborhood of a billion
dollars higher than was estimated last fall. This, as I say, is the
largest single item, and accounts for almost two-thirds of the difference between the January estimate of expenditure and today's.
There is also a substantial increase in the present fiscal year in the
order of $300 to $500 million for temporary unemployment compensation benefits which the President recommended and this Congress
enacted. I suppose that is the second largest single item. Beyond
this, there are increases in the Department of Agriculture, not very
large in total.
Mr. BYRNES. YOU mean that in just the 3 months, that the
temporary unemployment compensation has been in effect, we spent
$300 million?
Mr. BELL. Yes. I do not have a currently brought-up-to-date
estimate, as of today, but as of 2 or 3 weeks ago, it was expected that
about $400 million would flow out in the current fiscal year. I do
not know whether anyone here has a later figure.
Mr. BYRNES. That is all right. That is good enough.
Mr. BELL. It may be over $400 million, Mr. Byrnes. There was
some uncertainty about it. It depends, as you know, on how many
people are entitled, and so on. I think there is no other single agency
except the Post Office Department whose estimated expenditures for
1961 have risto more than $100 million between the January budget
and our present estimates. There are several, the Veterans' Administration and the Department of Agriculture, for example, in which
expenditures are upwards of $50 million or more. Would you like
me to provide a tabulation?
Mr. BYRNES. I wonder if you could supply it for the record.
The CHAIRMAN. Let us have that in the record at this point.
(Information referred to follows:)






Budget expenditures by major agency, fiscal year



[In millions]
Mar. 28,1961, revision

Legislative branch and the judiciary
Executive Office of the President
Funds appropriated to the President:
Mutual security—economic and contingencies..
Independent offices:
Atomic Energy Commission
Federal Aviation Agency
National Aeronautics and Space Administration
Small Business Administration
U.S. Information Agency
Veterans' Administration
General Services Administration
Housing and Home Finance Agency
Department of Agriculture
Department of Commerce
Department of Defense—military:
Military functions
Military assistance
Department of Defense—civil
Department of Health, Education, and Welfare
Department of the Interior
Department of Justice
Department of Labor
Post Office Department
Department of State
Treasury Department:
District of Columbia
Allowance for contingencies
Deduct interfund transactions

Jan. 16,1061,
Revisions in Administraestimates for tive actions
January pro- and program











- 6







NOTE.—Detail may not add to totals because of rounding.
Source: Bureau of the Budget.

The C H A I R M A N . Mr. Byrnes, if you will yield to me then, we also
created some additional spending in this fiscal year when we provided
the amendment to take care of the children of people who were unemployed.
Mr. B E L L . That is right.
The C H A I R M A N . H O W much do you anticipate will be spent under
that program in this fiscal year?
Mr. B E L L . Something in the neighborhood of $200 million, as I
The C H A I R M A N . That is total?
Mr. B E L L . Yes, sir; that is right for 1962. It would be less for
1961, but I do not have that figure in my head.
The C H A I R M A N . It probably will be reflected in some rise in spending within HEW.
Mr. B E L L . The H E W expenditure rise is only a small amount.
The figure 1 remember is only the total for a full year.
The C H A I R M A N . That indicates then that there is very little to be
spent on that program, at least by the Federal Government in this
fiscal year.



Mr. BELL. That program is one within a number of programs in the
Department of Health, Education, and Welfare. There may be
some offsetting items.
The CHAIRMAN. A number of States have to change their law
anyway, in order to participate.
A i r . BELL. We will be glad to submit a detailed statement for the
record, Mr. Chairman.
The CHAIRMAN. All right.
(Mr. Bell subsequently supplied the following additional information:)
For the program of aid to the dependent children of the unemployed, expenditures are estimated at $28 million in fiscal 19(51 and $215 million iii* fiscal 1902—
the first full year.

Mr. BYRNES. NOW, I would like to move into fiscal 1962, on the
expenditure side. The chairman was talking in terms of where we
could find $10 billion if we just refused to do anything.
[ think, however, we can think in terms of what might be done
to change fiscal 1962 expenditures downward just to see whether
any amount of the 1962 expenditures can be cut down and then find
out where we are as far as our debt needs.
We had a table furnished by the Bureau of the Budget which was
included in the report on the tax rate extension act. This showed a
total expenditure of $84,983 billion.
Mr. BELL. That is right.
Mr. BYRNES. But I understand that since that tabulation of May
25, there has been some addition to that.
M r . BELL. N O , s i r .

Secretary DILLON. Just $100 million, as we pointed out before of
contingency, that we put in that which would increase that $85,083
billion and then it was rounded out to $85.1 billion. It was that $100
million contingency.
Mr. BYRNES. I knew there was one item because in your other
table you show an expenditure of $85.1 billion and that includes this
$100 million. Now, of that $85.1 billion how much would be saved
if we had no new authorization legislation? Do you get my point?
What I am trying to suggest is that if Congress did not authorize any
new programs or extension of programs beyond what we have on the
books as of today—I am thinking in terms of how much of this expenditure of $85.1 billion is involved in, let us say, the aid to elementary and secondary education, how much is involved in this fiscal
1962 expenditure of the college program, how much in new authorizations, for instance, is being considered now under the Defense Education Act, how much of this expenditure of $85.1 billion is involved in
the new programs proposed under the housing program? Can you
give us any information on programs that are involved here and the
expenditures that are involved here, but cannot take place unless
Congress authorizes? I am not thinking in terms of appropriations.
I am thinking in terms of authorization.
Mr. BELL. Your question takes on even larger scope when you
realize that by the system which the Congress has been following in
the last year or so, the administration or the Government has to
obtain authorization for such major programs as the purchase of
missiles, and planes, and ships, and the entire program of the space
agency is authorized anew each year.




I believe the current authorization bill, which is before the Congress
or perhaps has just been enacted—I have been out of the city for 2
or 3 days. I apologize. I should know that—I believe it is in the
neighborhood of $12 billion for missiles, planes, and ships.
Mr. BYRNES. AS Mr. Curtis says, you cannot turn your back
around here without having something happen. We can understand
Mr. BELL. If you assume, in other words, that the Congress might
not enact an authorization bill for missiles, planes, ships, space programs, and so on, there is indeed a large proportion of the Government's program which is not authorized on a permanent and continuing
Mr. BYRNES. Let me suggest then, because I appreciate that there
are complications, that we discuss the nondefense programs, and I
will mention some. First, do you know how much is in this expenditure estimate for aid to secondary and elementary education?
Mr. BELL. Yes, sir; I can find that figure.
That is $667 million, the new obligational authority. The expenditure figure is $500 million.
Mr. BYRNES. In fiscal 1962?
Mr. BELL. Yes, sir; that is right.
Mr. BYRNES. What about the college program?
Mr. BELL. YOU are continuing to ask about the matters which are
not now authorized, but which require new authorizing legislation;
is that right?
Mr. BYRNES. That is right.
Mr. BELL. The two bills together, aid to higher education and the
National Defense Education Act amendments, wrould add $53 million
to 1962 expenditures, according to our current estimates, over and
above what would be authorized by the continuing legislation in the
higher education field.
The CHAIRMAN. That you mean is actual cash outflow?
Mr. BELL. That is right. These would be the expenditures in the
fiscal year 1962 resulting from legislative authorisations which are
now before the Congress which the President has recommended.
That is the intent of your question; is that right?
Mr. BYRNES. That is the continuous question, that is right. What
about housing?
Mr. BELL. The housing expenditures for fiscal 1962 are not particularly large under the new authorizations.
Mr. BYRNES. It could be. You have $2 billion for urban renewal
and there is nothing in the bill that says that it has to be spread over
the 3 years, or whatever the period of time.
Mr. BELL. N O ; the pattern of expenditures, sir, under the urban
renewal program is very long drawn out, indeed, and I suspect that of
the authorization for urban renewal which is now before the Congress,
there is unlikely to be much expenditure directly attributable to this
authorization for, say, 3 years. These are commitments which are
made wTith cities and States on the basis of very long-run forward
planning, and the expenditures for this program that are made in the
fiscal year 1962 will primarily result from commitments made 2 or
3 years ago. In the increased housing program which President
Kennedy recommended, including college housing loans, low cost
housing, urban renewal, and housing for the elderly, Mr. Byrnes,



there is some $50 million of expected expenditure in urban renewal.
Mr. BYRNES. D O you have a total just on the housing bill?
Mr. BELL. The table I have here is not precisely related to the bill
that is before the Congress. Let me give you these figures and then
let me, if I may, check them for the record to be sure they all compare
accurately to the bill that is before the Congress. The additional
expenditures from President Kennedy's recommendations would come
to $214 million in 1962, but some of these expenditures would be under
existing law and would not require new authorization.
Mr. BYRNES. What about this youth conservation program that
is recommended?
Mr. BELL. There are two bills, as you know, the youth training and
conservation bill and the Training and Retraining Act intended primarily for people who have been unemployed for quite some time to
assist them to find other lines of activity. The figure I have relates
to training, retraining, and increased worker mobility, and it would
mean $60 million of expenditures in the fiscal year 1962.
The space program, of course, Mr. Byrnes, is a large one. You can
look at that in two ways. One is that the whole program requires
reauthorization, but you can also notice that the President has recommended and the Congress is now considering a substantial addition
to the content of the program which, if agreed to by the Congress,
would result in expenditure increases in the fiscal year 1962 of about
$330 million over the previous budget estimate, as nearly as we can
figure it now.
Another significant increase is the President's proposal to increase
the size of the revolving fund for loans for small businesses. He made
that request recently. If the Congress agrees, we anticipate that the
rise in spending in the fiscal year 1962, that is, of loans being made
out, would be about $88 million net.
Mr. CURTIS. IS that over what comes in?
Mr. BELL. Yes, that is right. This is a net addition to the volume
of loans outstanding.
Mr. SCHNEEBELI. You have nothing for civil defense?
Mr. BELL. The civil defense figure is not definite as yet, and we
are taking that into consideration in the $100 million which the
Secretary referred to earlier. That is a very rough figure and does
not reflect a judgment that this is in fact what may precisely come
Mr. SCHNEEBELI. That is a possibility?
Mr. BELL. That is a possibility; yes, sir.
Mr. BYRNES. Mr. Chairman, I do not want to delay the committee,
but I wonder if the Director could furnish for the record the
elements in the expenditure for fiscal 1962 that is involved in these
Mr. BELL. I just realized, Mr. Byrnes, that this is a very tricky
business, this discussion of authorizations. I believe the small business figure that I just gave you does not require new authorization.
I think that is simply an additional appropriation to the revolving
fund, so that figure probably should not come within the reference
framework that you set down for us some few minutes ago.
Mr. BYRNES. Yes. I am not concerned, as far as this particular
discussion is concerned, with what happens as far as the appropriations
process is concerned because those are programs that for the most



part have been in existence. Maybe there are increases provided in
them and maybe we better look at the appropriations process to see
whether these increases are desirable, but I am thinking right now
more in terms of new programs that have been suggested, new activities of the Federal Government, which will involve new expenditures,
and we know that in those cases, the expenditure for the first year is
always very small, but at least we will see
Mr. BELL. It varies, sir.
Mr. B Y R N E S (continuing). How much of the expenditure increase
is involved in that.
Mr. B E L L . I would be very glad to furnish this.
(Information referred to follows:)
Estimated budget expenditures in fiscal year 1962 dependent upon new authorizing
legislation (as well as new obligationoX authority)—excluding Department of
Defense, military

[In millions]

Estimated expenditures, 1062
Program or proposal

Judiciary: Judgeship bill
Funds appropriated to the President: Mutual security program—economic and contingencies
Independent offices:
Atomic Energy Commission: Plant acquisition and construction
Civil Service Commission: Payment to certain retired
employees, widows, and widowers from trust fund
rather than appropriated funds for certain benefits enacted in 1958
Federal Home Loan Bank Board: Temporary premium
rate increase for member banks (equivalent to reduction in high requirement for investment in stock)
National Aeronautics and Space Administration: Annual
Veterans Administration:
Direct loans to veterans (January proposal would confine to Korean veterans)
Selective increases in veterans' compensation rates
Housing and Home Finance Agency:
Low-cost housing
Other housing proposals
Department of Agriculture:
Special milk program
Sugar Act program
Conservation reserve program
Farm housing loans
Forest Service
Department of Commerce: Area redevelopment program
Department of Health, Education, and Welfare:
Aid to federally impacted school districts
Promotion and further development of vocational
educati on
Aid to el ementary and secondary education
National Defense Education Act
Aid t o higher education
Medical education
Environmental health activities
Community heal th activities
Water and air pollution control
Medical benefits for the aged (January budget proAid to dependent children.
Effect on budget of proposed liberalization of old-age,
survivors, and disability insurance program
Department of Justice: Judgeship bill
Department of Labor:
Minimum wage legislation
Training, retraining, and increased worker mobility program
Post Office Department: Postal rate increases
Footnote on next page.

Jan. 16,1961,
since Jan. 20,



















l ~74i









Estimated budget expenditures in fiscal year 1962 dependent upon new authorizing
legislation las well as new obligational authority)—excluding
Department of
{In millions]
Estimated expenditures, 1962
Program or proposal

Department of State:
Acquisition, operation, and maintenance of buildings
Payment of Philippine war damage claims
Treasury Department: Internal Revenue Service (social
security numbers for taxpayers* accounts)

Tan. 16, 1961, Revisions
since Jan. 20,










Revised from $843 million to take account of administrative and other actions since January which
require a smaller legislative increase in postal rates.

Mr. B E L L . May I point out before letting it go by too far, that
some programs do in fact have large expenditures in the first year.
The education program is one.


Mr. B E L L . But there are others in which the first-year cost is
relatively low. Let me be sure, Mr. Byrnes, that I understand
exactly what you want. You would like to have us provide for the
record a listing of the expenditure estimates which are included in
our 1962 figures in the nondefense field which require new authorizations as well as new appropriations; is that correct, sir?
Mr. B Y R N E S . Yes; I would not worry about the appropriation
aspect of it, frankly.
Mr. B E L L . D O you wish us to include the space program?
Mr. B Y R N E S . Yes; it should be included because it is one where
you are requiring authorization and we can pick out of it the items
we feel are essential and those that are not so essential.
Mr. B E L L . I will be glad to do that.
Mr. B Y R N E S . From the figures we have developed here, so far we
have $500 million for elementary education, and $200 million for
housing, so just in those two items, you get up to $700 million. I am
sure that, in some of the others, it is not very hard to find maybe $300
million more. If, instead of the $13 billion temporary debt increase,
we only gave $12 billion, in other words, $1 billion less than you are
asking for, would that be a restraint then on these new programs?
Mr. B E L L . Restraint on the Congress?
Mr. B Y R N E S . I was thinking that maybe through the action of this
committee, we could put a brake on some of the legislative committees.
Secretary D I L L O N . I think, Mr. Byrnes, the answer to that is that
we would feel obliged in the Treasury to try and carry out the actions
and the appropriations, the authorizations of the Congress, to the best
of our ability. If we ran up to the limit on that, there are certain
undesirable methods which 1 mentioned at the end of my statement
whereby certain additional funds can be obtained without increasing
the debt limit. This had to be done, I think it was in 1958, by selling
some F N M A notes to the public, and FNMA paid part of this to the
Treasury. We would be forced to do that. If this was to have an




immediate effect, I think the only way that it would do so would be
for the Congress to make such a reduction in it that made it clear
that we could not live within that ceiling without reducing expenditures and then it would be up the the President to decide which
expenditures out of the overall total that the Congress authorized and
appropriated for he felt he wanted to impound. He would have to
make that decision.
It would not necessarily be new programs that he would feel were
the ones to be cut. That decision he would have to make.
Mr. BYRNES. In other words, what you are saying is that there is
nothing we can do to put any restraints on either the Congress or
the President as far as expenditures are concerned, in spite of the
deficit picture we are faced with and in spite of the fact that if we
go through with the proposed spending we are going to have to
increase the temporary debt limit?
Secretary DILLON. What I think I would be saying is that I think
this method of trying to regulate overall expenditures through the
temporary debt limit is not a very satisfactory one. It is much more
satisfactory for the Congress to tackle the issue head 011 when they
are considering appropriations or authorizations, if it is their objective
as a Congress to reduce expenditures, rather than by trying to do it
by this indirect means. I think that has been the general view of
the Secretaries of the Treasury in the past.
Mr. BYRNES. I wonder how far we could cut spending down,
whether the method is cumbersome or not. I am ready to seize any
technique that might have some effect in reducing spending.
That is all, Mr. Chairman.
The CHAIRMAN. Mr. Derouniaii.
Mr. DEROUNIAN. Mr. Secretary, what would happen if you got,
say, a $6 billion increase now or $7 billion increase? Could you get
along until January 1 on that and then conie back for more, if you
needed it?
Secretary DILLON. NO. The difficult problem is that as our tax
revenues come in they come in unevenly and the period of the year
where they come in at the slowest rate is in the first 6 months of the
fiscal year, during the fall. So we hit our highest estimated point of
debt outstanding always every year—and this is a usual occurrence,
just the pattern of revenues—in the middle of December, so that is
before Congress comes back.
From then on, it stays level for about a couple of months and then
gradually decreases as the heavy payments come in in the spring
The CHAIRMAN. Mr. Schneebeli.
Mr. SCHNEEBELI. Mr. Bell, you said that in January a projection
was made of what our Federal expenditures would be in the next
several years.
M r . BELL. Y e s , sir.

this period of time, what is the trend of
the ratio of Federal expenditures to our gross national product?
Mr. BELL. I do not have the document in front of me which Mr.
Stans and President Eisenhower put out. It showred, it I recall it
correctly, three alternative possible levels. They called them a high
level, a medium level, and a low level of projected expenditures for
the period 1960 to 1970.



If my recollection is correct, the highest of their projections would
not have shown much of an increase in the proportion of the gross
national product which was spent through the Federal budget.
Mr. SCHNEEBELI. Would it be rather constant?
Mr. BELL. A S I remember it, their high projection would have
showed approximately a constant ratio.
Mr. SCHNEEBELI. And this was based on no new programs, as of
that time?
Mr. BELL. N O ; it was based on
Mr. SCHNEEBELI. Anticipated?
Mr. B E L L . Yes; allowance was made for them.
Mr. SCHNEEBELI. Like the school program and so forth?
Mr. BELL. Yes; for the possibility that new programs might be
Mr. SCHNEEBELI. So your ratio is not too far out of balance?
Mr. BELL. That is right, but this brings me back to the point that
I made earlier, I think, to the chairman. It is most important that
all of us who think about these things keep it continuously in mind.
We have operated now for some years with a level of spending for
national defense which has been fairly stable. I think that this may
have given us a little too much a solid feeling about these proportions.
The proportion of the gross national product that was spent through
the Federal budget was approximately the same in 1960 as in 1950.
It was 15 percent in 1950 and 15^ percent in 1960. This was possible
only because the Federal Government spending for national defense
has been fairly stable during the past few years. I do not think that
any of us should kid ourselves that spending for defense will necessarily remain stable.
I have no reason to anticipate that it will jump or that it can be
cut in half, but my point is that it is such a large element of the
picture and it does depend on so many unpredictable elements, notably, the change in the world situation and the change in defense
technology, that we could find ourselves badly fooled if we began to
rely on the assumption that defense expenditures would continue
unchanged in the future.
Mr. SCHNEEBELI. D O you think there is a change on a plus, or
minus side?
Mr. BELL. It might go either way, Mr. Schneebeli. That is part
of the difficulty of trying to be positive about the budget forecast-.
On the plus side it "could easily go up if the world situation persuades
all of us that it should. It could go down if a change in technology
of various kinds occurred.
Mr. SCHNEEBELI. Would not that decrease be replaced by space
Mr. BELL. Not necessarily ; no, sir.
Mr. SCHNEEBELI. The projection I saw for the space agency was
rather large, too.
Mr. BELL. Space expenditures are likely to go up from, say, a
billion dollars a year, which is about where they are now, to $2, $3,
$4, $5 billion a year several years in the future, but the Defense
Department expenditures, as you kno w, are over $40 billion per year.
Mr. SCHNEEBELI. But your ratios probably will remain at the
high level, at about 15 percent of gross national product?




Mr. BELL. That was roughly what the Stans-Eisenhower high
projection showed—something over 15 percent. The Kennedy administration has no such figures as yet.
Mr. SCHNEEBELI. Based on possible new programs?
Mr. BELL. That is right.
Mr. SCHNEEBELI. Thank you, sir.
The CHAIRMAN. Mr. Betts.
Mr. BETTS. This may not be too important but, as I recall, the
deficit in 1955 was about $12 billion; is that correct?
Mr. BELL. 1959, sir. In 1955 it was something over $4 billion.
Mr. BETTS. I do not know whether this means anything or not,
but am I correct that the debt limit in 1954 was $281 billion and in
1956 was $278 billion? Those years had a deficit higher than was
anticipated in the next fiscal year and yet, the debt limit was reduced.
Is there any significance there?
Mr. BYRNES. You had two balanced budgets both years.
Mr. BETTS. He said there was a deficit there in 1955.
Mr. CURTIS. 1954. You have left 1955 out there.
Secretary DILLON. In 1 9 5 4 it was increased from $ 2 7 5 to $ 2 8 1
billion. There was no increase thereafter.
Mr. CURTIS. Did not the $ 3 billion temporary go off in July of
1956, Mr. Secretary?
Secretary DILLON. On August 2 6 , 1 9 5 4 , for the year ending June
30, 1955, which was the year the deficit occurred, it was increased
from $ 2 7 5 to $ 2 8 1 billion. Then again on June 30, 1 9 5 5 , that was
just maintained for another year.
Mr. BETTS. $275 billion?
Secretary DILLON. $ 2 8 1 billion. It was then reduced in 1 9 5 6 for
the fiscal year ending 1 9 5 7 to $ 2 7 8 billion and then there was no
temporary ceiling effective July 1, 1957, and it reverted to the permanent ceiling of $ 2 7 5 billion. That is when the Treasury in the beginning of the recession of 1958 got into trouble and it had to do this
FNMA financing, and it was then necessary to pass an emergency
increase as soon as Congress reconvened.
In February of 1958, they increased it to $280 billion and then
later that year when they began to foresee the deficit that was coming
up in fiscal year 1959, in September of that year, they increased it
to $288 billion.
Mr. BETTS. The point I was getting at may not be important, but
I was just wondering if there were years in which there was a deficit
that the debt limit was reduced.
Secretary DILLON. If the debt limit had proved to be adequate the
year before, and there was a small deficit, it could be absorbed.
Mr. BETTS. That was true in 1955?
Secretary DILLON. That is in a way the case that we are faced with
right now because we have a deficit that we expect this year of just
under $3 billion. Call it $2.8 billion. We expect next year to have a
deficit of $3.7 billion, which if you add them together is a total of
$6.5 billion. Nevertheless, we are asking only for an increase of $5
billion, so we are able to absorb a billion and a half of that that was
not really needed last year.
The CHAIRMAN. Mr. Knox.
Mr. K N O X . Mr. Secretary, in the request for consideration of the
increase in the temporary ceiling by $13 billion, may I ask if that



projects the administration's recommendation for Federal housing,
Federal-aid to education, foreign aid, and other related recommendations which the President has made?
Secretary DILLON. Yes, sir. It includes the expenditures that are
estimated to take place during the coming year under all programs
that have been submitted by the administration.
Mr. K N O X . If the Congress should approve of the programs as
recommended by the President and the debt must be increased what
additional cost would be involved in interest alone?
Secretary DILLON. The increased cost in interest of the increased
debt compared to the deficit which is expected, and we expect a
deficit of just under $4 billion, would, of course, depend on just how
we financed that increase. If we sold short-term securities, securities
due within 1 year, where our average rate might be said to be somewhere around 2}£ percent—it is less for 90-dav bills and it is around that
for 6-month bills—you could take 2l/2 percent. That would come to a
total of $100 million on $4 billion.
Mr. K N O X . If the programs, of course, are authorized by the
Congress that increased cost does not become temporary, does it?
It tends to become permanent?
Secretary DILLON. Some programs are permanent and some are
temporary, but I think the point that you are making is that most of
these expenditures will continue and probably under those authorizations even increase in future years. That is correct.
Mr. K N O X . Although some of the programs may be for a limited
time, such as your Federal aid to secondary and elementary schools,
I feel myself that if such legislation is enacted it would not be temporary, but would be permanent.
Secretary DILLON. I would agree that in all probability you are
perfectly correct in that assumption.
Mr. K N O X . So we would have no hope that the national debt in the
period of the 3 years which the program would call for could be
Secretary DILLON. Not by any very substantial amount, although,
as I said, we look forward in fiscal year 1963 to a balance and possibly
a surplus, and that would allow some reduction, but I do not look
forward to any very large reduction. If prosperity continues beyond
that and our country continues to grow, then the prospect is for
substantial surpluses thereafter, even with these new expenditures,
and there would be the opportunity to reduce the debt substantially.
Mr. K N O X . Of course, this leaves us with afinancialhouse in rather
complete chaos and disorder as far as the present is concerned.
Secretary DILLON. I did not understand that.
Mr. K N O X . In other words, our governmental operations are completely in chaos as far as a balanced target is concerned at the
present time.
Secretary DILLON. I do not think that is the case. I would not
say that because we can begin to look forward with a good deal of
clarity to what our revenue is likely to be in 1963 and our expenditures,
and at that time, we do look to a balance.
The problem next year is just the problem, as I mentioned earlier,
that revenues in the first year of a recovery are still affected very
heavily by the preceding recession. There is a lag in revenues, so we
are faced with recession level revenues next year, and there was a




choice of whether we should try to cut back our expenditures to meet
those levels or try to keep them on the basis that would fit with longer
term expectations, including expectations for much greater revenues
in 1963. It was the latter theory that was adopted and, therefore, we
do expect this deficit of about $3.7 billion in the coming fiscal year,
but it is because our revenues are still very much depressed.
As I think I pointed out, they jumped from 1959 to 1960 by $10
billion, and there is no reason why something quite similar would not
take place between 1962 and 1963.
Mr. K N O X . I was somewhat concerned from a newspaper article
that I read where the article predicted that we would have $100 billion
budget in the 1960,s.
Secretary DILLON. During the 1960's?
M r . KNOX. Yes.
Secretary DILLON. I

do not remember what the projections were
from Mr. Stans* report but Mr. Bell can give you that. I think that
probably was in the report.
Mr. BELL. Yes; the high estimates that were in the Stans-Eisenhower budget projections were well over $100 billion before 1970. I
do not regard those estimates or those projections as gospel in any
sense and I do not regard any projections as meaning anything, except indicating the range within which one is likely to work. We
regard it as necessary to review each dollar of expenditure on its own
merits and the President feels the same way.
Nevertheless, I think if the economy and the country continue to
grow, I do not believe, sir, that it is beyond the realm of possibility
at all that we would reach a $100 billion budget before 1970.
After all, the gross national product is, by relatively conservative
assumptions, expected to reach $750 billion by that time, if I am not
mistaken. Mr. Curtis probably has that figure in his mind.
Mr. CURTIS. That is within reason.
Mr. K N O X . That is all, Mr. Chairman.
The CHAIRMAN. Any further questions?
Mr. UTT. Mr. Chairman, I do not know whether this is a question,
but it seems to me that the debt limit does not have any relationship
to spending programs, and we deal in this as a fiction every year,
or every 2 years, and what effect does it have on spending and why
should we not remove the permanent debt limit or at least put it
up to $300 billion and get it out of our system for 2 or 3 years? I
would like to know what the effect is of a permanent debt ceiling?
Secretary DILLON. I would be glad to answer. We have never
felt that this is a very effective mechanism and when I say never,
I think this represents the continued views of the Treasury Department over the past years.
Nevertheless, the Congress has felt that this did provide a significant opportunity to have a public overall look and express opinions
on the state of the economy, and in view of that feeling by the Congress, we felt that that was up to Congress, and we would go along.
Mr. UTT. Thank you.
The CHAIRMAN. Thank you, gentlemen.
(Whereupon, at 11:45 a.m., the committee was recessed, to reconvene subject to the call of the Chair.)