Spending Heads Higher

Out of conferences, man-to-man chats and scratchings on the backs of envelopes last week, three facts about federal spending came clear. They were: 1) the Administration no longer intends to hold defense spending below a $38 billion ceiling; 2) the U.S. will be hard put to hold overall spending this year below the budgeted $72 billion; 3) the burgeoning budget for fiscal 1959, due for presentation to Congress next January, will exceed the Administration's earlier $70 billion forecast. The compelling reasons: Sputnik I and Sputnik II.

"When the $38 billion figure was hit upon, it was not by any manner or means a sacrosanct figure," said the President at his weekly press conference. Defense Secretary Neil McElroy started defense spending on the way up one day last week by restoring $170 million lopped off the current research and development budget by Charlie Wilson; he also authorized the Air Force to lift its emergency ceilings on monthly payments to aircraft companies (see BUSINESS). In view of the higher defense spending, said the President, it would require "serious retardations elsewhere" in the budget to hold the overall $70 billion line.

One standout place for a retardation could well be in the $5-billion-a-year program for subsidizing and spoon-feeding U.S. agriculture. But the Administration, full knowing that the current price-support program is a scandalous failure (TIME, Aug. 19), is afraid to attack revision in a congressional election year.

Therefore the prognosis for fiscal 1959 runs like this: 1) revenues, held down by the leveling of business and the cost-squeeze on profits, will not advance beyond current levels of about $73.5 billion a year; 2) spending will hit $72 billion or go higher. As of now, there is talk of a small surplus, but such talk will probably be stilled by the time snow flies.

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